FRAMINGHAM (10/24/2003) - A recent software upgrade that can turn most Cisco Systems Inc. access routers into IP PBXs could provide users with a simple path to follow for converging voice and data networks, and at the same time is causing concern among Cisco's voice-over-IP competitors.
Cisco earlier this month launched CallManager Express - a version of its IOS software that transforms a 1700, 2600 or 3700 series router into a small-office version of its CallManager IP PBX. While this conversion technology has been deployed in the past as an unannounced feature in IOS, it now has been packaged into a product for offices with fewer than 100 users - the average size for most business IP telephony deployments, analysts say.
Analysts say Cisco routers integrated with IP PBX functions - such as call control, hold, transfer and voice mail - could be a persuasive convergence path for small businesses and branch offices. And by tapping its huge router installed base, the company could wrap up the small/ midsize IP PBX market, which currently is wide open. But the technology also raises the familiar question of whether Cisco is cramming too much into its feature-heavy IOS code.
"This could do a lot for a company like us," says Dick Emford, lead network analyst for Newell Rubbermaid of Freeport, Ill., regarding IOS-based routers as a voice platform. The consumer and industrial plastics maker uses Cisco 2600 and 3700 routers to connect hundreds of offices and plants across the country, and is in the process of rolling out VoIP over its WAN.
"For the cost of an IOS upgrade and some extra DRAM, you could go and give yourself a PBX at every branch," Emford says.
Running call-control services on a router is not new to Cisco. Users have been able to add IP PBX functions to Cisco's 1700, 2600 and 3700 series of routers since the release two years ago of IOS Version 12.2 with IOS Telephony Services.
Cisco customers have deployed more than 2,000 live routers with IOS Telephony Services, but Cisco kept the IP PBX features in the background while it developed the product's stability and features.
"We wanted to gain experience, get some customer success and enhance the features" before announcing it as a product, says Mark Monday, director of product management for Cisco's Multi-service Customer Edge business unit. He adds that there are no plans yet to offer IOS-based call-control features into larger routers, such as the 7500 series.
Along with CallManager Express, Cisco this month also released a blade for its routers that adds a small-office version of its Unity unified voice mail/e-mail software for up to 120 users, giving customers a complete phone and messaging system in one box. CallManager Express uses Cisco's IP phones and Skinny protocol (which provides call-setup features), and can be integrated with its larger CallManager IP PBX servers. CallManager Express licenses range from US$750 to $2,800, and Unity Express starts at $2,995.
"The fact that Cisco publicly announced this when it had sort of kept this feature quiet in the past shows that Cisco is much more confident in its ability to provide the telephony," says Brian Riggs, an analyst with Current Analysis.
In the past, Cisco has used its leverage with enterprise data-equipment buyers to sell its IP telephony gear. Cisco leads the IP phone market, with half of the 1.4 million IP phones shipped worldwide in 2002 - five times the shipments of its nearest competitors, according to Synergy Research Group. Cisco also had 60 percent of the $576 million in last year's worldwide LAN telephony sales (phones, IP PBXs and gateways), Synergy says.
Competition catching up
But some analysts say the competition is catching up, and even beating Cisco in some key segments of the LAN telephony market.
For example, the telephony research firm Infotech reports that in the small/branch office systems market (40 to 100 users), Cisco had only 11 percent of the combined IP PBX/IP-enabled PBX line shipments in the second quarter. Cisco still leads all vendors in pure-IP (no TDM technology) and hybrid IP PBX (a mix of TDM and IP switching), with 26 percent of line shipments in the second quarter. (Avaya Inc. was second with 16 percent, and Nortel Networks Corp. was third with 13 percent).
Meanwhile, deployments in branch offices and small businesses tend to be the norm for IP telephony; the average number of lines deployed last year on an IP/converged PBX was 67, Synergy says.
To address this, Cisco over the last year has tried to offer a small-business VoIP package consisting of scaled-down CallManager servers. This effort has not been successful, as customers have turned to small-office boxes such as Avaya's IP Office, Mitel Corp.'s ICP and Nortel's BCM, says Frank Stinson, program director at Infotech.
"Cisco is hoping that they've finally got the right combo as far as features and pricing for that market," he adds.
The right VoIP fit
The IT group at clothing retailer Abercrombie and Fitch likes this combination, as the firm is in the process of replacing Panasonic key systems with Cisco 1700 routers and the CallManager Express IOS image in all 644 of its U.S. stores. Each store supports five to 10 IP phones. The router-based IP PBXs in each store are managed from a centralized Cisco CallManager in the company's headquarters in Columbus, Ohio.
The product was more cost-effective than deploying a Cisco router and some of the small-office IP PBXs the company looked at, such as Nortel's BCM, 3Com's NBX and a SIP-based box from PingTel. The company expects to save $400 to $600 per location on IP PBX hardware, phones and software licenses, says Steven Graves, senior manage of network technology for the shopping-mall-based clothier.
"It just made more sense to roll out one box to all the stores after we ran those numbers," he says.
These economics could be devastating to Cisco's competitors, some observers say, as it could potentially use its 70 percent market share in the access router market to generate new VoIP installs.
"With a software upgrade they can make a router customer into (an IP PBX customer)," says Frank Dzubeck, president of consulting firm Communications Network Architects. "No one else can do that."
Others say CallManager Express does not make the small/midsize enterprise VoIP market less competitive for Cisco.
"Cisco will still face competition from established platforms, such as Alcatel's OmniPCX Office and Avaya's IP Office, which sell for less," writes analyst Steven Blood of Gartner in a recent report on Cisco's IOS-based telephony plans.
"This is not the beginning of the end for traditional small-office vendors, such as Avaya, Nortel and Mitel," Current Analysis' Riggs says. He says the IP PBX functions on IOS still will come up short for some customers in terms of call features, support and reliably.
Banking on Cisco
One such customer is Citizens Bank NA in Flint, Mich., which has Cisco routers in 185 branches throughout the Midwest. The bank uses Siemens AG HiPath 3500 IP-enabled PBXs to tie together 70 of its offices. Chuck Wasson, vice president of technology, says the Siemens gear offers more features and includes more sophisticated call routing than any IP systems he's seen.
"I've always been wary of Cisco as a telephony provider," Wasson says. And after a complex companywide Cisco IOS and router hardware upgrade that caused some heartburn, he says he'd be hesitant to throw telephony features on top of his WAN boxes.
"Cisco needs to just work on making a few versions of IOS work well," he says.
"They need to cut down the number of IOS versions so your tech isn't trying to figure out the matrix of release versions and features," he adds.
After a scare over the summer when a major flaw in Cisco's software was discovered, users might also want to think twice about putting all their eggs in one IOS basket, others say.
"The fundamental question is, how much do you want to make something into a universal platform?" Dzubeck says, adding that Cisco routers can now do so. "And how willing are you to make something the focal point of failure."