IP Communications Insights
Newsletter
Volume 1/Number 1 March 2008
INTRODUCTION: WELCOME TO
IP COMMUNICATIONS INSIGHTS
Welcome to IP
Communications Insights, and the launch of our newsletter!
The IP communications space is ever-evolving, and there are many
sources we all rely on for news, information and insight. Everyone has
their favorites, and we follow different sources for different
things. We all follow what we can manage, which can be a full
time job itself, but with the endless stream of magazines, e-zines,
blogs, press releases, etc., information overload becomes a problem.
So, why another newsletter? And what is IP Communications Insights
about? Here's the story. Both of us - Jon Arnold and Marc Robins - are
independent analysts focused on the IP communications sector, and have
been immersed in it for several years. There is a lot of vertical
coverage out there, and we believe our broad perspective has a place,
which has been validated in our consulting practices. For us, IP
communications is largely rooted in VoIP, but there are numerous
branches to this tree, many of which stem from VoIP, such as
residential VoIP, SMB VoIP, Triple Play and Unified
Communications. Aside from VoIP, we follow carrier networks,
peering, telepresence, IPTV, WiFi, Web 2.0, Open Source, security, and
mobile communications. We also cover how these branches touch the
various marketplaces they serve, including the service provider, SMB,
SOHO and consumer market segments.
This newsletter is a new voice, and a voice we believe is
missing in the market. We see our newsletter as a source of independent
insight that provides views and content you won't find anywhere else.
Sure, we both have blogs, which are platforms for our views of the day,
but the newsletter format has more focus, is more digestible, and
provides a broader palette to work with. Furthermore, the blogs build
up their own following, but the newsletter can be shared and
distributed to a broader audience. We feel IP Communications Insights
is an ideal vehicle to do this, especially as IP technologies become
mainstream and touch far more than carrier networks and desktop phone
systems.
So what can you expect to see in our newsletter? In short,
independent industry analysis. We will provide our insights
about important trends and issues, as well as those of others. This
will take the form of our own articles and commentaries, as well as
interviews with industry thought leaders and articles submitted by
other independent voices. We plan to provide an ongoing set of metrics
that gauge the state of the IP market. And, we will be sharing learning
from our consulting engagements, and apprise you of what we're up to in
our practices.
This includes our IP Communications Insights industry
studies, which we are in the process of launching. We will be
publishing an ongoing series of reports that are very topical, highly
strategic, concise and affordably priced. These reports are where we
feel we can bring the full value of independent analysis to bear, and
you'll be hearing more about these soon.
There is more to the story. The newsletter is one part of our
IP Communications Insights portal. This is where the newsletter will be
hosted and archived, but the portal is our home for all things IP. The
portal is a work in progress, but we plan to have podcasts, videocasts,
newsfeeds, and more information about our consulting practices. We also
want to hear from you, and what you would like to see from our portal.
With all these pieces, our mission is to become your go-to guys for all
things IP, and if independent insights from trusted analysts are what
you're looking for, then we think you've come to the right place.
In this issue, we discuss our views on the overall state of
the IP communications industry. There is a lot to be excited about, but
the space is maturing, and we have some concerns to express.
Also, Jon recently interviewed Kurt Sauer, Skype's Chief Security
Officer, and the highlights have been excerpted in this issue. We also
have a guest article from Thomas Howe on voice mashups, and is a great
introduction to a space we are pretty excited about.
Lastly, we want you to know that this new newsletter will be
free to all subscribers - all we ask is that our readers provide us
with some basic contact information in exchange - a fair deal we
believe. To subscribe, please visit our signup page.
State of the
Industry - Our Assessment
Having followed the ebb and flow of IP communications pretty
much from the beginning, we have seen a few cycles, and being our
inaugural newsletter, we feel this is a timely topic of discussion. We
are all familiar with the early adopter phase of this market, but it
should be clear to anyone following this space that
“VoIP” is not cutting edge any more. At
least in the way it was a few years ago. VoIP has come a long way
since, but the basics have largely been worked out, and the industry
have moved on from education, trials and bake-offs to deployments,
building business models, strategic partnerships and exits for first
generation players. In short, VoIP 1.0.
