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Feature Article
September 2003

Go directly to the sidebar entitled Baxter Credit Union Deploys SIP-Based IP Telephony Solution.

Go directly to the sidebar entitled IP Telephony Brings Cost Efficiency To Small Call Centers.

Justifying ROI For IP Telephony In The Contact Center



�By 2006, some 35 percent of all annual North American call center sales will be made over IP networks.�

- 2002 North American IP Contact Center Market Report, Frost & Sullivan


If yesterday�s business climate rewarded technologies for their �cool factor,� today�s milieu demands that technologies show proven return on investment. Nowhere is this more true than in the contact center, where managers are under increasing pressure to transition from a cost center, to a profit center.

The good news is that there are a growing number of technologies that can help contact centers make this transition. Of these, perhaps the most promising is IP telephony. IP telephony involves the transmission of voice conversations (phone-to-phone) over packet-switched IP data networks, such as private LANs, WANs, intranets, and the Internet.

While growing evidence based on factors such as cost savings and simplified management show that IP telephony represents a viable alternative to circuit-switched contact center systems, the question remains: How do contact centers show ROI in order to justify such a significant purchase decision?

First, it�s critical that contact centers understand the ROI equation and how IP telephony factors into it. Second, they must understand the various approaches to IP telephony deployment, and how these approaches affect this equation.

The ROI equation equals the increase in revenue, plus reduction in costs, divided by the total investment.

Increasing Revenue
IP telephony can help increase revenue by its ability to easily and cost-effectively integrate with corporate network infrastructure in order to extend customer-focused applications to agents at remote and networked sites.

For example, Web- or network-enabled contact centers can deploy an IP telephony gateway to give agents working from anywhere the ability to simultaneously browse company Web sites and conduct live phone conversations. This type of Web collaboration enables agents to generate interest in, or close a pending sale by providing answers to questions, instantly.

IP telephony gateways also enable agents to more cost-effectively take advantage of unified communications applications, such as unified messaging, presence management, and find-me/ follow-me services. These applications are designed to facilitate communications between remote agents and corporate employees, and between agents and customers, further helping to accelerate the sales cycle. In addition, IP telephony enables agents to share routing rules and reporting tools across multiple sites for added productivity and efficiency gains.

Reducing Costs
Although reducing costs is an integral component of the ROI equation, contact centers should not weight it as heavily as factors contributing to increased revenue, such as improved productivity. This is because investment in most technologies tends to yield improvements in agent performance and efficiency, which has a greater impact on total cost of ownership (TCO).

There is evidence, however, that IP telephony can contribute to cost savings. For instance, IP telephony uses a single management scheme for system administration moves, adds, and changes (MACs). Industry analyst firm, Gartner, Inc., estimated that reduced system administration costs associated with performing MACs were $50 to $100 less per MAC for an IP phone versus that of a traditional phone.

A side benefit of simplified administration is reduced staffing costs, since fewer people are required to manage and support an IP telephony system.

Contact centers that employ agents at branch offices can also expect some savings. IP telephony can transparently support distributed users over an IP LAN or WAN instead of deploying dedicated phone systems at each remote location.

For contact centers that generate a lot of international voice and fax traffic, IP telephony�s toll bypass capability further reduces costs.

The Investment
Contact centers need to determine how much of their existing equipment can be migrated to IP telephony, and what it will cost to upgrade the data network to handle voice traffic. How many phones need to be replaced? How many routers must be upgraded? Is there a disaster recovery plan in place? These, and numerous other issues must be addressed as part of a total network infrastructure audit.

While research has shown that the price of IP telephony systems can be as much as 30 percent higher than that of traditional PBX systems, this factor should be kept in perspective. According to Gartner, price is less of an issue because technology represents, on average, only 10 percent of the total ongoing costs of running the contact center.

Largely impacting investment and, in fact, the entire ROI equation, is the type of IP telephony architecture chosen. Vendors now offer IP-enabled and pure IP telephony systems.

Many traditional PBX vendors have IP-enabled their systems by including a range of IP-oriented components, such as voice over IP trunks and gateways, IP line and station cards, and IP telephones and soft phones. The advantage of this approach is that contact centers can still leverage the best parts of their existing legacy equipment while enjoying some of the benefits of IP telephony. For instance, a contact center might deploy an IP-enabled system with many of the lines still using traditional circuit-switching matrixes for optimized voice quality. The disadvantage of this approach is that it often introduces complexities to the network, which can increase costs.

Pure IP telephony systems provide end-to-end IP telephony support. While this architecture can provide benefits, such as a single application for managing the architecture of networked call centers, it also involves additional initial investment and more risk.

As a result, an increasing number of vendors offer the option of swapping out circuit-switched components for IP-based components, thus enabling contact centers to migrate when they�re ready without enduring a forklift upgrade, or having to significantly modify code or lose applications altogether.

