Business Disruption in Document Communications – What Happened?

In the late 1990s, the Internet and the World Wide Web created massive technical disruption for the worlds of document communications and messaging. Now, nearly twenty years later, business communications looks much different than it did going into the Millennium and once major businesses such as the marketing of enterprise fax machines are deep into their long tail phase. In my last post, I noted several trends in both fax and email as the related standards communities pushed to transform these technologies for the new IP world. Let’s look at what happened.

One major driver of the success of fax in the Nineties was the classic network effect as postulated by Ethernet inventor Robert Metcalfe. In essence, Metcalfe had stated that a network became much more compelling as the number of connected devices increased.  In the Nineties, the fax machine vendors and computer fax companies were often on opposing sides in technical battles, but all of these companies benefited from Metcalfe’s network effect as it applied to the overall fax network. But as we crossed into the 21st century, fax machines designed to run on the circuit-switched phone network (aka the Public Switched Telephone Network or PSTN) had much less utility in an increasingly IP network connected world. As a result, physical fax machines began to disappear from larger enterprise offices and in smaller offices, they were often replaced by less expensive multi-function peripherals (MFPs), which were basically printers that also included fax and scanning features. This meant that the number of Group 3 fax devices in total at first plateaued and then began a decline. In essence, Metcalfe’s network effect played out in reverse. The fax machines and MFPs of the Nineties did not evolve to use the new IP fax standards, so as document communications moved to IP, these physical fax or MFP devices still only sent faxes over the PSTN and were less connected as IP communications became more prevalent.

If we consider the trends in computer-based fax, they played out differently. Companies like Brooktrout sold fax boards to independent software developers and the boards were incorporated in local area network solutions. These solutions also typically included tight integration with email.  By 2004, Fax over IP enabling technology started to be commercialized, using the ITU-T T.38 IP fax standards. T.38 had some technical issues, but it could use the same call control protocols — SIP, H.323 and H.248 — that were being adopted by the new Voice over IP networks, so T.38 became a popular choice for conveying fax over these VoIP networks. By contrast, the T.37 approach of Internet Fax over Email did not get much adoption, most likely because it didn’t mesh very well with Voice over IP.  The computer-based fax solutions that ran on Local Area Networks continued to have healthy growth in the first decade of the 2000s in large part due to the continued validity of fax as a legal document, perceived security compared to use of email over the Internet, a slow rampup in the use of digital signatures on other electronic documents and regulations such as the Health Insurance Portability and Accountability Act of 1996 (HIPAA) which meshed well with receiving fax documents in electronic form (rather than on a paper tray).

During the same period, email use continued to grow, but rising issues such as lack of security and massive amounts of spam made the use of email outside of corporate subject to a number of hassles. As noted above, electronic signatures started to become available as a legal alternative to fax signatures, but didn’t gain widespread use until the past few years. As a result, enterprises tended to standardize on a particular commercial email package and communicate whenever possible over secured private IP networks and by making use of security tools such as Virtual Private Networks (VPNs).

Now, in 2018, the messaging world is highly fragmented. Large enterprises have tended to choose unified communications eco-systems from large players like Microsoft, Cisco and Avaya, but even these solutions are rapidly evolving as the momentum is shifting toward pushing enterprise communications into the Cloud.  Hence, Microsoft is shifting its emphasis from Lync to Skype for Business and now onto Teams and other vendors such as Cisco are doing much the same.  Upstarts such as Slack have started by offering cloud-based team communications and have forced reactions from the traditional Unified Communications players.  As messaging has evolved, voice is now becoming less important and fax is now more of a niche play.  One thing I don’t see too much of is the use of business communications that can effectively cross the boundaries between organizations. In theory, Cloud-based communications could get us there, but the vision of the late Nineties of being able to communicate documents and other types of media effectively across the entire Internet has been hobbled by security, privacy and spam issues. We’ll have to see if the Cloud and better cross-network security mechanisms could form the foundation for approaches that will be superior to today’s highly balkanized communications landscape.

If you or your company have participated in the massive changes to the communications eco-system since the 1990s, feel free to weigh in with comments. If you’d like to explore strategies on how to evolve your application solutions or other communications products and services to better address the rapidly changing business environment, you can reach me on LinkedIn or on our web site.

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About James Rafferty
James Rafferty has been active in the world of telecommunications, standards and related businesses in a variety of roles. He's been a thought leader in areas such as Voice over IP and Internet fax through his consulting, product management, marketing and standards activities. He loves to write and talk about new connections, applications and business models as communications and related technologies evolve.

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