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"The time has clearly arrived for voice-over-IP technology with its compelling cost savings"

"In the fall of 2000, business-technology managers at the Minnesota Department of Labor and Industry had to replace a patchwork of five phone systems in the agency's headquarters. As they explored their options, they became intrigued by an emerging technology called voice over IP.

VoIP works by digitizing a voice signal, chopping it into packets, and sending them over a company's computer network or the Internet like data or E-mail. The packets are reassembled at the destination and, if they've traveled fast enough, end up producing a voice signal that sounds as clear and clean as a conventional analog telephone system. The technology promised to save the Minnesota department lots of money, provide better tools for collaboration, improve efficiency, and cut long-distance charges. In the long run, using voice over IP might even eliminate the need to operate separate voice and data networks.

But few large companies used the technology in the fall of 2000, and the state's tech managers were apprehensive. They worried that it was "all Buck Rogers stuff ... too out there," says Mary Benner, the department's VoIP project manager. But detailed discussions with networking vendor Cisco Systems convinced them that "maybe it's ready, maybe we can do it," Benner says.

The department deployed 300 Cisco IP telephones and additional software, hardware, and services at a cost of $435,000. More than three years later, Minnesota Labor and Industry is a true believer. One big benefit for the cash-strapped state government: The department has cut its monthly phone bill in half, from $21,700 to less than $10,000. Last summer, it expanded the VoIP program statewide to seven additional locations, and other branches of the Minnesota government are looking to follow suit."

Full article: InformationWeek