The networking and telecoms industries have been converging for some time, yet there remains a distinction between the two. However many mergers and acquisitions are made, Cisco and 3Com are still regarded as being data networking vendors, while BT, Lucent and Mitel are communications companies, as are Ericsson, Alcatel and Siemens Communications. Nortel is perhaps the only big name that has managed to be seen as a player in both camps, mainly because of its acquisition of Bay Networks.

Who will come out on top? "It is a tough one to call," said Andy Shepperd, general manager of the networking business unit at Computer 2000. "The question is whether it will be data over voice or voice over data. Will it be companies such as Cisco or Nortel?"

Staying single
The market has not yet fully defined itself at the vendor level, and although further merger and acquisition activity is certain to take place, the two sides may never become a single unified sector.

Nick Hunn, research and development director at communications products developer TDK Systems Europe, believes everyone is trying too hard. "Both the telecoms and the computing industry love the word convergence," he said. "They even agree that it means a way of grabbing some portion of the other's market. The problem is that neither really understands the other's market, which is not surprising when they have such different business models."

As a consequence, the leaders are racing to acquire companies and technologies that will allow them to straddle both data and voice. This aim, says Hunn, is "like having two mountains and no Mohammed".

The data and voice vendors are converging on the unified market from different directions, and are unable to progress beyond protecting their legacies and using the technology they have at their disposal. It will be many years yet before the two markets are truly converged. Once they are, people will no longer talk about convergence. It will be part of the expected functionality of the network.

Meanwhile, users are selecting the systems that suit them best - selecting vendors for combined solutions according to their specific needs and preferences. Success in this environment will depend on how vendors pace the transformation of their businesses. If they move too fast from their core business, they may come unstuck. Moving too slowly and failing to give customers protection for the future will also be unwise.

Data vendors, telecoms companies and PBX manufacturers alike will need to offer solutions that can combine voice and data as well as deliver value.

Mike Magee, product manager for IP services company Global Crossing (formerly Racal Telecom), says that as convergence takes place, all vendors will need to offer an end-to-end solution. "That means a technical and service solution offering multiple connectivity options via a converged network but retaining the networking quality," he said. "It also means enhancing the customer experience in the way the service is managed.

"The future supports the customers' needs by providing a feature-rich, fully converged networking solution that is reliable, secure and cost effective. An IP platform supporting a converged solution makes that a possibility," he added.

Heading down IP lane
IP is where the whole market is heading, and this would appear to favour the traditional data vendors. But it is not as clear cut as that. Standards for VoIP are not yet fully developed and there remain concerns about quality. Until these questions are answered the market is in stasis, and some vendors even appear to be backing off a little.

The latest suggestion that the market may not be developing fast enough to satisfy the data networking vendors' appetite for growth, has come from 3Com. It has distanced itself from some of its low-end communications products and has also thinned out its high-end networking range.

3Com's shift in strategy may prove to be part of a wider trend towards fragmentation, as many start to address specific areas of the market. Shepperd says the market has been dominated by corporate systems and proprietary converged solutions until now. "There has been nothing at the entry level that you can use out of the box," he said.

Some vendors are already starting to address SMEs. On one side there's 3Com with its MBX series and Multitech with its plug-in eight-port VoIP product, and from the telecoms direction, there's Netopia with its low-cost voice and data PBX product.

The SME market may be the easiest to penetrate, said Shepperd, as small companies installing their first networks and PBXs can save considerable amounts of money by installing one system instead of two. He believes we will see more companies focusing on this segment.

Once quality and standards issues have been resolved there will be no holding back, said Robert Turner, head of call centres at Mitel. He said convergence will become just another part of the solutions on offer. But the focus on IP is going to favour the data networkers in the end. The voice vendors are having to move in the IP direction.

"The pain felt in the birth of CTI [computer telephony integration] was not in telephony - which always has been a robust real-time application - but in business data and LAN infrastructure. We see CTI becoming a legacy term for what is implicitly available by voice-enabling an IP infrastructure," said Turner

But questions remain over the ability of the voice companies to move into the data arena. Telecoms giants do not have to answer that question because they are protected from any sudden fall-out by the issues of quality and reliability that continue to hang over VoIP. There will be a need for a carrier, but not for the PABX, said Shepperd, and telecoms vendors need to come to terms with this.

"Some serious consolidation needs to take place. Companies such as Lucent have not yet made the connection with the data market. In the data world, Cisco is the real driving force and it will be very difficult to beat," said Shepherd.

The struggle to guard new technology and control both the corporate and the SME fronts through acquisition is set to continue. Meanwhile, the technologies continue to look more like each other on paper.

Tim Wells, marketing manager at Ascom PSD, the private switching division of telecoms vendor Ascom Group, said that while just about every manufacturer is developing products that are VoIP-ready, the real winners will be those that communicate best with the customer.

"What's most important from a customer's viewpoint is that the application is deliverable and able to provide effective business benefits," said Wells. "Too often technology is oversold and then not actually used."

Conclusions

• Cisco is the leader in the convergence market, although many would argue that its activity is mainly confined to routing of traffic which has little to do with convergence.
  
• Nortel is a strong challenger and so are other voice vendors such as Mitel and Lucent who have strong legacies in the PBX segment and tried and tested quality. Behind these names is a group of telecoms companies that are all trying to establish their CTI credentials. But many haven't developed channel policies.
  
• Further consolidation is inevitable as voice companies seek out more IP skills and competition as the market - which is yet to really take off - intensifies. Major players are certain to continue with acquisitions.
  
• VoIP is the technology that every vendor is currently focusing on. However, quality and standards issues show no sign of being resolved yet and this is restricting the use of VoIP to private or local networks.
  
• Routing and IP/PSTN gateways have been the main battleground so far but soft switching will be the key area in the future. However, it may be five years before PBXs become redundant.