To many, the term Voice over IP (VoIP) still conjures up memories of crackly conversations over the internet using a cumbersome headset attached to a PC.

But today's VoIP services have come a long way since then. Indeed, they are almost indistinguishable in quality from ordinary phone lines, and are capable of providing far greater functionality.

If you use third-party carriers for long-distance and international calls, the chances are that you have already used VoIP without being aware of it.

And now the technology is making another bid for the corporate desktop, as equipment suppliers, carriers and users eye up the advantages of converged voice and data networks and applications.

These advantages could be as simple as making complex phone functions easily accessible via a PC browser, according to Mark Smith, a network consultant for 3Com.

"I'd guess that 99 per cent of those with digital business handsets don't use the extra features," he said. "Who knows how to program speed-dials or forward voicemail? With IP telephony we can push that PBX technology to the end user."

VoIP also brings location independence, because the phone number is tied to an IP address, not to a wall-socket. This means that call centres no longer need a geographical location.

DSL-connected employees could work from home, and it would also make it easy to move people around in an office, explained Denny Meijer, technical director for network integrator Scalable Networks.

"In large offices people work in project teams so, once you get to the scale where you have to hire people to manage phone movements, it's worthwhile," he said.

Meijer admitted that few organisations will replace an existing PBX, unless it is near the end of its lease or they are moving office, but he suggested that, in any case, few implementations are 100 per cent VoIP. "Usually it's technology that's deployed to interface with an existing voice network," he said.

However, there are disadvantages. IP phone handsets are much more expensive than ordinary ones, but vendors argue that this is outweighed by the reduced cost of needing only one Ethernet port per desk, which can be shared by phone and PC.

There are also savings at the centre because, once a VoIP call has been set up, it no longer needs the central gateway, whereas a circuit-switched call continues to occupy a switchboard line.

"VoIP is finally becoming capable of substituting for circuit-switched systems and, on managed networks, can match or even better voice quality," explained Margaret Hopkins, the author of a report from Analysys Research on the corporate market for IP voice services in Europe.

"It's already being used to carry an estimated six per cent of international traffic on routes where competition is limited."

Even this six per cent is probably an understatement, according to Denis Murphy, European vice president and managing director of VoIP equipment supplier Clarent. "That figure is for pure end-to-end IP calls," he said. "Most calls touch IP at some stage or other."

In Murphy's view, VoIP is being held back by outdated prejudice. "General acceptance isn't there because the decisions aren't yet being made by the financial folk," he maintained.

"Why have two departments when one can do the lot? The quality of service objection is rubbish, because data is the secondary application and voice has priority [on the network]."

IP telephony and the outside world

VoIP is also receiving a boost as third-generation (3G) mobile phone networks come online (because 3G is packet-based) and from cable TV companies selling telephony services.

While UK cable companies laid twisted-pair as well, most others laid only co-axial cable, said Benjamin Ellis, product marketing manager at backbone router developer Juniper Networks.

"In Germany, say, IP is the solution for cable telephony and video-on-demand," he explained. "The challenge is to get the necessary levels of quality of service from the IP network operator. Most of their products are best-effort services because of the equipment they use.

"You actually need guaranteed latency between sites, and a guarantee of maximum packet loss. Over-provisioning is not an effective answer as it doesn't deal with the latency and priority issues."

For users, the most compelling advantage of VoIP is that it makes it much cheaper to build a corporate voice network.

However, there are three competing protocols for end-user VoIP terminals: H.323, MGCP (media gateway control protocol) and SIP (session initiation protocol), and this is complicating the technology's development.

"VoIP is still a maturing technology, which will have clear advantages for the corporate network when it becomes straightforward to deploy," said Hopkins. "However, it still has to conclusively demonstrate its advantages over voice on frame relay and voice on ATM."

There are big challenges when it comes to managing a converged voice/data network. VoIP is a completely different architecture from current voice networks, and users have very different expectations of voice and data services.

Graeme Harper, product manager for VoIP at NetIQ, a developer of infrastructure management software, said: "VoIP gateways are just servers but, while there are management systems around for data servers, the metrics are quite different for voice. For example, transmission delays that might be acceptable for data are totally unacceptable for voice."

Ian Grobel, marketing manager at XACCT, which provides management software for network providers, added: "It merges two very different network management cultures. Voice places a new set of demands on the network: for example, focusing on statistics such as jitter and latency for quality of service is new for data managers.

"Meanwhile, voice network managers have a whole new concept of packets instead of circuits. They have to change focus too as they don't need as much bandwidth now."

Harper's advice is to start by using purpose built tools that simulate VoIP traffic, to highlight what problems there are in the existing network and tune it for voice use.

Once VoIP is up and running, the voice side of the network needs to be managed and monitored for quality of service separately, even though it is on the same infrastructure as the data network.

VoIP: is it voice or data?

The question is how much of the growing VoIP market the data network suppliers can seize before the voice networking industry strikes back.

As Gary Cohman, European product marketing manager for voice at Cisco, admitted: "The PBX vendors are talking about IP services and how they will take their customers to IP telephony. That's changed in the last two years. You can't go to a telephony show and hear about traditional products any more, it's all IP."

