World Wide Worx | Business Technology Research South Africa

VoIP finally meets expectations

Voice over Internet Protocol (VoIP), which allows Internet users to make phone calls to each other at no cost, is finally taking off among South African businesses, four years after it became legal to use it outside company networks.

This is the key finding of the VoIP in South Africa 2008 study, released today by World Wide Worx.

At the end of 2007, half of all corporations were making use of VoIP, and that usage level is expected to rise to 64% in 2008. Most of these companies are using it within the context of Least-cost Routing (LCR), which enables any phone call made from inside the company to be routed via the most cost-effective route.

Among Small and Medium Enterprises (SMEs), however, deployment of VoIP is still rather modest, despite LCR having been adopted at almost a similar rate as corporate adoption.

The use of VoIP among SMEs for business purposes rose from 9% in 2006 to 18% in 2007, after rising from 2% in 2004 (before legalisation) to 4% in 2005. This represents an effective doubling in each of the years in which it has been deployed among SMEs.

“In 2008, the expectations of SMEs are for dramatic growth in VoIP adoption, namely another doubling,” says Arthur Goldstuck, MD of World Wide Worx. “Experience suggests, however, that such high expectations are rarely met off a high base. A more realistic forecast would be for growth in VoIP adoption among SMEs to match the level of growth seen in 2007, i.e. to reach around the 25%-30% level in 2008.”

The background to the research

In early 2005, all eyes in South African telecommunications were on VoIP, due partly to its deregulation on 1 February of that year, and due to the vast promise it held for reducing communications cost for individuals and corporations alike.

In its first report on VoIP in South Africa, released in January 2005, World Wide Worx concluded that the technology was already in active use in large organisations, and such use would intensify, but that take-up among consumers and small and medium enterprises (SMEs) would remain muted for several years until seamless and bundled solutions, cost-effective broadband, and a clear value proposition were available.

This indeed proved to be the case. Many observers who had expected greater “fireworks” expressed disappointment in the take-up of VoIP during 2005 in particular, as well as during 2006.

However, the picture began to change in 2007, with broadband becoming more pervasive among existing Internet users, and VoIP beginning to attract SMEs in significant numbers.

Motivation and Methodology

World Wide Worx engages in a three-stage research process to provide an understanding of VoIP trends, namely:

• a detailed analysis of business and technology trends that are shaping the evolution of IP and being shaped by it;
• face-to-face interviews with decision-makers from 100 South African corporations, including more than 10% of the companies listed on the Johannesburg Stock Exchange;
• telephonic interviews with 800 small and medium enterprises.

The three phases of the 2008 study were conducted during the second half of 2007 and the beginning of 2008. Trend lines included in the report were developed from comparing the findings of similar research conducted by World Wide Worx in 2004, 2005 and 2006.

For more information, please contact Arthur Goldstuck by phone on 011 7827003 or by e-mail at arthur@worldwideworx.com