Off the hook

The world may be flat and the information age is well underway, but expanding a business internationally is still a daunting task. In addition to the difficulty of coordinating tasks without face-to-face meetings, there can be time-zone differences and other logistical hazards to negotiate.

Add to that the cost of all those international phone calls, missed e-mails and, in China, language barriers, and those plans to conquer the Chinese market may start looking less attractive.

Thankfully, the internet has stepped in – as is often the case these days – to solve at least part of the problem. Voice over internet protocol, or VOIP, is an increasingly common way for companies to keep in touch with clients, employees or offices abroad, often at a fraction of the cost of traditional telephony.

A richer set of functions makes VOIP an especially useful technology for companies planning to start a production facility or sales office in China, but with headquarters elsewhere.

The most common application of VOIP technology is as a telephone replacement. The technology allows voice calls to be placed through computers connected to a network, bypassing phone lines, and thus phone charges, completely.

This is demonstrated with devastating efficiency by the free program Skype, which allows any user with an internet connection and a microphone the ability to instantly “dial” a friend anywhere in the world – online or offline.

“The most significant advantage VOIP technology offers companies is lower costs, especially if the company places a lot of international or long-distance calls,” said Ryan Zhou, a technology consultant at Getronics, a technology services provider which installs VOIP technology for clients.

Rich and varied uses

But using VOIP as a telephone replacement only explains part of the technology’s allure. Voice over IP drives a host of possible uses, from video-conferencing to voice messaging and call-routing. The technology is robust, simple to use, and easily adapted for large networks, so everyone from freelancers using Skype to from home to call centers using industrial-strength VOIP solutions has a use for it.

A case in point is Yellow Mountain Imports, which sells boards and pieces for the ancient Chinese game weiqi online. It has warehouses in Los Angeles and Shanghai, and the company’s founders constantly shuttle between the two cities.

The company’s eight staff in the US and Shanghai coordinate operations with a daily video conference, and continue sending instant messages and voice calls using Skype throughout the day.

“Before Skype we weren’t able to work as closely as a team in two different locations like we do now,” said Aaron Shershow, the company’s co-founder.

Beyond telephony

Indeed, the employees at Yellow Mountain have found that Skype surpasses phone calls and emails as a communication tool, facilitating a heightened level of dialogue.

“I had a video conference last week with our manager in Shanghai, Li Ziyang, where I held up products and discussed design changes, while simultaneously streaming files to him and spelling out words in English on Skype chat,” said Shershow. “That’s a much more productive conversation than a phone call plus e-mail.”
Voice over IP’s varied applications, whether they be platforms for voice, video, file transfer or chat, offer even more benefits to companies that have larger operations.

The fact that VOIP uses existing data networks means economies of scale are easily reaped, and can be adapted to workforces different sizes.

“VOIP is most efficient in large companies,” said Getronics’s Zhou. “Companies already pay for [network access fees], so using VOIP is efficiently using that resource. Using VOIP can be very important when companies are testing unfamiliar markets because the initial costs are low.”

But VOIP’s strength – riding data networks – is also its weakness.

Call quality can be highly dependent on a user’s internet connection speed and the destination of a call. Calls within China, for example, have better voice quality because internet connections within the country are faster. But calls outside China can be slow, depending on the bandwidth available between the two countries.

Service providers like Getronics, however, can set up Wide Area Networks, or WANs, that essentially operate as private pipelines to channel a company’s data traffic. Having a WAN in place would factor out the internet’s vagaries and guarantee the quality of VOIP calls made over it.

According to Zhou, WANs in China offer bandwidths of up to 100 megabits per second.

Still, even the most stable WAN is subject to disruption. The undersea earthquake off Taiwan’s coast on Dec 26 damaged undersea data cables, causing massive internet outages across Asia that lasted weeks.

Nothing is perfect

Companies like Yellow Mountain, whose operations rely heavily on the internet, were stopped in their tracks.

“[The internet outage] was a disaster for us. We couldn’t talk on Skype, our Shanghai staff couldn’t access our database, order processing or customer service websites. It disrupted the 24-hour workflow we had become used to,” Shershow said.

Raghavendra Tripitati of Satyam Computer Services, an Indian technology services company, faced a similar situation. “[The outage] impacted our accessibility to our US websites and India websites. It’s been close to three weeks and operations are still not normalized,” he said.

But companies thinking of using VOIP to do business in China can take heart. Verizon, the American phone carrier, announced last month that it would partner several regional telecom operators in building a US$500 million high-speed optical cable linking China and the US.

Crackling voices and dropped connections should be a thing of the past when the cable is ready in 2008 – it will increase current bandwidth by 60 times.