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To get our heads around the state of play in the realm of hosted telephony services, we talked to industry expert Paul Desbois.

Q. Hi Paul, I'd like you to imagine I am a novice in this marketplace. I could be running a call centre for instance, but want to streamline my operation and learn a little about the how's and why's of Hosted services. What can you tell me.

Paul: Let's go into some background first, and go from there.

There are two primary technology environments inside any business that have to communicate: one is telephony and the other is the IT environment. For telephony we're looking at telephones, modems, things that connect to the network but all in all people think of this as voice.

On the IT side you're talking about database applications specific to running a business. People tend to think of that as data. Today, using ISDN and VoIP the two are being combined under the one umbrella. However, people still perceive them as different things - telecoms for voice and computers for data.

Today, every business goes out and buys a telephone system and in making that decision about what telephone system to purchase they have to look at their voice applications and what they want to do with their inbound and outbound voice calls. There are questions in people's minds today about what is the future of voice technology going to look like; historically it's been something called TDM* and the future looks like something called VoIP. There is the question of which of these technologies to go for, what are the kind of applications that you're going to be able to run on those technologies and what services as a business are going to needed in the future.

And then there is the issue of staying ahead of the competition.

There can be significant costs in setting up a business to be able to compete in a given environment, so we are looking at capital expenditure to buy in technologies, both IT technologies and Telecom technologies necessary to be able to compete.

As a hosting company we move with the times, take on the burden of capital expenditure so our customers can just get on with what they do best.

Q. Explain the value of VoIP to me..

Paul: It seems that many people are lured by the perception that VoIP is free, however unless you use a client like Skype it is just another method of voice transmission.

VoIP is still an immature technology. It was originally designed for video conferencing. Video conferencing required a protocol to allow people to actually tie up video data with voice data and synchronise the two.

However with traditional telephony you have dedicated bandwidth, you have copper or an ISDN line between the connected points. With VoIP you have to deal with something called contention ratios, which is where the amount of data that you're sending has to compete for bandwidth with other data. This can give you latency issues.

Latency is the lag in the time it takes for the data to get from point A to point B. Over a standard telephone the human ear can handle about 126 Milliseconds of latency before the conversation starts to sound really affected Over standard telephone you have around about 40 Milliseconds of latency, which is virtually real time as far as the human ear is concerned.

The problem with VoIP, is that when you take voice and turn it into data to travel down the network, you have to go through a codec - you have to basically convert it from analogue, which is what you hear in the real world, to digital. Every time you do that there is a certain amount of processing power required which takes about 30 Milliseconds. So, if you have more than 2 or 3 codex in the network between caller A and caller B, you will have latency beyond that of which people will be able to accept it as a valid service. You can also get a certain amount of data that just disappears and so the voice can break-up.

Q: So how does this all relate to hosted services?

Paul: Hosting actually sits and straddles both technologies, so a true hosting company should be able to provide VoIP and TDM options, which gives the customer the choice of which type of service to go for.

Another benefit of being with a hosted company is that they would have installed systems within co-location facilities that are built specifically for housing data centres, so they are conditioned units to control the ambient temperature. They have high speed, high capacity data network switches that can carry VoIP traffic, and the whole environment is geared to high performance and high availability. So, from a client's point of view a hosted service has already dealt with all of the technical issues with regards to what to buy, how to set it up and where to install it.

Q: Typically what sort of telephony services can you get on a hosted basis?

Paul: Telephony applications are all based on four fundamental building blocks.

1. Switching and routing which some people think of as ACD. The ability to route calls intelligently - switching and routing is a primary function and it's what telecoms is all about.
2. Messaging, the ability to play people messages, deliver messages or take messages. Messaging includes things like voicemail, fax, email, SNS.
3. IVR (Interactive Voice Response). Everyone knows it as "press 1 for sales, press 2 for accounts" it's the ability for someone to go through a menu driven system, to choose options and allow them to orientate themselves without the assistance of a live person. Historically that's been done using D2F (press 1 press 2) but this is changing to speech recognition..
4. Conferencing, which gives you the ability for more than one person to talk to each other at the same time.

