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Business Week Online] <http://www.businessweek.com/>
JULY 10, 2006
VoIP
Open Source Takes on Telecom Digium CEO Mark Spencer explains how he's woven
freely available software into a low-priced phone system for businesses
In 1999, Mark Spencer needed a phone system for his startup, Linux Support
Services. The company's aim was to provide technical support to businesses
and programmers for Linux, an operating system for which the source code is
free, making it an appealing alternative to Microsoft's (MSFT <javascript:
void showTicker('MSFT')> ) Windows. But, Spencer was still a student at
Auburn University and he had raised a mere $4,000 in startup capital. "I
thought I really needed to get a phone system, but they were simply too
expensive," he says.
So he did what any programmer wise in the ways of open-source software would
do: He created his own. Using a combination of Linux and C programming, he
created an open-source telephone switch called Asterisk, and then made the
software available for free to others who wanted to use it.
Without realizing it at the time, Spencer was at the forefront of a movement
to bring open source to telecom. By 2001, Voice over Internet Protocol
(VoIP)the technology that routes voice calls over data networkshad started
to take off. And it became clear to Spencer that the market was ready for
open-source telecom systems. So, he changed the focus of his company to the
Asterisk switch and in 2002 renamed the company Digium.
SIGNIFICANT SAVINGS. Since then, others have followed Spencer's lead.
Today, Pingtel and Signate also make corporate open-source telephone systems
that take advantage of VoIP. Open-source productsstill at the leading edge
of the enterprise telephony marketare less expensive than the home-grown
systems from companies such as Avaya (AV <javascript: void
showTicker('AV')>) and Nortel (
NT <javascript: void showTicker('NT')> ).
Signate CEO Paul Mahler says that his company's open-source phone systems
can save companies 50% or more compared with proprietary voice systems. This
is largely because open-source software is available at little or no cost,
and it runs on off-the-shelf computers or servers. With open-source telecom
systems, companies also avoid getting locked into a relationship with one
vendor and don't depend on that vendor to create new features. Instead, any
programmer versed in Linux can customize a telephone system to the needs of
a particular business.
BusinessWeek.com writer Rachael King spoke to Spencer about the impact of
open-source telecom systems in the corporate market. Edited excerpts follow.
*What is the primary benefit of using open source in a corporate telephony
environment?*
There are several benefits. First, there is very significant cost savings,
which becomes more dramatic when you compare it to feature-rich telephone
systems like those used in call centers or for conferencing.
Features like conferencing are usually very expensive. But when you have
commodity PCsand we make very inexpensive hardware that allows you to
connect those PCs to the conventional phone networkand you combine those
together, all of a sudden there's a dramatic cost reduction. We were talking
to one enterprise customer and we compared the cost of what they were buying
and what it actually costsliterally just the software, the PC, and the
hardwareand the actual real cost was less than 5% of what they were paying.
*What are the benefits other than cost savings?*
There is also the flexibility to be able to customize the product. There is
a company that sold a (rival's) system into a group of doctor's offices down
in Birmingham (Ala.), and after they got the whole system installed, the
doctors realized they could not program the speed dial from their phones. It
had to be done by an administrator. These guys were up in arms about it
because they had always been able to program their own speed-dial numbers on
their old system. There was nothing the reseller could do about this. They
were powerless to make any kind of change to the product.
By contrast, there was a City of Manchester (Conn.) installation of Asterisk
where the reseller there created its own application for the city schools,
which permitted the teachers to take the roll by phone and then have the
phone system automatically call the parents of pupils who didn't come to
class. That's the contrast of how valuable being able to customize the
software is.
*Is Asterisk a Voice over IP product?*
Well, it's a hybrid, so it supports not only just Voice over IP, but also
time division multiplexing (conventional private branch exchange [PBX]
technology used in many enterprises). This is one of the other huge benefits
of Asterisk. Asterisk can talk to both Voice over IP stuff and the
traditional old-school telephony, so you can just mate it up to existing
systems.
