Voice-over IP (VoIP) is generating a level of interest in the boardroom that the traditional voice and data networks have never achieved.

The big promise is huge reductions in phone call costs, and access to new, productivity-enhancing applications - many of which have yet to be conceived - that will revolutionise the business.

But the market remains immature, the technology still isn't as good as more tried and tested equipment, and, as ever, there's a danger of simply jumping on the bandwagon out of a fear of being left behind.

So who is deploying VoIP and why? And what are its pitfalls? According to Zeus Kerravala, vice president of enterprise infrastructure at analyst Yankee Group, the market is still in its infancy, and although early adopters have been purchasing the technology for the past five years or so, the market has been slow to mature.

But concerns about security, lack of resilience and quality of service, particularly relating to voice, have largely been overcome, which means that Kerravala expects the sector to double in value over the next five years to $4bn (£2.1bn).

In terms of adoption rates, this equates to between 10 and 20 per cent of all new private telephone exchange (PBX) extensions currently sold into organisations being IP-based and, in the small to medium business sector, between five and 10 per cent, says Peter Hall, research director at Ovum.

Among large organisations this figure is likely to grow to 50 per cent over the next three years, while VoIP will undoubtedly become almost universal over the next 10 years, not least because telcos plan ultimately to use the technology as a replacement for their existing core network infrastructure.

One of the key drivers of this adoption over the next couple of years is that many existing PBXs are coming to the end of their life or depreciation cycle, their last replacement being prior to 2000 to tackle the Millennium Bug.

But another factor relates to one-off events such as mergers and acquisitions or office relocation. In these cases, organisations review their requirements and introduce a converged network either in anticipation of future needs or for the potential cost savings.

These savings can come from lower management overheads, through only having to look after one network and vendor rather than two, and from being able to use the web interface provided by VoIP applications to move telephone extensions.

This drastically cuts the amount of time and resources assigned to the task, especially in large organisations where staff movement is often frequent, according to Hall.

But other cost savings can be derived from the reduced call fees that result from not having to use expensive public phone networks for internal communications. This, however, tends only to be true of firms with multiple sites that generate a lot of inter-branch call traffic.

As a result, although many VoIP implementations are currently limited to individual internal departments or branch offices rather than being enterprise-wide, sectors most likely to benefit from lower call costs in the future are those with distributed business models, such as retail, manufacturing, local government and professional services.

Other, softer benefits include possible productivity gains from being able to reroute calls and switch user profiles in software rather than having to reprogram the PBX, said Hall. This means that remote or mobile workers can have their calls - or, in the case of unified messaging, their email, instant messaging and their videoconferencing - follow them wherever they go.

But implementing VoIP can be challenging, not least because it requires a mix of telephony and IT skills that many organisations simply lack.

"Customers tend to regard VoIP as a replacement phone system, and deploy the same skills, methodology and approach," explained Dave Tansley, technology and telecoms partner at Deloitte. "But viewing it as an IT project is absolutely essential, because it's a distributed thin-client application and the skills required are quite esoteric."

So it is crucial to have the right processes in place to undertake software distribution, configuration management and upgrades, but also to cost the project properly, as it is likely to be as complex as any other applications-related initiative.

As a result, Tansley warns: "If you converge your voice and data network, you'll need to converge the organisations that deal with these two areas."

But another issue is VoIP's upfront capital cost. While regular phones can cost as little as £40-£50 each, IP handsets cost between £100 and £150, and their added complexity is likely to require staff training.

And, with interoperability between different products and systems still poor, it's advisable to buy a complete package from a single provider rather than from multiple manufacturers, despite this reducing negotiating power.

Many organisations also find they need to upgrade (or, at the very least, reconfigure) their network infrastructure to provide enough bandwidth to cope with voice calls.

As VoIP significantly increases companies' reliance on their data network, the issue of redundancy must also be considered, according to Tansley.

When infrastructure was available separately for both voice and data, if one failed, it was still possible to communicate using the other. But with IP telephony, some form of wireless communication or wider deployment of mobile phones may be necessary.

The challenge of security, with VoIP handsets just as vulnerable as data-based computers to threats such as viruses, eavesdropping and denial-of-service attacks, can be met by deploying systems over corporate intranets already protected by a firewall.

Despite all the considerations, Hall concludes: "There's been a marked shift towards adoption of IP telephony in the enterprise, largely based on business case and return on investment, and the market is only set to grow over the next few years."