Time to hang up on office phones?

In 2011 venture capitalist Mark Andreessen wrote an op-ed for the Wall Street Journal declaring that software “is eating the world,” listing popular commodities that were “eaten” by software. If paper was the appetizer, then CDs, books and DVDs were the main course. Now, in 2015, it seems landline phones are the dessert.

Office telephony—a $1.6 trillion dollar industry—has seen a major shift away from fixed-line phones in favor of “softphones,” or software that uses the Internet instead of wire transmission to make phone calls.

Households have been ditching their landline phones for some time. As of 2004, there are more mobile phone subscriptions than fixed-line connections in the U.S.and a 2013 Centers for Disease Control survey estimated that 41% of American households are wireless phone only. Currently, there are about twice as many privately owned cellphones as there are landlines.

And the trend has been migrating to the office. Notably absent from desks at Google (GOOGL), the Weather Channel and recently, Yahoo (YHOO) (the parent company of Yahoo Finance), are landline phones. Some schools like Marquette University and Roanoke College have also made the switch.

Cutting the cord (and costs)

There are many reasons for large corporations to ditch their landline phone systems, perhaps chief among them is the additional functionality phone software can provide. Screen/photo sharing, group document editing and even calendar invites can be built into any phone call with software such as Microsoft Office 365 (or “Skype for Business”), 8X8, Inc. RingCentral and Biba, to name a few.

There is a fair amount of overlap between the available softphone services – many include video conferencing and almost all promise some sort of capability to transfer calls between different devices. The major divide, according to Phil Edholm, a consultant specializing in office telecommunications, is what type of device the software is run on. Some companies’ software operates on mobile devices (the user gets a distinct phone number and makes calls via an app rather than use minutes), while others operate on personal computers.

Much of the software is cloud-based, which makes the service cheaper in the long run. A Wall Street Journal article estimated that softphone services run about $15 a month per employee while fixed-line phones cost about $25 a month to operate.

The built-in applications in most of these softphone services allow for easy multitasking. And while that word typically carries a positive connotation these days, it’s not necessarily a plus in all corporate cultures.

“The big war going on is between the multitaskers and the belief in focus,” says Michael Schrage, a research fellow at the Massachusetts Institute of Technology Center for Digital Business.

A niche industry

Edholm says that a large number of softphone companies are thriving because they each cater to unique types of organizations.

“The communication solutions you need are incredibly different depending on the type of company you are,” he says. As of now, each softphone company satisfies a specific niche, and thus, no definitive industry leader has emerged.

While Google Talk hasn’t gained much popularity in the business world, Switch, which provides cloud-based calling services compatible with Google Apps, is garnering a lot of attention. Launched by former Google executive Craig Walker in December 2014, the company’s services cost only $15 per employee.

Edholm explained that Switch’s compatibility with Google Apps will likely make it the main competitor to Skype for Business, which works best with Microsoft Office 365 and its applications.

Not-so-natural selection

The advent of softphone-ware isn’t the only shift in the office telephony industry. J.P. Morgan Chase (JPM) said last week that it will eliminate voicemail for all employees who don’t interact with customers directly. Coca-Cola (KO) did the same late last year at their Atlanta headquarters.

Voicemail is seen as an inefficient alternative to texting and email, and hardly anyone uses it, Schrage says. He even described the practice of using voicemail as a bad habit, likening it to eating carbs or chewing tobacco.

But while voicemail is on the decline, softphone-ware (which includes voicemail capability) and all its shiny utilities are (surprisingly) making conference calls more popular. As group email chains clog inboxes and slow down workflow, companies are using softphones to make conference calls. It’s an unexpected return to an older practice, a testament to the unpredictability of change in the tech world.

“It’s not a natural progression—there’s nothing natural about it,” says Schrage. “Think about mammals taking over the dinosaurs—it wasn’t logical, but it happened.”

So will the trusty landline phone be all but a memory in a few years? That’s uncertain. Just because some companies are making the switch doesn’t mean it’s the end for fixed-line telephony.

Vishy Gopalakrishnan, an AT&T spokesman, noted that the broad and diverse needs of different businesses probably mean a continued need for fixed-line phones.

“Call centers and desk-based workers – office assistants, etc. – frequently still rely on fixed-line phones,” he says.

Edholm agrees, noting that there are some obvious benefits to keeping fixed-line phones in the office. They’re always “on,” unlike a computer or a mobile phone, so consumers are less likely to miss incoming calls.

Ultimately, the issue comes down to context.

“People have a lust and desire for efficient convenience and convenient efficiency,” says Schrage. “What has really changed is our notion of what’s efficient and convenient.”