The Evolution of Endpoints
The UCStrategies Experts discuss the proliferation of new types of endpoints in the unified communications market, in this Industry Buzz podcast. The role mobility will play in the evolution of the endpoint is debated, and the Experts discuss whether the demise of the desktop phone is imminent.
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Jim Burton: Welcome to UCStrategies Industry Buzz, this is Jim Burton and I'm here as usual with the UCStrategies expert team and today's topic is endpoints. It's one that's near and dear to my heart since I've been actively involved in endpoints for an important part of my career. One of the big subjects is, what's the evolution of endpoints? We see major vendors coming out with desktop devices, new ones, and Dave Michels will talk about a couple of those in a minute, and then we of course see everyone has a cell phone.
One of the interesting announcements that is being made or product that will be launched in the very near future is from the company Altigen Communications. You all remember them as a server-based solution, but they have come out with a family of docking stations for all the various types of mobile devices. It's very compelling; it's basically a way to charge the device, to use a speakerphone that it's integrated with, but also then they have software that allows you to provide an interface with your existing phone system so that you can actually use the features and functions with your existing phone system from your cell phone. I know that's nothing new but they have a very, very compelling application for that. So without any further ado, let me turn it over to Dave Michels who has been following this; has been on many panels talking about it. Dave, take it away.
Dave Michels: At VoiceCon earlier this year one of my complaints about the show was that there were no new endpoints, and that was back in...I think it was April. That's certainly changed dramatically between then and now and now we're seeing a lot of endpoints, so many that I would say there's even a fair amount of confusion of what we should expect in an endpoint which we didn't used to have.
We have the Cisco and Avaya announcements with both similar types of products, although neither one of them have been released yet, with Android pad type devices with video capabilities. Cisco's is called the Cius, Avaya's is called Avaya Desktop Video Device and those are both portable devices. Even though it's called a desktop device, they're both portable wireless devices meant for video conferencing. At the IT Expo Show just a couple weeks ago we had a start-up camp, and the winner of that by a landslide was the company that presented an IP desk phone based on Android and a SIP Stack, and got a lot of attention. Personally I think they've got a long road ahead of them, but I thought the amount of attention that product got was quite surprising.
We've got Polycom SpectraLink just recently announced a new phone which is kind of a new category buster which is combining for the first time a WiFi Phone with a high speed scanner aimed at healthcare and retail. I think that's bringing convergence to a new level and kind of reshaping who the competitors are. Of course Alcatel's got their My IC Phone that they've been launching and talking about; several new phones from the Microsoft environment; Polycom and Aastra have them. These are the only new phones on the market don't support a standard SIP Stack or an XML browser, but they have a lot of additional capabilities. And then there's the whole cell phone environment-which is constantly changing pretty much on a near daily basis-that a number of people believe those should be the desktop device of choice. Michael, you've been watching the cell phones, what do you think of the cell phone as a desktop?
Michael Finneran: Well I don't know about as a desktop, Dave, but certainly it has gained a particular area. People's cell phones have become their "organize my life" device. You have your contacts on there, your calendar, you've got your camera, you keep your kids pictures, it's your mp3 player... and certainly what we have seen more than anything else is that if we're going to support these, we're going to have to support a variety. Some people love the iPhone, some love Blackberry, Android and right now we seem to be in a frenetic phase. If you've got an iPhone, you're cool. If you've got an Android, you're really cool. If you've got a Blackberry like me, you're an old fart. But we're going to get beyond this, when people start will start looking at these-well basically accept the fact that they're going to have the smartphone, and then figure out what's most important to them. Is it most important to have a browser, a good email interface, a good texting, a good social network interface?
So really I'm waiting for us to get past this frenetic stage. Of course things like docking stations, I'm not so sure. I see a lot of people who are trying to glom in on the mobility space. Problem with the docking station is, people are going to leave and forget their phone, and that's the great thing about a cell phone, it's the one communication device you're going to have with you all the time. But yes, certainly, anyone looking for devices today, if they want to see what people want, they should be looking at the smartphone.
Marty Parker: I'll follow-up on Michael to talk about smartphones, and that's exactly what we're seeing in some of our clients. Healthcare would be one example where the iPod Touch, with the Release 4 software which makes it equivalent to an iPhone, is a fabulous device. Our clients are finding that the cost of purchasing that device is less than the cost of a two-way pager with a one-year contract on it. So they're finding they're getting a hand-held browser interface, on WiFi, with SIP communications capability. There are about four different clients available, even some of the major PBX vendors like Avaya are coming forward with SIP clients for the WiFi mobile phones. So in-building, we're starting to see people go totally away from cellular but it's still going to be a WiFi phone on a portable computer is the way it's starting to look. And that's leading to questions about battery life and that type of thing. But we're starting to see the Android-based devices coming out in so many different form factors, and in packages like from Motorola that address the battery life based on their long experience in that market. So I think what you and Dave have already said is just exactly right. This is going to be a fast moving market and it's going to become very personalized, it's going to be a computer on steroids basically but with voice communications built in as well. So I think we're going to see a lot of changes.
