Maximizing ROI In Enterprise VoIP
BY JENNIFER STAGNARO
When Mike Shisko, director of IT for Experio Solutions, an IT consulting
company, needed to deploy a new phone system, he evaluated both legacy and
VoIP phone systems. When he dug into the detail, he found that different
architectures resulted in very different ROI models. In addition to looking
for ways to make his team of consultants more productive, Mike had a
business decision based on dollars and cents.
Said Shishko, ï¿½The differences in ROI were remarkable. One of the
solutions we looked at reduced our equipment and installation costs by 50
percent and further reduced our ongoing management and toll bypass expenses
by more than 66 percent.ï¿½
But determining just what return on investment a VoIP system can bring isnï¿½t
a simple matter. At least three fundamentally different types of VoIP
architecture are offered by more than a dozen different suppliers; and each
architecture has unique requirements that impact ROI. The black box legacy
model yields expensive management costs and proprietary phones while the
overlay data architecture requires expensive data networking upgrades. There
is a third category of architectures that eliminate these hidden costs and
delivers a cost-effective, application-rich IP phone system. But how can you
tell which one delivers the best combination for your business needs?
Before embarking on your phone system evaluation, an IT manager should
compare ROI across the various architectures in acquisition costs (equipment
and installation costs), on-going management (including maintenance) and
network costs as well as toll expenses.
But cost reduction is just one aspect of the payoff from VoIP. A leading
tech news service, for example, now offers a host of easy-to-use
collaborative applications to users, including unified messaging, ACD, AA,
and conferencing. Employees can file, forward, and store voice mails the way
they do e-mail, and can call fellow employees with a click of a mouse. Users
can move their extensions from one office to another in a matter of seconds
using a four-digit PIN -- without administrator help.
While itï¿½s hard to quantify the benefit of employees and customers working
together more effectively, enterprises are making measurable changes in how
they operate as a result of the collaborative potential of VoIP.
California-based Bay Federal Credit Union used VoIP to make it easier for
customers calling their branches to reach the right departments, and
complaints about phone service also dropped substantially.
Boston-based OneUnited Bank centralized customer service at one site,
allowing the staff at other sites to focus on sales. Cleveland-based
Mortgage Information Services uses the collaborative capabilities of VoIP to
easily and quickly focus virtual teams from multiple offices on areas that
require more support, without having to relocate employees.
So when you look at VoIP keep at least one thing in mind; there are
significant ROI differences between architectures. Your choice before
install will have a long-term impact on your bottom line, from cost to
productivity. Make sure you take a close enough look at your requirements
and what different systems actually deliver.
ACQUISITION COSTS VARY ACROSS ARCHITECTURES
Architecture can have a substantial impact on acquisition costs, which
typically include telephones, PBX equipment, applications such as voice mail
and ACD, network upgrades, training, and installation. Anyone evaluating
systems should beware of the low-priced ï¿½skeletonï¿½ RFPs that look comparable
at first glance, then lock the customer into expensive add-ons or
proprietary hardware, software, or management support. Some systems support
only proprietary phones, or require add-ons for simple things like analog
phone support. Before accepting anything at face value, be prepared to ask
ï¿½ Can the proposed system be managed by existing staff?
ï¿½ What are the training requirements?
ï¿½ Are upgrades hardware- or software- based?
ï¿½ Is reliability built-in, or is it an extra that requires additional
equipment or support?
ï¿½ What are my phone choices?
EQUIPMENT: RELIABILITY OR PRICE?
List prices are the first place to begin, but beware of the hidden costs
to get you to a level of reliability you can live with. For some systems it
is extra. Youï¿½ll need redundancy for some, network upgrades for others, and
some will require both.
One enterprise told the story of a supplier who positioned the aggressive
network upgrades required for its ï¿½pure VoIPï¿½ system as simply ï¿½upgrading
their network for the twenty-first century.ï¿½ The enterprise didnï¿½t bite.
Anyone considering VoIP should pay careful attention to whether a vendor
mandates the conversion of servers to call-control devices; this is
typically not easy or intuitive, and often involves retrofitting solutions
across network devices never intended to carry voice traffic. The result can
be a tangled network of repurposed and often redundant devices that again
require additional networking gear for enterprise-class performance. This
may also require disrupting an existing network, which is never without
Legacy PBX/gateway architectures typically require ongoing dependence on the
supplier for management and maintenance, training, etc., because the legacy
PBX remains the core of the system. Gateways help to reduce toll bypass
expenses, but keep the user dependent on the TDM backplane and the old-world
complexity. Marketed as an evolutionary approach, this leads to additional
equipment and installation expense, with some possible toll cost savings --
but typically the same feature set as before.
