Competitive hosted VOIP service providers are questioning the suitability of commercial IP Centrex platforms for carriers, following Level 3 Communications Inc.'s (Nasdaq: LVLT) decision to exit the hosted VOIP market (see Level 3 Provides VOIP Lesson).

Two of the upstarts hoping to capitalize on Level 3's decision say they're using their own in-house platforms, and not systems sourced from vendors.

Jason Talley, CEO at Nuvio Corp., says his company is in talks with a number of current 3(Tone) channel partners looking for a new hosted VOIP wholesaler (see Nuvio Treads in Level 3's Tracks).

"We developed our own services platform, and that pleases the channel partners. It makes them confident that they won't suffer the outage issue that Level 3 had," says Talley. (Level 3 hasn't admitted to any outage problems -- see Level 3 Provides VOIP Lesson).

"We checked out the commercial IP Centrex suppliers, but there weren't any advantages to switching off our own system. Their license costs are high, and every time you want to change something you need to call out someone from the supplier to code a new feature. The usual suspects didn't have anything going for them."

Those "usual suspects" include BroadSoft Inc., Sylantro Systems Corp., and VocalData Inc., which is now part of the Tekelec Inc. (Nasdaq: TKLC) empire (see Tekelec Connects With VocalData).

Talley's view is largely echoed by John Wind, senior director of marketing at Volo Communications Inc., who says his company is also fielding calls from current 3(Tone) channel partners.

"Our position has always been that we prefer to develop our own applications. We know about other platforms and the features and functions they have, but the key for us is to have the source code and to own and manage the interfaces with our other systems, rather than have a box parked in our network that we can't fully manage on our own. It's all about the level of management that's required -- we don't want to have to call an external agent in each time we want to change something."

He adds that "any service provider, large or small, using external technology will always face scaling problems. That's the nature of the beast."

And Wind is concerned that Level 3's decision to drop 3(Tone) will reflect badly on the Centrex market in general. "The hosted platform business does work, and it's safe and stable."

Not surprisingly, the commercial system vendors are eager to counter the claims of inflexibility. On the question of having to call in external support to make changes and updates, Broadsoft's head of marketing Scott Wharton says that's "patently untrue."

"Our system is designed to be changed and managed not only by our customers, but also through a Web interface by the end users of the service. Our system is highly flexible to a very granular level -- just ask any of our customers, such as BellSouth or MCI. This sounds like posturing to me. I'd be very surprised if these [in-house] systems could match anything near our capabilities."

And Wharton says Level 3's experience shows how important it is to have a system that allows service providers to be able to make the changes themselves. "Not everyone's needs fit the cookie-cutter. You need to address that need for flexibility."

Over at Sylantro, senior VP of marketing David Illing is very upbeat about the state of the IP Centrex market and demand for his company's products (see Sylantro Ready for Its Public). He is also quick to point to Level 3's admission that it is dropping 3(Tone) because it adopted the wrong strategy, and not because the technology (Sylantro's platform, in this case) didn't work properly.

"It has always been the case that service providers need to decide whether to build or buy, but if a service provider builds a system it needs to look at the features it can get out of its own technology in a time-to-market situation. The whole testing process, making a platform reliable -- all that work has to be done before services can be launched," and with a commercial system all that work has already been done, says Illing.

"We are testing millions of calls every night on our system. That's the sort of process that needs to be done. But it's up to each operator how much time and money they want to invest in a system. A commercial platform is good for some and not for others," he concedes.

On the question of supporting systems such as Sylantro's platform, Illing says his company trains its customers' technical staff, but that "people have to learn about the interfaces and how they work, and that can take time, maybe longer than if they had built the system themselves."

And it seems there is no shortage of service providers willing to take the support regime and license costs on board. Broadsoft, Sylantro, and Tekelec are all adding new customers, with Illing claiming that Sylantro added 11 new customers in the fourth quarter of 2004 alone. (See Sylantro Lands New Customers, McLeodUSA Selects Broadsoft , iiNet Offers VOIP With Broadsoft, XO Picks BroadSoft's VOIP Apps, Broadsoft Names New Customers, One Connect IP Picks Tekelec , and Telekenex Uses VocalData for VOIP.)

— Ray Le Maistre, International News Editor, Light Reading