It is arguable whether VoIP is actually a market at all. We
view it more as a bedrock technology around which other industries and
markets are being built. VoIP enables so many other things, and it is
these other things that are the basis of VoIP 2.0, which is the new
cool for IP communications. What do we mean by this? For us,
VoIP 2.0 is about integrating VoIP into other things - such as Open
Source telephony, voice mashups, FMC solutions, IM platforms, Unified
Communications, etc. The good news is that incumbents were not friendly
to VoIP in the early days, but VoIP survived, and it is now ready to
take over the communications world. There is no doubt now that VoIP is
a viable technology, and this “2.0” world offers
fantastic promise and exciting opportunities.
The challenge, however, is how to get on the train and how to
stay on the train. IP communications encompasses so many areas that we
have many years of growth ahead before we exhaust all the
possibilities. However, the barriers to entry are probably lower today
than they were with VoIP 1.0, so the space is attracting a lot of
entries, as well as companies re-inventing themselves - perhaps for the
umpteenth time. This is particularly frustrating for the financial
community, who have lots of capital at their disposal, but have
difficulty spending it here. VoIP-related start-ups typically have
modest capital requirements, and with many being software-based, their
exit valuations are often not enough to make things interesting for
investors. Everyone is looking for the next Google or Skype, but we
don't see that coming for quite some time. And let's not forget to
mention the mixed bag we've seen with IPOs.
In parallel with this trend of many players looking to enter
is the countervailing force of top-down consolidation. There is a
Darwinian element to all free markets, and IP communications is no
exception. The strongest survive, and as the major carriers consolidate
- such as AT&T/BellSouth or Sprint/NexTel - the domino effect
spreads to the vendors. The Tier 1 vendor space has been rife with acquisitions or alliances in the past year, with Alcatel/Lucent, Siemens/Nokia, Nortel/Microsoft, and Cisco/Webex being just a few. This, in turn, has forced Tier 2 vendors to consolidate, with notable examples being GenBand, Mitel/Inter-Tel, Dialogic/Cantata, NexTone/Reef Point and AudioCodes/CTI2. Everyone is bulking
up to stay in the game, as the promised land of large scale IP
deployments by the major carriers is now in sight. As such, while, we
see no shortage of new entries coming up from the bottom, the middle
and top layers of the market - on both the supply and demand side - are
thinning out. This means fewer buyers, fewer RFPs, fewer trials, fewer
acquirers, longer sales cycles and fewer exhibitors at trade shows.
These are simply natural steps along the way for a maturing
market, but we are not optimistic there will be room for all of this
activity. There is a tremendous amount of innovation going on in spaces
like Open Source, Web 2.0, disruptive broadcasting and mobile presence,
but a lot of this is fuelled by developers who are willing to devote
tremendous amount s of time for little in return. This kind of energy
is great for the short term, but it is difficult to see the
monetization potential. Many of these companies are
self-funded and face real challenges acquiring paying customers and
building a profile in the industry.
This brings us to our next area of concern - industry
conferences. These are the lifeblood for many companies, and for
analysts like us, conferences are a vital barometer of the health of IP
communications. We have attended several conferences so far this year,
including VON, Internet Telephony's IT Expo, Pacific Telecom Council,
and IT360 Expo, as well as a number of vendor-sponsored events. What
are we seeing? A few things.
First, in the context of our earlier comments, as the
industry matures, the role of these shows is changing. People are not
coming out so much anymore for VoIP 101. They've done that, and now
need to turn this into a viable business, so they come looking for
customers, partners, and even exits. With consolidation becoming a
dominant trend, this is getting harder to do.
Another trend we're seeing is the increasingly horizontal
focus of the events (which by the way is also occurring in the trade
magazine arena as publishers try to cover a widening spectrum of
technology, products and services.) While it's exciting to see how IP
is finding its way into every form of communication, this means there
are more markets and segments to chase. With the core VoIP 1.0 base
diminishing, the shows need to go wide to keep attendance and exhibitor
rosters healthy. This means going beyond basic VoIP to everyone else
connected to IP - IMS, video, Open Source, peering, WiFi, IPTV, Web
2.0, etc. At one level, there is enough common ground to
attract these disparate audiences to a single event, but we feel this
dilutes the content and value of the information. It is impossible to
cover every track during these events, and exhibitors get a different
mix of traffic. Conversely, all of these sectors have vertical events
of their own that focus exclusively on one flavor of IP.