Another major issue of which contact centers should be aware is that a converged voice and data network does not necessarily bring with it a converged applications architecture. Many vendors offering IP telephony systems are still using the disparate model on which traditional PBX systems are based. These vendors still require multiple servers for features, such as voice mail, fax services, ACD and IVR. In addition, many require a separate gateway for simple media control functions.

Contact centers should confirm that IP telephony vendors are able to provide media processing on the same server architecture, as well as a broad range of pre-integrated applications for both agents and business users. By minimizing the number of required devices and integration points, and by applying ROI across the entire enterprise, contact centers will be able to present a much stronger business case for the purchase of an IP telephony system.

Another critical factor affecting the ROI equation is the degree to which IP telephony architectures are standards-based or �open.� Many IP telephony vendors still require that contact centers use proprietary hardware and peripheral devices. To avoid vendor �lock-in,� contact centers should look for IP telephony systems that support servers and phones from multiple manufacturers. These systems should also support standards-based technologies such as XML, SOAP, Java, .NET services, and especially SIP (session initiation protocol).

SIP is a protocol for creating, modifying, and terminating multiparty sessions, particularly Internet conferencing and Internet telephony sessions. Unlike its predecessor, the H.323 protocol, SIP address messages are formatted as human-readable text, which is compatible with the Internet�s uniform resource locator (URL) address message format. SIP is considered a more �light-weight,� open, and flexible protocol and is, thus, gaining traction over H.323.

The benefits of an IP telephony system that supports SIP are improved interoperability, increased flexibility (particularly when planning for disaster recovery), the elimination of separate IP PBX and contact center systems, and the option of purchasing low-cost SIP-based IP phones. Based on industry research, this latter benefit alone can significantly strengthen the ROI equation. Industry analyst firm, Forrester Research, Inc., states that the largest single cost associated with a new IP telephony infrastructure is the IP handsets, which represent about one-third of the total cost of deployment.

Clearly, plugging IP telephony into the ROI equation constitutes more than simple math. Beyond the basic elements of the equation are factors ranging from management�s risk-aversion versus risk-tolerance, to varying business models, any of which can significantly confound a contact center�s decision to deploy an IP telephony system. Still, the ROI equation is a good starting place and will be an increasingly effective tool as the adoption of IP telephony provides more real-life examples against which this equation can be tested.

The good news is that this adoption is occurring fairly rapidly, with many industry analysts predicting the widespread adoption of IP telephony by 2005. It also appears that contact centers will be among the first to embrace this technology. According to Gartner, contact centers will be the first place in the enterprise where voice over IP can be cost-justified. That�s great news for contact centers ready to take the ROI plunge -- and better news for the many customers that stand to benefit from this promising communications technology.

Christine J. Holley is the Market Communications Director for Indianapolis-based Interactive Intelligence Inc., a global developer of software for IP telephony, contact center automation, and unified communications.

[ Return To The September 2003 Table Of Contents ]

Baxter Credit Union Deploys SIP-Based IP Telephony Solution

Baxter Credit Union, Vernon Hills, IL

1. Consolidate communications technologies for reduced development, deployment, and training costs, and improved internal communications;
2. Create an infrastructure that would provide best-in-class and integrated services across multiple delivery channels;
3. Create the fundamental building blocks for Baxter�s CRM deployment; and
4. Implement a standards-based solution that would minimize integration and be compatible with the evolution of Web and customer support technologies.

SIP-based IP telephony bundled applications software suite by Interactive Intelligence; Boards by AudioCodes and Aculab; Server by Compaq.

Digital Voice Systems (www.dvsweb.com)

Phase One
� Deployment at headquarters in Vernon Hills completed.
Phase Two � Working with major telco vendors to design a SIP infrastructure in the �cloud� to provide multi-site support and dynamic disaster recovery; working with solutions provider to integrate software with Jack Henry�s Symitar transaction system and the Web for direct member support.
Phase Three � Deploy company-wide, including Baxter�s 19 offices throughout the U.S. and Puerto Rico.

1. Leveraged existing investments in IP network infrastructure and employee expertise on the Wintel platform;
2. Significantly reduced custom development time to meet operational requirements;
3. Improved contact center efficiencies (e.g., reduced speed-to-answer times, reduced abandon rates, etc.) as a result of bundled applications software architecture; and
4. When deployed at remote offices, will combine voice and data over IP network with a �software-only� investment to provide full connectivity for improved internal communications and reduced toll charges.


IP Telephony Brings Cost Efficiency To Small Call Centers


The broad definition of a call center is an organization whose primary charter is to make and receive calls as a means of doing business. Basically, any organized group of people who handle high volumes of phones calls can be considered a call center. Yet the phrase �call center� has come to denote an organization with about 30 agents or more. This is because call center products have previously been designed for larger organizations.