In Huntsville (Ala.), there's a company that makes bookkeeping software for
libraries, and they had 70 phones on old key systems (a low-cost basic phone
system) and they didn't even have voice mail. So they just hooked Asterisk
up to it and were able to add IP handsets and conferencing and voice mail to
this old key system. They didn't have to throw anything away.
*Do you need to be a Linux expert to deploy Asterisk?*
People think, "Oh, I've got to be an expert at Linux in order to use it,"
and that's not really true. While you can, if you are an expert, do
everything yourself if that's the direction you want to go. Or, there are
people like Digium, who are happy to hold your hand through the whole
process and give you a solution that is much more of a packaged solution,
and you still get to benefit from all those benefits from open source.
*So, if you're a CEO buying one of these systems, do you want to think about
what kind of expertise you have in-house?*
Exactly. If they need help with that, then they can certainly contact us.
That's one of the things we do. People can come to us and say, "Hey, I need
a whole PBX," or "I've got some Linux-savvy people and all I need are some
cards," or "I need some tech support with this specific problem we're
having," whatever it is. And we have definitely seen enterprises that go
both ways.
*Where are the majority of your installations? Are they larger companies or
smaller companies?*
They are really all over the globe and all over in terms of size. Generally
speaking, bigger companies tend to use Asterisk in a more targeted way, to
solve specific problems in their networks.
*How does pricing work?*
There are two versions of the software. There's an open-source version,
which is freely downloadable, and then there is the business edition, which
is more traditionally licensed, warranted, and supported. In that case, the
business edition is really more. It's the same software, but it's presented
in a different way, with more traditional licensing, more traditional
support. There are certain third-party proprietary modules that are
available for the business edition to do things like speech recognition and
text-to-speech and some features that don't exist in open source today, that
are enabled through the business edition.
To be clear, the software we produce is all open source, but sometimes there
are other companies that have proprietary productswhether it's because of
patents, or because of the nature of their software, or their business model
is not open sourcethat we can enable through the business edition.
Obviously the open-source one is a free download, and the business edition,
I believe, is $995, and a typical installation would support 160 users.
*So services are what typically cost the most?*
The services will typically be where you'll spend the money in terms of the
integration and if you want to get a higher grade of support; for instance,
if you need 24/7 support. Even if you start lumping all that stuff in, it's
still very competitive.
I can tell you there was one large enterprise that had come to us to get a
solution, and we really put everything we could think of, including the
kitchen sink, and put everything at list price because we knew this was
going to be a problem. And even so, I think we ended up coming in at 40% of
the next highest bid, and they simply didn't believe it. They wouldn't do it
because they didn't believe that it could really be that inexpensive.
*When I was at the O'Reilly Emerging Telephony Conference (ETel), I heard
lots of nonprofits and activists talking about how Asterisk gave them an
affordable PBX. Are you surprised at the way Asterisk has been used?*
Well, it's always been my theory that when you make something open source,
that people will be able to extend it and will extend it to do new and
creative things above and beyond just duplicating what technologies exist
today. What's so interesting to me, this year in particular, is seeing the
first sprouts of completely novel ideas that nobody would have ever thought
of before, that are being enabled because of Asterisk.
ETel was a place that it was most visible of all the shows I've been to.
There, I saw Spark parking, people paying for parking spaces by phone, or
the people from (New York University) that had this application where you'd
put stickers on the wall and then they'd have a phone number and an
identifier that was unique to that sticker and you could record a phone blog
for that location. When someone else called, they could hear your story
about that location, maybe add another story. These are not necessarily big
money makers, but they're really new.
There's even a guy who wrote an alarm receiver for Asterisk, which can
receive signals from an alarm panel, so you can have the PBX call people and
page people based upon alarm events rather than having them go to an alarm
company. That's obviously a niche area, although it has general value. We've
seen other people that use that application, but on the scale of a PBX, is
that ever going to be on Nortel's feature list? Probably not. It's outside
the scope of what people consider the features of a PBX.
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