Other ï¿½gotchasï¿½ include high-priced proprietary phones or ï¿½standardsï¿½ that
arenï¿½t quite standard yet. What appears at first to be an inexpensive system
locks the customer into higher-margin hardware -- not to mention costly
support and/or maintenance programs -- over the life of the system. That
makes for a happier vendor but a weaker ROI.
INSTALLATION: YOU DONï¿½T HAVE YOUR OWN ARMY?
From an ROI perspective, a high-cost installation is a bad start. While
ï¿½last-of-breedï¿½ legacy PBXs had a notorious reputation for installation
challenges, some of the new VoIP architectures havenï¿½t made much headway,
and still promote a complex, site-bound approach that virtually recreates
the installation experience of the past. Complexity adds expense, and the
first sign of complexity is an expensive and/or time-consuming installation.
A supplier bid that is based on time and materials for installation, rather
than a fixed cost, may be a clue that the install could contain a few
surprises. Other red flags are solutions that have multiple management
systems and interfaces. Many purpose-built VoIP systems offer relatively
easy installation and a single GUI for all administrative functions.
Whether itï¿½s because of a challenging installation or excessive hardware or
software requirements, acquisition often sets the stage for long-term TCO
and the potential for a fast ROI. An easy install can mean reduced
complexity and lower costs. New York-based SPI Polyols, an international
chemical company with about 400 employees across four locations, received an
installation bid that represented about 30 percent of total equipment cost
before finding an alternative VoIP supplier whose system could be installed
with a reasonable effort; the later system also included voice mail, unified
messaging, and ACD at no additional cost.
ONGOING EXPENSES ALSO VARY
Valent USA, an agricultural products company, looked at its phone costs
in 1999 and was stunned by what was ï¿½hiding under the rockï¿½ when it came to
ongoing management and maintenance expenses. The company converted 12
offices and more than 600 users to VoIP starting in 1999, and saved more in
management contracts in the first year than the new system cost to acquire.
Ongoing expenses -- management, maintenance and toll charges -- can add up
significantly over time. Many IT and telecom managers simply donï¿½t know how
much they pay every year for their phone systems, because traditional
suppliers have developed ways to work within multiple budgets and cost
centers, spreading out the cost of hardware, software, upgrades, training,
and other key elements across the enterprise as spending allows.
Legacy/PBX gateway approaches typically leverage last-of-breed legacy PBXs,
so that management and maintenance costs remain about the same, or increase
slightly, with the addition of gateways. Systems with a high ï¿½cobble factorï¿½
are easy to uncover, as they typically use a multitude of interfaces and
require substantial training. Many of the new server-based and purpose-built
architectures offer easier MACs, yet even among these systems there are
considerable differences in the spectrum running between intuitive and
If a VoIP solution involves multiple platforms that are not interchangeable
-- e.g., if regional offices require different platforms than small branch
locations -- maintenance and support costs are likely to be higher over the
long term, especially for a company with a multi-site network and offices of
varying sizes. This is reflected in everything from the increased stocking
of spares to the training requirements involved with managing multiple
interfaces. In a recent lab report by The Tolly Group, such factors caused
one vendorï¿½s VoIP solution to be three to five times as expensive as
anotherï¿½s over a period of five years.
When it comes to toll bypass, each type of architecture also has its own
cost and performance implications. Experio Solutions was able to reduce
monthly per-employee long distance from over $20 to less than $7 without
additional equipment or upgrades. A single telecom manager spends about half
his time managing the system. Over five years the company will have reduced
their toll-charge expense by more than $600,000, without an additional
up-front investment in hardware, software, or acquisition.
GETTING A HANDLE ON TOTAL COST OF OWNERSHIP
Anyone evaluating VoIP should consider all costs of ownership, from
acquisition expenses to ongoing maintenance, management, and long-distance
charges. A recent focus group found that IT and telecom executives and
managers did not know how much their companies were paying for each of these
components of phone system costs. Not understanding the significance of
architectural differences, they are leaving themselves open for some
Jennifer Stagnaro is Chief Marketing Officer at Shoreline Communications,
Inc. Shoreline delivers robust IP phone systems and has been making
enterprise-class IP voice communications a reality for over four years. The
company has shipped the Shoreline IP voice communications system to hundreds
of customers and has delivered over 80,000 individual stations to date. For
more information, please visit the company online at
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