Feature Story

September 28, 2004

It's a year of important milestones for Cisco Systems. At the same time as it celebrates its 20th anniversary, the networking leader is reflecting back over a phenomenally successful five years in the IP telephony (IPT) market.

In 1999, Cisco unveiled both the Cisco 7900 series of IP phones and Cisco AVVID (Architecture for Voice, Video and Integrated Data). Since then, IPT has grown to a $2 billion/year industry worldwide, and the company is playing a leading role in its continuing growth.

News@Cisco spoke with Don Proctor, vice president and general manager, Voice Technology Group, about the advance of IPT, the role Cisco has played in its development and the future outlook.

When did Cisco ship its first IP phone and to whom?

Don Proctor: Our first IP phone was shipped to Level 3 Communications in May 2000.

We shipped the millionth phone 30 months later, the 2 millionth phone 13 months after that, and the 3 millionth phone only eight months after that. As of today, we've sold roughly 3.5 million.

Currently we're selling IP phones at a rate of 2 million per year - two to five times as many as any other competitor. That means that about 8,000 traditional phones are being replaced every business day.

How would you describe the impact VoIP has had on the telecommunications industry?

Don Proctor: I like to think of voice over IP (VoIP) as the great equalizer. This technology has helped enable service providers to court the business of different kinds of customers, regardless of geography or the underlying network technology involved.

We're at a really interesting point in the industry for the development of VoIP solutions, based on technology readiness, broadband penetration, and favorable regulatory climate. We believe that, by the end of the decade, virtually all telephone calls will cross an IP network at some point during the call.

How about the influence of VoIP and IP Communications on business customers?

Don Proctor: When we started five years ago, convergence had a different meaning than it has today. Then, we talked about media convergence: voice, video and data over the same network media - and reaping the advantages of no longer having to maintain multiple networks.

Today, our customers know that with VoIP, they can quickly modify their networks and their business models. Customers have seen the benefits of IPT as the technology has developed.

As technology progressed and adoption increased, we started to talk about convergence of the logical network infrastructure and the communications control plane - the switching intelligence that controls how voice calls and video calls are made. For the past two years, this has helped enable customers like SouthTrust Bank to simplify its network and eliminate large amounts of gear by adding critical software to the network.

Looking ahead to 2005, we're entering a new phase: convergence of the user experience. That represents bringing together all of the disparate communications systems people use - whether it's voice mail, e-mail, instant messaging or video conferencing - into a single, unified communications experience.

And this is where it gets fun for Cisco. We've spent much of the past five years replicating the mature set of functionality that the traditional telecom industry has been providing for 30 years. Now we get to help users benefit from all the additional capabilities of IP on top of what they get from their current communications systems.

How has IPC evolved over these past five years?

Don Proctor: It's all about these unique capabilities. We've evolved to a point now at which applications - the things you can do only with IP - are becoming the most important business driver.

For example, customers are beginning to look at how they can use this technology to affect business process transformation. And as the dialogue ascends to that level, the inherent advantages of centralized call control, geographically dispersed virtual contact centers or unified messaging really become compelling business drivers for customers.

So, today it's not just about 'how much money can I save?' but also 'what can I do better, more efficiently and more effectively?' using this technology.

Where does Cisco rank as a telecommunications vendor today?

Don Proctor: This year, we passed Alcatel to become the #4 global enterprise telephony vendor - and the #3 vendor in the United States and the United Kingdom. Recently, we passed Avaya in enterprise PBX revenue, selling more IP-based systems than Avaya's total PBX business, including traditional TDM systems. At the current rate of sales, we are displacing 8,000 traditional TDM telephones every business day.

And what's amazing is that we've gone from a standing start to this point in essentially five years - that's faster growth than any other communications vendor in history. And we're competing against very well established, 100-year-old companies.

What do you see as the company's most significant accomplishment in the voice arena to date?

Don Proctor: We've been very successful at capitalizing on the advantages of IP communications and helping to bring the technology well into the mainstream.

Two and a half years ago, Cisco was a lone voice talking about IP-based communications. Today, every incumbent vendor in business communications has announced that all future products will be based on IP.

Looking ahead five years, where will Cisco be in the telecommunications market?

Don Proctor: We have a very ambitious goal: to be the first truly global supplier of business communications products and services. The combination of our very focused development of native IP solutions, the company's strong commitment to this field and our global reach in markets around the world puts us in a very strong position to be able to accomplish that.