Converted Nokia has seen the light

When Nokia announced recently that it would integrate its high-end cellphones with office telephone systems from Avaya and Cisco, it seemed the Finnish mobility vendor had changed religion.

For years, Nokia has advised companies to bin their desk phone systems (known as private branch exchanges or PBXs) and replace them with fleets of mobiles.

This, it claimed, would yield huge productivity gains and save money spent managing desk phones no one used anyway. But few companies bought into it and PBX sales have continued to grow.

The reality is that enterprises see the cellphone as just one component of business communications.

Nokia seems ready to concede this and is changing its message. “Mobile-only is not a relevant question for large enterprises. Fixed telephony has its place,” says Jaakko Olkkonen, head of Nokia’s enterprise voice business.

What has changed, says Nokia, is the trend toward fixed-mobile convergence, the latest telecommunications industry craze.

Proponents say convergence will break down the barriers between mobile and wireline services, enabling new services while saving everyone money.

But few converged services exist. That is why Nokia finds using today’s mobile phones to access PBX services attractive. “There are about 430m PBX lines worldwide and about 200m business mobiles. We aim for market share in the fixed space,” explains Mr Olkkonen. Nokia hopes to speed this up by signing deals with market leaders Avaya and Cisco.

“Rather than fixed-mobile convergence, I see collision,” says Rob Bamforth, principal analyst at consultancy Quocirca. “There will be damage, some will lose out and even big companies have to hedge their bets. So we are seeing once unlikely bedfellows closer together.”

The Finnish group’s agreement with Avaya is a perfect illustration of this strategic shift.

Nokia developed software for its Series 60 business-class mobiles that allows Avaya PBX users to access all of the functionality of their office system via a simple graphical interface. The cellphone itself becomes just another PBX extension.

Combining mobility with PBX functionality is a long-standing enterprise requirement that few mobile service providers have addressed. With convergence, enterprises can take matters into their own hands.

Not that companies really desire this responsibility. “Convergence requires complex infrastructure, and many enterprises would like to buy these services as managed by a service provider,” says Mr Olkkonen.

A survey by Quocirca shows that 70 per cent of senior European IT executives are interested in a service provider offering that bundles a hosted PBX with fixed and wireless communications.

Another advantage of the PBX is the cost-savings it promises since it routes calls over (free) internal communications networks instead of the public phone system.

Cellphones, on the other hand, with their roaming and cross network transfer fees, tend to be the most expensive form of communication.

Nokia estimates that mobile voice communications account for 10 to 25 per cent of corporate ICT spend, which is more than any other business system including big-ticket items such as SAP.

“Mobility is a key element of employee efficiency but it is expensive,” says Ed Vonk, head of the EVUA, a telecoms user group that represents multi-national companies.

“The mobile environment should fit into the private fixed world to reduce our costs.”

But while Nokia cosies up to PBX leaders, it is also working with emerging convergence vendors that provide software that stands alongside enterprise voice systems and could eventually eliminate them altogether.

For instance, Nokia announced that it will market software from OnRelay, which integrates smartphones with next-generation and legacy PBXs from a wide range of vendors.

But its most powerful feature is the ability to switch between two profiles, one based on the cellphone number and the other linked to the office desk phone.

What that means is that when using the office profile, a call appears to both the called party and the internal IT systems as if it had been made from the internal extension.

“We look at the mobile number as a Hotmail account – it’s a private business tool and you don’t necessarily want to give out that number,” says Marie Wold, president of OnRelay.

Another convergence al-ternative from vendor Telepo could eliminate the PBX altogether.

Besides enabling mobile-PBX integration, it can also replace the PBX, offering similar functions such as least-cost call routing, conferencing, voice mail and call-recording.

“We are facing a major technological inflection point. The PBX that we know today will disappear to be replaced by a software-based client-server solution,” says Micke Paqvalen, chief executive of Telepo.

But Nokia is keeping quiet about Telepo.

Rather than commercialising the solution, it has deployed it internally in 15 countries and will roll it out worldwide by mid-2006.

The vendor is using Telepo to route mobile calls over its corporate network and expects to receive a return on its investment within six to nine months.

Convergence works but who will buy it?

Adding cellphone mobility to PBX functionality and achieving call cost savings is a form of convergence many enterprises will find compelling.

But industry hype is around dual-mode phones that invisibly switch between cellular and WiFi networks. You could start a conversation on the motorway using your mobile provider and then hand the call over to your company’s private network once in the office.

But are enterprises excited? Nokia’s Jaako Olkkonen is cautious: “Customers are not very interested.

“It could grow quickly but we have signals that it could take several years. Convergence means nothing to most communications managers I talk to at Blue Chip companies.

This is being pushed by the vendor community,” says Andrew Scott, mobility practice director at Cable Wireless. He is also sceptical over the high cost of dual-mode phones and the need for ubiquitous WiFi coverage, which is rare in most offices.

Motorola’s Andrew Till is more optimistic, pointing to dozens of trials taking place worldwide.

He also sees significant price drops for dual-mode terminals. “By 2007, there will be no price premium for dual-mode technology.”