The Challenge For Small Call Centers
Businesses who need call center functionality for a small group of agents have long been a neglected market. These small call centers primarily comprise sales, customer service, or support departments of companies who desire inexpensive but efficient means of handling their own customers. Small call centers can range anywhere from two to 30 agents. This creates a significant handicap in sourcing cost effective solutions for effectively managing their calls. With the traditional architecture of a large call center, a company has to buy an external phone system, buy a call center system, and integrate the two products. This is often a very expensive and time-consuming process.

Why Setting Up A Call Center Is Expensive
The introduction of the PC in the workplace was a revolutionary move towards making call centers efficient, giving agents the ability to immediately enter or retrieve information regarding a particular call. Today, most call center stations have at least one PC. However, without any communication between the PC and the phone system, there are many problems in correlating data to a specific phone call. These issues are inherent in the separation between voice and data networks.

The first attempt at bridging the gap between the two networks was a special interface called the CTI (Computer Telephony Integration) link. Many PBX manufacturers provided a CTI link -- at an additional cost, of course -- to allow their phone system to be controlled from an external server. The original design of the CTI link was clumsy and connected only to one device. CTI links then changed from being a separate physical interface to being IP-based. Using the CTI link, agents could handle calls from a software program rather than the physical phone. However, cost issues associated with the CTI link kept small call centers from being able to afford their benefits. The correlation between the call control on the PBX and the call center software was not easy to achieve. Solutions that offered seamless integration were very expensive because the supplier of a call center system was required to provide customization for communication with the customer�s PBX. For many call centers using CTI technology, the price became cost prohibitive, exceeding $2,000 per station for items like desktop phones, physical voice ports, CTI links, agent licenses, server licenses, and customization fees.

IP Telephony Solves The Problem
The advantage of a phone system that communicates over the same network as the data is a compelling justification for small call centers to move towards IP telephony. Having the voice call presented on the PC obviates the need for a separate desktop phone at the station -- saving roughly $100 to $200 per station -- and eliminates the need to run a second set of wires for voice. The need to purchase CTI links and the redundancy of maintaining separate networks are also eliminated because the correlation of phone calls with software is inherent in IP telephony. Typically, the required feature set of a small call center is met by the purchase of the IP telephony system alone. With many systems, the client software with ACD capabilities is built in. Some systems even provide integration with popular CRM packages as a standard feature.

Most IP telephony systems (often called converged systems) make use of a Windows client, which is installed on the majority of desktops in the workplace. The Windows platform has also evolved into making the PC more adaptable for the call center application. Microsoft�s adoption of TAPI and SIP support opened up many opportunities for more suppliers to enter the converged market. Originally developed to provide analog telephony for the PC, the TAPI interface became more suitable for providing call control within IP telephony. With TAPI support, a converged system could communicate with any software application that also supports TAPI. Microsoft made recent strides towards integration of voice and data by embracing the SIP protocol. With native support for SIP, the Windows XP platform essentially builds voice over IP support into every PC.

Other Advantages
IP telephony systems not only make the deployment of call centers more affordable for the smaller call centers, but they also improve efficiency in operation and flexibility in the way call centers are set up. The data network brings many new applications that the legacy phone network is not capable of providing on its own. Features such as instant messaging, chat, presence, detailed call logs, infinite call appearances, and visual presentation of a calling party (screen pops) are just a few of the tools now available for agents and supervisors. With the PC, the agent not only becomes more efficient at handling telephone calls, but is also armed with other forms of communication. For example:

Chat (text-based conversations) provides the means for agents to be able to handle more than one customer simultaneously.

Instant messaging (unthreaded text-based communication) allows agents and supervisors to communicate without interrupting communication links with customers.

Indication of an agent�s presence (activity status such as logged in, active on a call, idle, or in wrap up mode) is not only used for the logic of call distribution, but is also a valuable supervisory tool.

Although these advanced features increase efficiency in handling calls and transactions, some companies find IP telephony compelling because of the ability to place agents anywhere in the world. Traditional call centers require all agents to operate from the same physical location, so relocating skilled agents to a geographical area involves great expense. The converged system allows companies to accommodate skilled agents at the location of their choice. Converged systems are better suited for setting up remote offices because all calls are natively transported as IP data. Remote agents need only a standard broadband connection to be part of the call center. With seamless integration of remote locations, smaller businesses can afford to retain skilled agents to maintain a higher level of customer satisfaction.

With IP telephony, businesses have more choice than ever before in implementing and managing their own call centers. No longer are companies tied to the traditional call center model. There is no requirement to purchase expensive servers, desktop phones, physical phone ports, or customization fees. With more ways to communicate for less money than the cost of a legacy solution, small call centers are sure to make the smarter choice with the converged system.

Iain Milnes is president of Zultys Technologies. Zultys designs and manufactures products that integrate telecommunications and data communications for enterprise networks.


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