This leaves most of us with difficult choices about which
shows to attend, which shows to exhibit at, which shows to sponsor, and
which shows to accept speaking invitations for. As IP continues to
expand into new frontiers, the universe expands, and we get to a point
where there are simply too many shows. For many of us, it is a question
of going broad or going deep. If I'm an IPTV vendor, do I
support a show with a 100% focus on IPTV, where I know my core
community will be, and the content will be totally relevant? Or, do I
put my time and money behind a show with a broader focus that has IPTV,
but a lot of other things too? Maybe I need to broaden my ecosystem and
knowledge base to see how going outside my sphere will benefit my
business. Both are valid points of view, and the choices are not easy.
Ultimately, people will go where they believe they'll get the
best payoff, which of course, could mean a lot of things. Whatever
their criteria are for success, they will make choices around these, as
it is no longer possible to support all the events we once did. We
think this puts a lot of pressure on the conferences, as they struggle
to define a value proposition that reflects the current state of the
market. Conferences come and go, and none of them today can
rely solely on what has worked in the past. Buyers and
sellers need conferences as much as the conferences need them, and our
view is that conferences should look within the industry for a better
way.
What do we mean by this? Well, we're all in the IP
communications business, and in this day and age, there surely must be
ways to use these technologies to make the conference experience more
relevant, and to more creatively produce and deliver content. And let's
not forget about the interactive aspect - perhaps the most important
reason people go to conferences. Engaging audiences - either
as a group or to facilitate one-on-one meetings - is where the magic
happens for most of us, and with social networking making its way into
the grown-up world, there must be better ways to take advantage of
everyone being under one roof. So, that's our call to action, and we
think there's a great opportunity for any show out there. The
technology is not the issue - it's having a vision and the will to
reinvent or even just fine-tune before it's too late.
Feature
Article: “VoIP Mashups”
by Thomas Howe, CEO of The Thomas Howe Company
http://www.thomashowe.com
I wonder, did Gutenberg understand the flattening effects of
the first moveable type press? Could he have foreseen the
massive changes in society his invention would enable? His
earliest letters speak of a "secret" that would wipe out his debts, but
chances are he only grasped how much easier books, and in particular
the Bible, would be to produce. The moveable type
press made books, and the information they contained, freely available
to those that could afford it.
Institutions that relied on the control of information
suffered
greatly; smaller concerns thrived on the new freedom. Democracy itself
required the technology to sustain the free flow of information on
which it depends. But to start, the goals were more modest. I
personally doubt that Mr. Gutenberg was planning anything more than a
good business for himself. Once the technology took root, the
unintended and powerful consequences
flowered.
The term "Mashup" is new to many outside of the worlds of
music and modern Web technologies. A mashup is something you get when
you take two unrelated things, and combine them together to make
something entirely new. Taking two songs and playing them at the same
time is an example of a mashup. Taking words from an instant messenger
application, searching for them on Flickr and displaying the results on
your desktop background is another example of a mashup. These
two mashups are not earth shattering ideas, and little more than a
temporary diversion.
In the world of Web technologies, a mashup is a site or
service that takes data from two different sources and combines them
into something more valuable. As an example, a new site I
love is called "Wheel of Food", and it helps you pick what restaurant
to eat at. You give it your zip code, and what you are looking for
(Lunch), and you are presented with a flash program that shows you a
wheel - just like "Wheel of Fortune". Around the circle are the names
of local restaurants that serve lunch. Give it a spin, and it picks
your restaurant for you. You can click on the name, and it
will give you a map of where it is. Serious? No.
Important? Well, as important as eating lunch. Entertaining?
Absolutely. There are tons of mashups like this, addressing all sorts
of needs, some serious, others... not so much.
This mashup designer created this site by using Web services
from Yahoo! Local API and Google Maps. A Web service is a sort of
mini-web page that carries data, images or whatever back to another web
page. A Web designer would use the Google Maps API in his
page when he wanted to display a map on his site. A good
example of this would be to graphically display driving directions for
each unique visitor. The Yahoo! Local API gives the designer
access to local information, such as listings of restaurants, movie
theatres and paint stores. "Wheel of Food" is a funny one,
but what about more serious applications such as figuring out where to
put your new restaurant? You could take the restaurant results from
Yahoo! Local, and display them on a map using Google Maps, and see that
there's not a single fast food restaurant in Barnstable Village.