So, with those four building blocks we can then think of any telephony application, any communication application imaginable and we can build it. Typically at the moment the major areas of interest are inbound ACD - the ability to handle inbound caller traffic and distribute it to the right individuals/departments and to report on that and to understand the effect on the business of your inbound traffic.

There's the outbound side which is the ability for you to connect to the outside world and dialler technologies like predictive dialling.

Q: What kinds of companies are going for Hosted services?

Paul: Most companies have room for hosted services in their setups:

You have the new company with the opportunity to install completely new technology. For them there is a serious decision as to whether they go for the capital expenditure route of buying physical systems to install in the new office, or whether they go for a hosted model where they avoid those.

You have the company with some old systems, some historical investment but a perception that they need to move upward and gain access to new applications and services, or that they need to enhance their existing platforms but don't again want to go through the capital expenditure of upgrading or replacing their legacy systems and again, they are able to go to a hosted supplier that has already made that investment, that is moving with the latest technologies and can make these services available on a Pay As You Go basis that the business can now run as an operating expenditure.

I could go on, but you can see that it can be a sound technological and financial decision to go hosted.

Q: So people can put off making technological choices that might not have an answer right now?

Paul: Yes. With IVR systems, telephone systems, computer systems, CRM environments etc, a lot of work can go into understanding the technology. There are normally a number of different costs attached to that; there are the upfront costs of investment in consultancy, some upfront costs in buying systems. Then there's the actual cost of ownership - training, maintenance etc. One of the most difficult things is actually what hardware technology to buy because it has to grow with you and allow you to fulfil the requirements of that technology. Hosting provides you with an existing environment that has already been designed very effectively, so you avoid having to make a decision today that you can put off till tomorrow because with hosting you can go with existing platforms in technology - but importantly you can choose the things that you want in the form of a shopping list, and go through a learning curve without having the initial investment of buying the hardware.

Q: Give me a scenario?

Paul: Let's take as an example a virtual call centre.

A hosted service allows calls to be routed to different agents, for customers to feel as if they are in one environment whereas there is no need for the company to operate this way at all.

Billing and statistics also come from one central source, so it ties up all of the loose ends. Our call centre solutions involve all that hosted telephony can offer in one place.

Q: What are peoples fears about going for hosted services?

Paul: It seems complicated at the outset because there are so many possibilities on offer. That's where we are here to help.

Q: Where do people start?

Paul: They would normally trial something like call recording because it's not an intrusive application. It's something that happens in the background and doesn't normally affect any of the existing processes. People can see benefits like access via the web to the recordings, stats as well as the reduced charges for their outbound telephony.

Q: So people can save money?

Paul: As a hosting company we generate lots of traffic and as such we're able to negotiate very considerable discounting. We pass this on to our clients.

Q: Are many people using hosted services right now?

Paul: Virtually everyone is using some form of hosted service already. If you use a mobile phone you're actually using a hosted service, because a lot of intelligence that runs on that phone is actually held at a central office location, so if you're with O2 or Vodafone they have systems that host your voicemail, they have IVR and you're mobile is just an access device. Typically the cost of the technology is supplemented by the contract you are on. So, you may have bought your phone for a few pounds when in fact the retail price of that phone may be hundreds of pounds and you are now paying for that technology over a period of time, based on a contract with the spend value per month which goes to that provider. So everyone is actually using hosting in some fashion or another.

Regarding market share, I estimate that 1% of the UK market would recognise themselves as hosting some sort of the telecoms service today. In North America it is much more. An example is that mail order companies can ship products with a service number attached to it, so if it arrives damaged there is a phone number on there that people can ring which will take you through to someone that can help you - in America 96% have this, in the UK it is more like 20%.

Q: What would you ask your hosting company?

Paul: The first thing to know is where have they co-located their equipment. You need a high capacity/high available environment with a lot of resilient architecture. What that means is that you want a co-location that has got environmental controls, is a manned facility with an engineer on site to deal with problems 24/7.

Thanks Paul.

*TDM Time Division Multiplexing is a method where lots of signals are combined for transmission on a single communications channel or line. Each signal is broken up into lots of segments, each having short duration.

OPEX Call Centre Solutions and Contact Centre Services offer comprehensive hosted telephony services. Paul Desbois can be contacted at http://www.opexhosting.com and can advise on VOIP, hosted in network ACD, conference call services and self service ivr.

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