Firms say VoIP has promise, but isn't quite there yet.

Although the technology for making phone calls over the Internet has been touted as the next big innovation in telecommunications, local companies are not jumping on the band-wagon just yet.

Whether it's cost to set up, efficiency, or technology-founded doubt in VoIP, short for Voice over Internet Protocol, small and medium-sized firms interviewed by the Business Journal are choosing to stick to their regular phone service--for now.

"We think (VoIP) is rapidly maturing but we're not sure it's quite ready for full-scale adoption," said Ed Bascom, vice president of information services at Westlake Village-based Pleasant Holidays, an online travel agency. "We have the capability, it's not cost-effective yet."

Although VoIP may not be catching on companies such as Pleasant Holidays, one of the largest telecommunications companies, SBC Communications, is banking on its growth. Citing industry analyst firm IDC, executive director of SBC Brian Buffington recently wrote: "During the next several years, the hosted VoIP market alone is expected to grow from $287 million to $6.7 billion."

SBC, in fact, has offered VoIP service since 1998, but it has been "expanded and enhanced in the last few years," said Jason Hillery, an SBC spokesman.

Hillery said the company has had an increasing demand for VoIP from businesses between 50 and 250 employees. But the move over to VoIP does not mean firms are abandoning traditional phone service. Instead, they are taking more of an "evolutionary approach," Hillery said. He did not provide further details about the number of SBC clients who have made the switch, but pointed out that "most of the equipment we sell is VoIP or VoIP-enabled."

"In many cases businesses are looking for VoIP options in conjunction with current phone service," Hillery said. "We have a transitional service."

According to Hillery, businesses best-suited for VoIP are those that have a heavy volume of calls between company offices or often dial long distance. Firms that have a "robust data network" are also good candidates, he added.

VoIP helps to save money on phone calls and combines voice and data capabilities.

"Most of the businesses we talk to (are interested) in network consolidation, as they have to manage a separate data and voice network (now)," Hillery said. "From a management perspective, it can be great cost savings."

Matter of timing

Tony Laiewski, vice president of sales for Camarillo-based CPI Solutions, said marketing VoIP to businesses "has to do with timing" and whether "they're getting ready to invest."

At CPI, which sells and maintains VoIP systems made by Cisco Systems, Inc., business is increasing rapidly.

"I would say that it's doubled" in 2003 over 2002, Laiewski said. By the end of this year, he said he expects revenues to double or even triple due to increased demand.

In addition to a fast network, companies that are thinking of implementing VoIP must use one that's "reliable," Laiewski said.

"Most of the networks out there have issues," he added.

ISWest, an Internet service provider based in Agoura Hills, has high-speed Internet lines that are capable for VoIP, said Drew Kaplan, the company's CEO. But he said he feels the technology isn't quite ready and does not recommend it to his clients.

"We're cautiously optimistic," Kaplan said. "Even though VoIP is coming, it's still sort of a hybrid thing."

United Online, an Internet service provider which operates discount dial-up services Net Zero and Juno, has not implemented VoIP, said Peter Delgrosso, a company spokesman.

Comfortability factor

And even Inter/Media Advertising in Encino, which is an advertising, public relations and media buying firm that has one of the leading VoIP companies on its client roster, is not jumping over to the new technology quite yet.

"It's a very new technology, people are very comfortable with what they already know," said Michelle Zygelman, an account executive whose clients include New Jersey-based Vonage, one of the companies offering only VoIP service. "I think a lot of people are just not aware that the service is out there," Zygelman said.

But Inter/Media Advertising is in the "planning stages" to adopt VoIP in part, "because we feel that it will support our land wires ... and it's a reliable alternative," said Malena Cruz, senior vice president and controller at the company.

The company is not abandoning its land lines phone service, however, which is perhaps a sign that it's not completely convinced the new technology is reliable.

"We're going to have a dual service," Cruz said.