Mashups take structured data from providers, and use them in new and
valuable ways. Just like Gutenberg's press, it's pretty easy
to see the small benefits in Web mashups, and it's pretty easy to miss
the large ones.
The large business benefit to Web mashups will not be
realized until communications technologies become available through Web
services. Communications technologies such as instant
messaging, telephony, and voice and text messaging are entirely
dominated by human beings. When your phone rings, it's always a
person. If these communications technologies were exposed as
Web services, then mashup designers could use them as part of their
site. It would be nice to click on the "Wheel of Food" winner
to make a reservation. How about clicking on another link to
hear the special of the day? How about telling your group of a dozen
friends that you're going down to The Dolphin for lunch? Imagine taking
your buddy list from AOL, and having some Web API text message each
person's cell phone saying "Going to the dolphin at noon for lunch".
The staff at Twitter has already imagined this, and now provides this
as a service. All the designer needs to do is to integrate the Twitter
API into his page. The real explosion happens once these communications
technologies are exposed through Web
services.
Today's real-time communications systems are nearly divorced
from the business processes they serve. Every business is
different, but the PBXs that serve them are functionally identical. How
ridiculous would it be if there was only one web site for all
businesses? It still seems ridiculous when you think that
there would be only web site for all dentists and another site for all
plumbers, etc. Yet, if we had a phone system optimized just
for that, it would be an astonishing leap forward in PBX
technology. The large explosion will occur for business
communications when designers can easily integrate disparate sources of
technology, data and services. This is the real power in
mashups.
The mashup technology, mindset and culture make applications,
and the information they contain, freely available any web designer.
Large service providers and the vendors that supply them, that monetize
the control of services and information will suffer greatly, as smaller
concerns will thrive on the new freedom. I wonder, does the designer of
"Wheel of Food" understand the flattening effects of his site?
Skype
for Business
Jon Arnold's Interview with Kurt Sauer, Skype's Chief
Security Officer
Alright, Kurt, let's talk
about the opportunity Skype sees in
the business arena, and where you think you can bring true value.
As you know, our roots have always been in the consumer
space, and that has had a profound impact on how we design the
usability of our software. We try to make Skype an administrator-free
application, and most of the move into the business space has come
organically from internal people at Skype who have found it to be
useful in their personal lives. They found it would be
helpful to cut the budget on calls or to collaborate at work; so many
people were bringing it in to share with their teammates. Suddenly they
were discovering how presence was a good productivity adjunct.
So, what came out of this was the idea of a business version
of Skype. It was really an incremental build of features, both in the
software and in on our server infrastructure. This build
happened over a number of releases, and someone finally said we're just
going to make an announcement about Skype for Business. The 3.0 release
beta in November was the first time we had a set of features
specifically aimed at business users. And those were mostly to do with
security functionality.
Let's talk about that a
little more. The basic public
perception is that Skype is about free phone calls. But now people are
asking themselves why can't I use this in my job, so I'd like hear more
about the features specific to business that are beyond cheap voice.
The first would be the whole integration of group messaging
and presence information in a way that relies on trusted credentials
for the user. We've built a trusted method for people to communicate
with each other over links that are encrypted. Most VoIP and instant
messaging technologies are unencrypted, so any level of privacy will be
better than what you get out-of-the-box with these VoIP solutions.
So, if you're a business and want to ensure privacy to comply
with regulations such as Sarbanes-Oxley, you really can't meet these
obligations using instant messaging. With Skype, we provide you with a
way - at no extra cost - to be sure that you are communicating with the
person you expect to be communicating with. And - it's available to
everybody using Skype, which I think is a real plus.
Would you say, then, that
Skype for Business is primarily
designed for use inside the business, or more for external
communications?
That's a hard one to answer. I can give you examples of
companies who are using Skype mainly to reduce IT costs and to improve
internal productivity, but I know companies who are using it to reach
out to suppliers and vendors. We're targeting SMEs, and for companies
under 100, there are lots of examples of companies using Skype
successfully in those environments.
Encryption - this is
something I wanted to come back to. I
don't think encryption is something people initially associate with
Skype, and I think is one of the key selling points of what Skype for
Business has to offer. So, are you telling me that when I'm sending IMs
over MSN or Lotus Notes, that those are not encrypted?
