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Cisco and IBM Make 'Net Ring Tones
washingtonpost.com Staff Writer
Tuesday, May 18, 2004; 10:00 AM
Internet telephony is getting another vote of confidence today with the announcement by two of technology's biggest names -- IBM and Cisco Systems -- that they will join up to offer Internet phone service to businesses.
Cisco and IBM executives "called the new relationship an effort to help increase the acceptance of Internet phone service among corporate users. Internet telephony uses the Internet infrastructure to transmit data, voice and video, and is considered more versatile and efficient than traditional telephone networks," The New York Times said in an article today, explaining that Cisco will supply the hardware while IBM will provide the software and integration expertise to run the system. The two companies are targeting the finance and retail sectors first, the Times said, though their first customer is a law firm -- Preston Gates & Ellis of Seattle.
VoIP, short for voice-over-Internet-protocol, "has been around for years," Reuters noted, but "recent advancements in network technology have made it an attractive alternative to regular phone services for a growing number of customers. IBM said that both companies will make significant investments in the area, which is seeing increasing demand from medium and large-sized corporations, according to IBM's Don Fitzpatrick, vice president of Cisco strategic alliances. 'We think we have hit that inflection point. We think it's taking off,' Fitzpatrick said. 'We think it's a significant opportunity.'"
That's likely because Internet phone service is a growing niche of the telecom industry. "Gartner Research ... said that within three years Internet phones are likely to account for the vast majority of business phone systems, with sales of phones alone reaching $4.2 billion. According to figures provided by I.B.M., that market over all is growing at about 30 percent a year. Until recently, corporations were unwilling to install large-scale Internet phone systems because the technology was still considered unreliable and complex," The New York Times reported.
The Cisco-IBM deal was first reported over the weekend in Japan's Nihon Keizai Shimbun newspaper, as Bloomberg and News.com noted in their subsequent coverage. According to News.com, "Cisco has said that by migrating to a voice over IP infrastructure, companies can cut telecommunications costs by about 50 percent and can improve productivity." The networking firm "has been growing its IP telephony business over the past couple of years, installing gear in more than 14,000 organizations worldwide, according to its own estimates. Recently, it announced that it had shipped its 3 millionth IP telephone to Adobe Systems, a significant milestone for Cisco. In August 2002, Cisco announced that it had shipped 1 million IP phones, an accomplishment that took the company three and a half years to achieve. One year later, Cisco announced that it reached the 2 million mark, and in April of this year, its shipments increased to 3 million IP phones overall. The company said that it has been displacing more than 6,000 traditional business phones every day."
As with any hyped technology, there are always contrarians, as a Business 2.0 article from March noted. Excerpt: "In the past month alone, venture capitalists have poured nearly $85 million into three VOIP providers: Vonage ($40 million), VoiceGlo ($28 million), and Skype ($18.8 million). These companies have a lot in common. Most notably, not one of them has cleared a dime in profits. But also, they are all now facing increased competition from established players."
Cisco and IBM face formidable competition from a number of start-up VOIP firms, including Skype and Vonage. On Monday, Vonage said it has 155,000 customers and is signing more at a rate of 20,000 per month, Reuters reported. "The company, which reached 100,000 users in February, also said it was lowering the price of its unlimited calling plan for new and existing residential customers to $30 from $35," the article said. CNET's News.com said "Vonage's price cuts are likely to force smaller players into further dropping prices on calls to differentiate themselves."
Vonage is going head-to-head with AT&T's Internet phone service. The Wall Street Journal reported yesterday that Vonage's price-cutting move "comes just six weeks after AT&T Corp. launched its Internet calling plan, known as CallVantage, which it plans to roll out to 100 cities by year end. AT&T's unlimited calling plan costs $39.99 a month, though the company is offering it for $19.99 a month for the first six months. AT&T won't say how many customers it has signed up." And the article pointed out that old rivalries exist between traditional Baby Bell companies, who recall spurned Internet calling until they realized they could potentially make money on the technology.
Vonage is tooting its horn today at Morgan Stanley's VOIP Technology Conference, a gathering that signals Wall Street is paying close attention to the Internet phone technology too. Vonage chief Jeffrey Citron is slated to talk about how VOIP "is transforming the telecommunications industry," according to a company statement.
Meanwhile, another Ma Bell descendent -- BellSouth -- announced last week it was selling its own brand of Internet phone services for businesses.
VOIP still faces a few snags, including whether or not it will face more regulation going forward. So far, the Federal Communications Commission has been just studying the issue. Another potential hangup is the ability to track the location of emergency 911 calls made via VOIP technology. Business Week looks at this issue, noting that anyone thinking about making the switch to VOIP should consider the 911 tracking issue. The magazine noted that Vonage lets its subscribers "register the physical location of the phone," information the "company then uses ... to route 911 calls to the phone number of a local" 911 call center.
You might have a hard time reaching local emergency responders with your Internet phone, but that's not stopping hospitals and other businesses from embracing the technology for internal communications, as Fast Company magazine noted in a feature article in March. For example, nurses at one California hospital recently "began wearing a small, voice-activated wireless device that allows them to communicate directly with one another." Excerpt: "'We live in Silicon Valley, so we're all into techie stuff anyway,' says nurse manager [Chris] Tarver, who puts on her Vocera device as soon as she arrives at work. 'But patients think it's really cool, because when they say, "I need my pain med," they see that the nurse gets called, and the issue gets taken care of immediately.' It's a case in which technology hasn't just entered the mainstream. It's entered the bloodstream."
Security folks at Cisco Systems must be losing sleep over this: Bits of the main software code that powers the company's networking equipment was posted on Russian Web site SecurityLab.ru over the weekend. Cisco and the feds, namely the FBI, are investigating, The Washington Post said. More from the Post: "The computer code is part of the company's Internetwork Operating System, which runs the Cisco-built hardware that makes the Internet work. The IOS, as it is known, consists of millions of lines of source code, and there are hundreds of versions of it in existence. It was not clear yesterday which version of the software was stolen." Maybe there's not much to worry about though. The Post noted that "[s]ome of the source code for Microsoft's Windows operating system was published online earlier in this year; though the compromised code in that case has since led to the discovery of at least two previously unknown weaknesses in Microsoft's flagship software, it did not lead to the wave of hacker attacks that some had feared."
More from The San Jose Mercury News: "Any theft of code from the operating system for Cisco equipment could help hackers attack the Cisco routers and switches that direct traffic around the Internet. But one security expert downplayed that risk. The incident could also prove embarrassing for the San Jose networking company, which has been emphasizing the security of its products. Source code, a program's blueprints, is usually a tightly guarded secret held by technology companies."
Salesforce.com's public offering has been delayed once again. "At the request of the SEC, Salesforce.com, first mover in the on-demand software space, will be delaying its IPO, which was expected the week of May 24," IPOhome.com reported yesterday, in an item picked up today by The San Francisco Chronicle. The Securities and Exchange Commission isn't happy with the way the company chose to account for sales commissions, and then there's the fact that SalesForce.com founder Marc Benioff was profiled in The New York Times within two weeks of the planned IPO date, a no-no according to the SEC. No new date has been set. For more details on the complex set of factors causing the IPO delay, see the links below.
...to dodging the cats. Venture capitalists aren't the only once-endangered species on the loose again in Silicon Valley. A mountain lion roamed free in Palo Alto yesterday and was shot and killed after a dog chased it up a tree, The San Jose Mercury News and others reported yesterday. The San Francisco Chronicle has a photo.
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