Traditionally, Centrex service is the outsourcing of PBX facilities to a section of the local Central Office switch, with individual lines (often multiplexed) from the CO to each user extension on a business site. In the US, it represents a solid business for incumbent telcos and overall accounts for a surprisingly large 15% of business extensions. However, for a variety of reasons, this type of service has never really taken off in Europe. Will IP Centrex be any different?

What’s good for the US . . .

In the US, conventional Centrex appeals to both large and small businesses for rather different reasons. For small businesses, it requires little or no upfront investment in equipment or installation and can be leased on a month-by-month basis, which protects companies that are changing or growing rapidly from being locked in. Centrex gives these customers the basic business features they need – DDI numbers, three or four-digit dialling, call forward, call hold, etc. – without them needing either to buy or manage their own phone system.

Large businesses, on the other hand, typically have longer Centrex contracts and may also have equipment deployed on premises at their main sites. Centrex is attractive for them because, as a central office service, it can scale up or down by almost any amount. It keeps the cost of the equipment and upgrades off the company’s assets and provides a means for 24x7 maintenance outside the business. It can also be more cost-effective for getting service to multiple locations than connecting PBXs with tie lines, or leasing off-premise extension lines.

Where Centrex tends to fall short of the PBX alternative is in the features that it offers and in the customer’s ability to control the service. Centrex usually offers essentially two options for delivery of features – cheap, dumb, analogue phones or smarter, but more expensive, proprietary or ISDN featurephones. For the cost-sensitive customer, the analogue phone is the only real choice and this offers a poor interface for actually using the features (star and hash codes, hook flashes, etc.). For those willing to spend more, the extra does not in fact buy that much. Other problems include the fact that a Centrex user relies almost entirely on the service provider for configuration and management. While having someone else to manage the overall service is a key benefit of Centrex, there are some areas – like adds, moves and changes for example – where it would be faster and more accurate to have a self-service offering for the user. This is not usually possible, though, with today’s circuit-switched system architectures.

In reality, there is little beyond price and what an organisation has done in the past to encourage it to choose a Centrex solution. Because of the nature of this type of outsourcing, there is even less that ties it to a particular service provider in a competitive market because there is little or no differentiation between services. In Europe, it has also often proved costly and difficult to implement.

And the difference is . . . ?

So why should IP Centrex succeed where the traditional, circuit-switched flavour has not? Most arguments emphasise the fact that an IP-based solution makes it easier to develop and deploy new applications. This is certainly true. However, just adding new features, like unified messaging and find me/follow me, is unlikely to convince die-hard PBX users to switch to a different model. Most of these features can be implemented using IP PBXs anyway. What is more likely to be successful probably has more to do with the inherent capabilities of IP itself and with the growing strengths of an outsourced model for service provision.

In an IP environment, all user pathways are managed by a central call server and delivered over a single common link to the business site, then distributed to user devices via a LAN or WAN. A local administrator within the company can readily add a new user, or move an existing one, by logging on directly to the central server. For customers with multiple locations, the same capabilities can extend to the wide area network, where common dialling plans and feature groups can be shared across a voice VPN.

Although these capabilities apply equally to a premise-base IP PBX model, a key attribute is that IP Centrex facilities are no longer inferior to the IP PBX alternative. At the same time, the need for co-ordination of wide area communications, covering mobile and remote workers as well as closer and more complex communications with trading partners as part of e-business development, is increasing rapidly. This emphasises the likely benefits of a network-based solution. At the same time, as Application Service Providers become more visible in areas such as web hosting and enterprise software (CRM, ERP, etc.), telephony is increasingly likely to fall in line as another mission-critical, hosted application.

Faced with this, the argument that current PBX users like to own their phone systems just for the sake of ownership is misplaced. The opportunity to outsource an increasingly complex and demanding set of requirements, without incurring additional cost or sacrificing functionality, to a trusted service provider who can guarantee a reliable service will prove irresistible for many.

What’s in a name?

Another difficulty with IP Centrex is the name. Although descriptive of part of the functionality, it gives the impression of simply replacing the traditional Centrex features with IP equivalents. As such, it carries a lot of baggage about relevance to small, medium and large businesses and diverts attention from the real purpose.

In fact, the IP version has a different objective: enabling and enhancing group communications, particularly for groups that may change rapidly. This means putting more control into the user’s hands, for example the ability to control features through a web interface as opposed to a keypad.

Time for a new name?

© e-principles 2001

Robin Duke-Woolley

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