I'm not going to comment on those architectures, as I'd have
to do proper due diligence. But what I can tell you is that generally,
IM is an unencrypted application. This has been a real
problem for a lot of businesses, as they don't feel comfortable using
IM as it puts their data at risk. Most companies, especially smaller
ones, don't have the resources to build in the necessary security or
public key infrastructure, which is needed just to comply with things
like HIPAA, for those in health care.
We're not trying to sell military grade encryption, but what
we do provide is a very high assurance that your communications are not
going to be read or listened to by those who shouldn't. In fact, we've
hired a renowned cryptographer, who's not part of the company, to come
and review our implementation and design. His report has been published
on our web site, and I believe you can find it at www.skype.com/security.
What I'm hearing here is
that the level of encryption is
quite high for Skype. Let me just play Devil's advocate now, and ask
about the objections businesses typically have about Skype - such as
traversing firewalls.
The most common comment I hear - which is not correct - is
that they believe Skype is punching a hole through their firewall, or
that people are able to connect to their computers from the outside and
they're not able to monitor this. In fact, the way Skype works is that
the Skype client on the computer initiates all contact with the outside
world. There are no holes being punched through firewalls.
What Skype does is use the authorized channels open on the firewall
that the administrator has made available to deal with outside traffic
like the Internet.
For example, I'm running Skype here on eBay's network. Nobody
can reach in to communicate with me from outside without going through
our network. But, the way Skype works with its Global Index -
supernodes - is that, say, I have an association with another user on
the Internet who is not behind our firewall. Well, through a supernode,
that person basically taps me on the shoulder to say I have an incoming
call from him. He cannot reach me through the firewall, but he will be
able to reach my supernode - my neighbour on the network, who will tap
me on the back, and say “Kurt, do you want to speak with this
person?” If yes, then I initiate an outbound message, just
like I would if I were going to a web server. So, now I'm setting up
the call, which is going through our firewall, in an authorized
direction.
There's a common misconception that Skype is somehow
reconfiguring the firewall to allow for arbitrary connections anywhere
on the Internet. Once people understand what Skype is actually doing,
they stop seeing it as a threat to the perimeter security model they
have around their network.
Let's come back to Skype
for Business. I can see how Skype
brings value, especially for small businesses that lack the IT
resources to do these things internally. It looks to me that they can
use it as much for internal collaboration - such as conferencing or
file sharing -as they can for inbound/outbound communications. A real
strength for me is that this is not a replacement for existing telco or
IM platforms - it does those things, but in a different way, and in a
new way.
You're dead on there, Jon. The productivity tools small
businesses are using weren't really planned - people are just figuring
out how to apply them on their own. For example, we've found people who
are using Skype for distance education. On a social level, I've heard
of people in different cities using Skype to talk to each other in real
time while watching the same football game. Because the call is free,
they just keep it open the whole game, and talk back and forth to each
other as the game is going on. It doesn't take much to see how this
could translate into a more productive way of doing things at work.
Sure, I can see that,
Kurt. So, how is Skype for Business
priced and how do businesses actually deploy it?
Well, it's free - there's no cost for the software. Skype
doesn't have
any infrastructure costs, so giving it away but is not a problem for
us. The users are seeing high value at little cost, and the more people
using it, the more revenue we generate from calls made outside of
Skype. We have a lot of developers who wouldn't be doing these things
if Skype wasn't around, and we want to nurture that to foster
innovation for our platform. This helps make Skype relevant for
everyday use in as many ways as possible. It's this usability that has
made Skype so popular, and we want people to keep finding new ways to
make Skype part of their everyday activities.
For the telephony piece,
where's the business model?
In the long run, we all expect telecom revenues will go to
zero, and it's not wise to count on these revenues for your planning.
So we're working on things like click-to-call models where this drives
commerce as opposed to just having people talk to each other. Another
use is lead generation for sales. A good example is car sales - there
are companies providing per call lead services to car manufacturers and
car dealerships. They may be charging $5 per qualified lead, and you
don't have to have many of these to get a comparable number of
inquiries that would come from a Google-type model, and where you get a
very small amount of revenue per click-through.
The idea is that as commerce moves more towards
human-to-human contact, as opposed to just clicking through on
websites, that there's got to be a better way to monetize this than
through a more impersonal web-based sphere. Basically, commerce is
converging with new technologies, and with that convergence come
opportunities for higher margins on things that involve people with
automated transactions.
Ok, we'll leave it at that
for now. Thanks very much for
sharing your thoughts with me today, Kurt.
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