Cisco unveils VOIP strategy

Cisco Systems. officials gave notice of its plans for the VOIP (voice over IP) market Tuesday, stressing the importance of enterprise application development beyond traditional telephone service and claiming that the VOIP market is primed to grow dramatically.

Noting trends such as the overall increase in bandwidth, the development of wireless connectivity standards (such as 3G), and an increased demand for intelligent networks, Cisco's VOIP play will be based largely on developing IP infrastructures.

To that end, the company will aim its new offerings at service providers and large enterprises, according to Mike Volpi, Cisco's chief strategy officer.

"The big win for Cisco is absolutely on the infrastructure side," Volpi said, adding that IP phones themselves (which Cisco manufactures) are "probably the least central part of our strategy."

The VOIP market is currently enjoying the effects of a "tornado market," according to Volpi. He added that the overall VOIP market is growing by 100 percent per quarter, while sales of older PBX units are decreasing by 16 percent.

Cisco is also planning a set of end-user tools. "Most people who think about IP think about cheap minutes," Volpi said. But, according to Alistair Woodman, marketing director of Cisco's service provider unit, the company is concentrating on ambitious, high-end applications that will differentiate IP-based telephony from traditional telephone services.

"Completely different types of business applications" will drive growth in the VOIP market, said Woodman, "not replicating current phone capabilities."

Most notably, Cisco is working on a development suite known as the E-Service Application Engine that will let programmers create XML applications to suit their enterprise needs. During the announcement, Marthin DeBeer, Cisco's vice president of enterprise voice, demonstrated a voice-enabled application that allowed him to pull stock quotes from Yahoo's financial Web site.

"The IP phone will become a thin client, and information will literally come from any Web site," DeBeer said.

Cisco has identified four application categories in particular: unified messaging, voice recognition, high-quality wideband voice, and "find me" services, which will switch and forward calls according to user-defined rules and policies.

Other applications could include corporate directory integration, personalized menus, e-mail clients, distance learning programs, online communities, calendaring services, and a voicemail viewing application that would let users scroll through messages displayed on an LCD screen.

In a departure from its traditional hardware pitch, Cisco emphasized software during the presentation. Although the company manufactures IP phones, Volpi said that the phones "are probably the least central part of our overall strategy." He went on to say that other vendors would be likely to dominate IP telephony manufacturing.

Most analysts agree that VOIP will become a key market for the struggling networking giant.

"Cisco is making a significant effort in VOIP," said Jeffrey Young, author of the recently published book Cisco Unauthorized. "They see it as a place where they can play their corporate strength, their enterprise strength, and their fear-uncertainty-doubt strength. They can keep their margins relatively high and deliver."

"But the problem is the entrenched market of PBXs," Young added. How do you integrate them? The only way to win in the VOIP space is to buy a customer base."

Cisco officials did not speculate on how the company would perform in the VOIP market. Although Volpi "guaranteed" growth in sales to enterprise customers, he also said that performance in the service provider space is difficult to predict.

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