An important part of this is that these companies already have the skills needed to understand and manage voice networks, which most data specialists lack. Mark Darvill, director of technology at network integrator Logical, indicated that this presents major opportunities on both sides.

"Mitel, Alcatel, Siemens - all these companies have fully-featured IP solutions and will start to align themselves with data network integrators. They have the voice expertise and the installed base," he said.

"Not all companies have a big data network. Some are voice-centric and, while in an ideal world it's much easier to start again, in the real world companies are reluctant to throw away an investment.

"They want to build bubbles of IP telephony and convergence around their traditional networks, so they need skills on both sides of the fence."

IP telephony suits designer

IP telephony is proving a hit with fashion designer Paul Smith at his eponymous company's Nottingham headquarters. The business is a test site for a Cisco-based converged voice and data IP service from BT.

Paul Smith formerly ran its voice traffic through a normal PBX, and outsourced the management of its data network to a support company. But Lee Bingham, business IT analyst at Paul Smith, explained that the company began to feel that this arrangement was restrictive.

"We had been talking to BT about both voice and data," he said. "Initially we decided to move just our data needs over to BT's NetEquip virtual private network solution, which went really well." This led to consideration of the benefits the company might also enjoy by moving voice onto IP.

BT offered Paul Smith the chance to be a test site for a new quality-assured voice service running on EquIP, and using Cisco's AVVID (Architecture for Voice Video and Integrated Data) platform.

"Cisco convinced us that the trial would be the right move and that VoIP technology was tried and tested enough to work for us," said Bingham.

The new system was rolled out in the Nottingham headquarters first. "We swapped to the new Cisco switch, and then rolled it out to the desktops," he said.

"For two weeks, we ran VoIP alongside the old PBX, then over a weekend we switched over to VoIP only. This went very smoothly, and paid dividends with an immediate increase in the quality of voice traffic."

Now the system connects headquarters and the warehouse in Nottingham, with two Cisco AVVID servers linking to a gateway handling calls to and from the local area network. The next stage is to add VoIP to the EquIP wide area network this year.

"We're also looking at hot-desking, which will be great news for all those who travel between Nottingham and London," added Bingham. "It was a choice for the future. We could have replaced our old PBX with a new one, but we believed that with VoIP we were investing in the long-term rather than a quick fix."

Voice for long-distance links

Motivated by a routine office move and high fixed leased line charges, neckwear manufacturer Michelsons adopted VoIP for voice calls between its two sites in the south east of England. A single line now carries multiple voice and fax calls as well as data, saving money and improving customer service.

"We were moving our site and wanted to avoid the financial commitment of running a dedicated voice link, which was extremely expensive and not very efficient," explained IT manager Rob Dobell.

The leased line cost £3,500 a year and only allowed one call at a time, so the company was also spending as much again on routing other inter-site calls over dial-up lines.

As well as reducing communication costs, VoIP provided other benefits. Intelligent call routing allows calls to leave the company's network at the most appropriate point, so many of those which would have been charged at national rates become local rate instead.

Also, if staff at one office are busy, incoming calls from clients can automatically be re-routed to the operator at the other office, and documents which would once have been faxed between offices can now be sent to a printer at the remote site.

Michelsons chose Alcatel's OmniPCX Office, an integrated voice, data and internet system which allowed it to adopt VoIP and add functions such as DDI direct-dial, voice mail and intelligent call routing while continuing to use existing digital handsets.

"It's extremely user-friendly, which allows us to maintain the system internally. Furthermore, it gives us modular functionality with the flexibility to expand easily in the future without the need for re-implementation," said Dobell.

He added that, as well as the cost savings and better customer service, the VoIP system has improved internal communications by linking telephone systems into a single switchboard.

The next step is to add software that will allow the VoIP channels to handle fax calls as well, both for inter-site faxes and for intelligent routing.

Bandwidth and cost on demand

According to German carrier Avantis Telecom, it's impossible to run a business based on communication without VoIP.

"If I have a partner in Africa, say, it could take months to establish a leased line between us. With IP, we can check the line quality quickly and then do business," said Leo Mondrus, joint managing director at Avantis.

"It's $20,000 a month for a leased line from Germany to Moscow, but using VoIP I can have transmission between two points anywhere in the world and only pay for what I use."

The core Avantis network is based on VoIP gateways and soft switches from Clarent, plus bandwidth from Cable & Wireless.

The network can carry voice, fax and data traffic for sale, but its main role is to provide voice telephony on a wholesale basis to carriers, other companies and businesses such as long-distance call shops.

According to Mondrus, the use of VoIP provides the scalability and flexibility he needs to gain a competitive edge.

He added that, because Avantis is primarily a supplier of voice capacity, it prefers to rely on equipment designed from the outset to carry VoIP, rather than devices which are essentially data routers adapted to handle voice traffic.

"When it comes to acoustic quality, Clarent has the better solution, although Cisco is more widely available and the network provider just needs to upgrade its switches to add VoIP," he said.

"Billing is usually provided on top using a third-party program. There are more companies writing software for Cisco than for Clarent, but it's a question of how much you want to pay."