By Olga Yashkova, Research Analyst, Test & Measurement

Voice over IP (VoIP) still remains a "hot" topic in telecomm industry. More and more companies are realizing the unlimited potential of VoIP and its ability to transform the world of telecommunications. Our society as a whole strives toward efficiency and convenience. More and more companies are realizing that the days when every carrier offered the same limited services are being left behind. Companies are beginning to understand that they no longer have to build a new network in order to introduce a new service. VoIP offers a converged, packet-based network that would enable carriers to provide an unlimited range of services quickly, inexpensively, and without taking any big risks.

With the rapid growth of VoIP technology, the VoIP monitoring solutions market is expected to grow increasingly. This market was fairly small in 2003. However, in 2004, the market has developed rather quickly. According to Frost & Sullivan's forecast, in 2004 market revenues reached $50.7 million. In 2008, the market is expected to generate $297.1 million worldwide.

Chart 1.1 highlights the revenue forecast of the world VoIP monitoring/management market.

Market Challenges

For the VoIP monitoring market, there are two major challenges: economical and technical. Providing a solution that meets service providers' requirements and at the same time is affordable to them remains a major challenge for vendors. Network operators are not able to invest millions of dollars for monitoring solutions. Also, the ability to monitor the voice quality and performance of a large number of calls still remains a technical challenge for vendors. Small and medium-sized businesses (SMB) are more price-sensitive than Service Providers and Carriers (SP&Cs) and large enterprises. Vendors' task is to convince enterprises that VoIP monitoring is part of the overall VoIP deployment. It should never be a choice between the equipment itself and the quality control management.

Another key challenge in the monitoring market is keeping up with all the variations of different call servers, technologies, and ways to collect information either from SMPs or from on-board agents of equipment vendors. The fact that vendors find it difficult to select the market they need to focus on represents one more challenge for the monitoring equipment vendors. Currently these vendors have solutions for small customers, large customers, carriers, and enterprises.

Lack of knowledge of end-users regarding the voice quality represents a challenge as well. This challenge is likely to reduce as the terminology emerges in the market and organization such as ITU and IETF put efforts into developing more standards that would allow customers to compare the performance of networks evenly.

Market Opportunities

According to Frost & Sullivan, SP&Cs represented less than half of the world revenues of VoIP monitoring solution vendors in 2004. By 2008, they are likely to represent the majority of the market. These end-users require larger monitoring systems with greater monitoring capabilities than enterprise end-users. Increased competition between CATV and telcos is spurring VoIP deployments, especially in North America.

Nevertheless, the enterprise market is growing significantly. High potential revenues are expected from international corporations, financial institutions, and governments. Such industries are estimated to have the strongest need in terms of VoIP reliability and quality, and therefore in terms of monitoring within the enterprise market.

International companies require large monitoring solutions and so do customer service operations. Financial institutions cannot afford downtime. If the network is off several hours a year, there is likely to be a loss of millions of dollars by the businesses.

Many service providers and enterprises do not realize the importance and the full range of benefits that might come with an effective Service Level greement (SLA). SLAs should specify end-to-end latency, jitter and packet loss. The agreement should also specify exactly how long it would take to respond to trouble-tickets, and how long it would take to restore the service. Detailed escalation procedures mark a good SLA as well. Telco managers should know in detail what would happen if an SLA is breached. Vendors have an opportunity to offer SLAs to their customers in order to add value to their products.

Active versus Passive Approaches

VoIP quality management includes active and passive approaches. Active monitoring systems generate calls and report on their quality. Passive monitoring systems monitor existing traffic. British Telecom implemented Psytechnics monitoring equipment that exemplifies the active, or in another words intrusive approach. This method consists of installing a thin client on different endpoints that takes local readings and sends them back to a Perceptual Evaluation of Speech Quality metric. This method conducts a targeted testing of specific network links and elements. The measurement goes from point to point and a norm for comparison is established. One of the weaknesses of this particular test is that it takes up active bandwidth.

Telchemy, on the other hand, created a device based on the passive approach that produces voice quality metrics such as packet loss and jitter taken out from network statistics. According to Frost & Sullivan, the demand for passive or non-intrusive monitoring has been rising due to the fact that the market has been dominated so far by active monitoring, although both methods have advantages over the other.

The entry of more products in the test and measurement market that encompass both active and passive approaches is expected in the near future. One such solution is AppareNet Voice, a hybrid of passive and active approaches. This testing mechanism creates test traffic and uses software probes to monitor it but does not need the installation of software agents at terminal sites. All a user needs to know is the IP address at the originating site and he/she can monitor as many as a hundred of sites an hour.

Quite a few service providers and enterprises still do not fully understand the importance of investing in quality VoIP monitoring solutions. They assume that a testing freeware that comes with the VoIP equipment or a low-end single protocol solution is likely to provide their businesses with an adequate quality control solution. They are proved wrong quite soon.

As it was mentioned before, voice quality testing and monitoring requires an investment. Some of the new products for enterprises start in the $30,000 to $40,000 range. Qovia, for instance, adds 10-20 percent to the cost of a new VoIP system for call management and its customers believe that it is worth the extra money.

To conclude, in spite of all the listed challenges in the VoIP monitoring test equipment market, there are many opportunities for vendors as well. As more and more businesses realize the value of the network management, they are expected to understand the necessity of these tools.

If you have any questions or comments, please contact Olga Yashkova at oyashkova@frost.com. The World VoIP Monitoring Solution Markets Study (F127-30) is currently available. It features detailed revenue forecasts by system and end-user type as well as an in-depth geographic analysis. The study also features a chapter on market opportunities and recommendations for vendors of VoIP monitoring solutions.

If your interest goes beyond monitoring, Frost & Sullivan also provides insights into the R&D, manufacturing and installation and maintenance market segments of the VoIP testing industry through its annual "World VoIP Test Equipment Markets" research service. Please contact us for any queries regarding the latest update of this study (F369-30).