Meanwhile, I think in the SIP world to echo what Dave said, I was surprised recently, pleasantly surprised, to see Avaya come up with a 9608 Phone which is a black and white but 8-lined display based desk phone with SIP client, SIP capability, that I'm seeing bid at $150; that's net discount on a high volume bid, but $150, black and white display, 8-line phone on a desktop is a pretty good deal.
David Yedwab: Let me jump in and talk a little bit about the crush on the business model for the traditional system vendors of the endpoint proliferation. Historically, the endpoint has been the profit model, if you will, for the traditional voice vendors. Anywhere from a third to a half of the per-user cost or the overall system cost has been in endpoints and with the blow up and diversity on endpoints, the entire business model of the system vendor is being revolutionalized and not necessarily being changed for the better for those vendors. And I think the change in business model around endpoint is going to be very critical to see how the whole industry evolves, and it will be definitely something that we will need to watch out for because if the vendors can't find a business model that makes profit for them, the solutions aren't going to go anywhere.
Art Rosenberg: David, I want to second your motion because it's not only the business model having to do with an enterprise organization, but as individual end users, consumers if you will, are going to bring their own devices, that's the end of the supply of those devices through the enterprise.
Michael Finneran: One other thing we have to think about if we're talking about the cell phones and WiFi devices, people also have to be able to talk over these things. And the quality of the cell phone conversation is still fairly abysmal. It will improve in time, particularly with 4G, but we still need to be able to talk on the phone when we have a phone.
Marty Parker: I'd say that's why I think that the whole user experience is in for some continued change. So for example, in a healthcare environment, in order to make these things useable, we're investigating what the care providers are willing to do, and what started to show up are things like ear buds and lapel mics and appliances that make these devices-maybe even some of these tactile covers that go on iPhones so that you can know what button you're touching without seeing the device. I mean there's some evolution that's yet to happen to make these portable devices really useable in all conditions.
Dave Michels: I think one of the big drivers is going to really be around the applications that can run on the desk phone and how those applications are going to be architected. There's basically I see three environments that are opening up: one is the toolkit environment of the SDK, of Polycom, ALU, or Alcatel-Lucent is doing that with their new phone. They want you to kind of write to their standards and that's kind of a chicken and egg problem.
The Android phone at IT Expo got a lot of attention around that, and this is what Cisco and Avaya are talking about. That since it's an Android phone you could load other Android apps and there's an Android development community out there. The problem I see with this one is that the apps are just not that exciting, the phone at IT Expo when he was demoing email on the phone, and a few other things but most phones really are next to a PC or a desktop computer and they don't really need to have those types of applications. It's different in a cell phone or in a mobile environment but on a desk phone I just don't know. They had an interesting app where they were showing a tie-in with www.salesforce.com where it would log calls through a gui on the phone, and that could be practical.
Then the third environment is the XML which is what some of the SIP providers are doing,or SIP phones are doing like Aastra, because SIP is so limited in its display functionality and applications and so they're building in using the browser on the phone to actually control things on the phone like conference calls and muting and stuff like that through the XML browser. Depending on which one of these standards really kind of can takes hold we'll either see what kind of desktop devices come out of that, or we'll stay with proprietary phones, which is why a lot of the vendors right now are staying with proprietary phones.
Jim Burton: Let me address a couple of issues here. One is the business model. There is no question that the challenge that the traditional telecom vendors have had is changing their business model from a hardware architecture, to a software architecture, and endpoints is part of that. Now a number of them have been very smart and they're charging a software license for an endpoint, so in theory they don't care what the endpoint costs, but many of them are still dependent on endpoint revenue which I think is the kiss of death because customers are going to go with endpoints that are more usable for them, and so what do you need your desktop phone to do, and as someone just pointed out, especially when it's sitting right next to a PC.
Clearly there are situations where the IO and their liability of that endpoint device next to a PC may have some level of importance, but in many ways if it was a mobile device, then you're on a different network anyway. So I think we're going to see a lot of change in this marketplace. I see the demise of the endpoint that we've known for years as the desktop telephone, as we start going to more and more mobile devices being part of that solution. And when I say the demise, I don't mean they'll ever go away completely because there are clearly situations where people will want them, and I also think there's a generational thing. You take young people getting into the market today, into the business market, they are looking for devices that they're used to and those are the mobile devices. They don't use phones that are at a desktop or even residential phones. So I think there's a lot of excitement. There's going to be a lot of churn going on in this marketplace over the next few years which will make it exciting for all of us. But again, I think that the endpoint market is just going to see major, major evolution and the endpoint devices that we've come to know for years as a desktop phone will fade away.
Marty Parker: Jim, if I could build on that to say I agree with you and I agree in some cases it will be a long, slow transition, in other cases very quick as you've described, which will really relate back to conversations we've had in previous podcasts and some of the posts on UCStrategies.com to talk about use cases. More and more I believe customers will be well advised to become highly distinctive about the use cases across their various business processes. So that they can make the endpoint selections based on the jobs people are doing, and we're seeing more and more affinity to that idea among our clients.
