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Feature Article
August 2004

Hosted VoIP Is A Win-Win Scenario!


Are there viable VoIP solutions for the small company? Most small companies have a small to non-existent capital budget and VoIP solutions often tend to be targeted toward high-end telephony equipment and Fortune 500 companies.


We first looked at VoIP in 2001 not because of the technology but as a way to reduce our private line (T1) costs and reduce our TCO by using our T1 for voice and data. For a number of reasons in 2001 � such as initial cash outlay and questionable return � we lost interest in hosted VoIP. It was two years later when we looked at hosted VoIP again. The main reason was to reduce our escalating private line costs. As a small private manufacturing company with less than $30M in annual sales, information technology is not the primary focus. In fact, information technology is still perceived as a cost center. With a small staff (two), we laid out a basic plan with a straightforward goal: Reduce our private line costs.

We had the corporate site and one remote location that used the private line. We used six channels of the private line for network communication. Two channels were used for data communication and four channels were used for voice between the two locations. The remaining T1 channels were for the company�s inbound/outbound long-distance calls and toll-free number.
We wanted to reduce our private line costs and show a ROI of 12 months or less. The question was could we do it without a large cash outlay? A breakeven or small ROI was unacceptable.

We considered two approaches. The first approach was to remove the six channels of the private line and set up the corporate office and the remote location with DSL. This meant we would lose our ability to extension dial our remote location but the savings with DSL offset the cost per minute for LD phone calls to our remote location.

The second approach was hosted VoIP. Even though the savings for this approach was slightly less, there were a number of benefits we could not overlook.

� Lower monthly cost.
� Maintain existing phone system features like extension dialing.
� Capitalize on existing phone system equipment.
� Greater network bandwidth.
� New infrastructure that scales up for future expansion.

Why Hosted VoIP?
Managing change can be the most challenging task facing a company on a daily basis. Changing the way people used the phone to communicate with our remote location was no different. The DSL approach would have flooded the receptionist at both locations with inter-company calls. Hosted VoIP could solve both the objective to reduce costs and allow users to function as they always have in the past. Since the cost savings projected with hosted VoIP was so close to the DSL solution, hosted VoIP emerged as the preferred option. The project started in March 2003 and by November 2003 we began implementation. The concept for the hosted VoIP was simple: use our existing PBX and voice mail (VM) systems.

This architecture had a number of selling points for the company and its small IT department. Hosted meant we did not need additional personnel resources to install, configure, implement, and maintain the VoIP technology. Another appealing feature of the hosted VoIP architecture was that the company phone system (PBX and VM) did not require major upgrading at either location. The PBX at the corporate location required upgrading to allow expansion in our clamshell housing for a second DS1 (T1) board.

To reduce the affects of change on the users, the hosted VoIP would allow users to use extension dialing and the company would have minimal investment in equipment. The VoIP is all handled through the LD carrier�s equipment consisting of a Cisco 2600 series router and VoIP card installed for both locations.
The implementation was straightforward. Everything was going smoothly and exactly as planned. For a project this size with multiple locations and multiple business partners, this was unusual. Even the testing was going well and then we encountered our only problem. The VM test for our remote location failed.
We had a single VM system to handle both locations. The VM for both locations was in the corporate office. The test calls were routed to the general welcoming message instead of directly to the VM extension. Research indicated the DTMF codes were not received by the VM system correctly. Our older VM system did not provide enough control to increase the wait time on the VM system. The solution was to install an inexpensive VM system at the remote location. This took a bite out of our ROI, but still kept our projected ROI well under 12 months.

The projected yearly savings for this project is $35,000 � $45,000 with a $25,000 savings the first year. The new VM system ($8,000) in our remote location reduces our first year savings slightly. The final step to this project is to monitor the savings over the next six months to calculate the actual savings. Small companies find they need technology to increase their competitive advantage and far too often find that they cannot afford the technology. Here is one example of reducing cost, increasing the company�s bottom line, and adding value to the end user while using new technology.

Mike Schumacher is Corporate MIS Manager at Weiler and Company. Weiler and Company manufactures food-processing equipment for a global clientele. Weiler and Company was founded in 1939 and is a privately held company headquartered in Whitewater, Wisconsin.

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