Michael Finneran: I think you're right on, Marty and also it's going to involve choice, because it's not going to be one preferred device for everyone and of course coming from the mobile standpoint, I still think the primary application of the desktop phone is going to be to hold down a stack of papers in a high wind.
Jim Burton: Russell, it sounded like you had some comments.
Russell Bennett: I want to echo what has already been said. I'm a little bit confused by the new tablets and what the marginal utility of those is over the phone versus the PC. I'm also a little concerned about the actual portability of those tablets. Do they go out of the building? Do they only stay in the building? And if they don't do both, then how much marginal utility is there. What is the actual service plan that employees will have with their cell phone minutes, is it just an extension of their personal cell phone contract that they have to get expensed from their employer, or is there a corporate deal going to happen? That's not really clear to me.
Also I want to address the notion of the availability of applications built on Android that are more than games or booking a flight or posting on Facebook. I was on a call this morning with Cisco where they were talking about more of their collaboration vision and they were trying to extend the definition of UC into integration with enterprise applications, and so the notion is that somebody's going to sit down on Android or on iPhone or whatever and write an application that hooks into SAP or into an accounting package or something like this, and its not clear to me...all of these little applications that run on these platforms sound trivial. It's not clear to me that the software development of a quality application is any less trivial than one that you'd implement on a PC, and so once again I'm just not seeing the marginal utility there.
Jim Burton: Good point.
Steve Leaden: Yes Jim, we're involved in a couple of projects right now and we're seeing some interesting areas. We're seeing a push by some of the manufacturers who are talking about open standards where actually one of our clients who's implementing a non-Cisco solution; we can reuse Cisco endpoints on this other manufacturer's solution, which I thought was interesting.
The other thing I'm seeing quite a bit is, and it's actually in two cases, is the cost of a gigabit interface - is it simply staying with the same model and just buying it as a 10-100 or a gig interface OR do I have to upgrade to a phone that is twice, sometimes even three times the price of the phone? Not all manufacturers are the same here. Some customers are also looking for cordless, one being a Mitel customer of ours - all the executives now want the desk cordless interface on their phones and they're actually pretty excited about it. So it's interesting what we're seeing.
What we're also finding is again that the desktop, (actually this was given to me by one of the manufacturers last week), there is still a lot of margin in the endpoints and actually much more so than the licensing factor, and therefore, I think it's not just the users that drive the market but the manufacturers at large that also drive what is provided to the end user market.
I had discussions with colleagues 15 years ago all about the demise of the desktop - it was just going to go away. And yet as the desktop gets to be more integrated with UC and UC actually now is taking over (or superseding) the desktop with some of the manufacturers if you will, the smarts are now in the UC interface at the PC and not even in the phone. I think we're going to see the phones, the desktops as we know it, still here for quite a while. So I think as the manufacturers continue to evolve they will provide us price points like Marty was sharing a little bit earlier--$150 to $200 per endpoint--and again I think the tablets will gain some speed once they come down below that $2,000, $1,000 mark to Russell's point a little bit earlier on the tablets. I think we're at an interesting time with all of these endpoints, and we'll see what the market bears, and we definitely see mobility out there taking over for some clients where they're thinking about, "should we really do 100% replacement on desktops - maybe we'll do 80% maybe 90%." But still, the idea of just getting rid of the desktop totally, I think that's still a ways off.
Jim Burton: Commenting on a comment you made, and something that Marty said, I think use cases will drive a lot of these decisions. If you think about why you would have a tablet with the video capability as part of your communications package, I can see that happening, but are there a lot of use cases for that? Maybe not, but at the same time if you look at some of the products that Motorola has delivered over the past few years, they deliver a lot of devices--devices that UPS comes to your house with, that's a mobile device, has some handwriting capabilities on it; a variety of types of things, so they have been dealing in this whole area for quite some time. I see use cases being developed for why would someone use one of these, and we'll call them tablet types of devices--that will drive this. I see a lot of these devices being developed today that I expect to see in garage sales two or three years from now, because they really don't have a use case developed for them. Yeah, they're cute, they're clever, and I want to have one of them, but you would enterprise go out and buy a bunch of them for their organization, and again I think it gets back to what Marty is always preaching to us-about use cases.
Art Rosenberg: I want to just emphasize that it's not just the use cases, per say, but also the market. The user market is the segment, and for example in healthcare you can look at the people who work inside an organization, inside the building and so on, but then you look at the consumers who are affected and the consumers who need to be notified about a reminder, say, to take a pill or the fact that there was a detection of some kind of a problem with them, or a reminder to come and make an appointment, and so on. Things that were done manually, all of these can be automated, if you will-self services. And they are not going to be doing this from a desktop. Period. So they're going to be saying, "you call me the way everybody else calls me and let me know about a reminder," and there are going to be a zillion of them.
Jim Burton: There's an app for that.
Art Rosenberg: Yep, a zillion apps.
Jim Burton: Thank you, everybody, and I look forward to talking to you next week.