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entitled Baxter Credit Union Deploys SIP-Based IP Telephony Solution.
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entitled IP Telephony Brings Cost Efficiency To Small Call Centers.
Justifying ROI For IP Telephony In The
BY CHRISTINE HOLLEY
ï¿½By 2006, some 35 percent of all annual
North American call center sales will be made over IP networks.ï¿½
- 2002 North American IP Contact Center Market Report,
Frost & Sullivan
WHY IP TELEPHONY?
If yesterdayï¿½s business climate rewarded technologies for their ï¿½cool
factor,ï¿½ todayï¿½s 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
THE ROI EQUATION
First, itï¿½s 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
The ROI equation equals the increase in revenue, plus reduction in costs,
divided by the total investment.
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
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,
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
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
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
For contact centers that generate a lot of international voice and fax
traffic, IP telephonyï¿½s toll bypass capability further reduces costs.
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.
IP TELEPHONY APPROACHES
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 theyï¿½re ready without enduring a forklift
upgrade, or having to significantly modify code or lose applications
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
Another critical factor affecting the ROI equation is the degree to which
IP telephony architectures are standards-based or ï¿½open.ï¿½ Many IP telephony
vendors still require that contact centers use proprietary hardware and
peripheral devices. To avoid vendor ï¿½lock-in,ï¿½ 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
Internetï¿½s uniform resource locator (URL) address message format. SIP is
considered a more ï¿½light-weight,ï¿½ 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 managementï¿½s risk-aversion versus risk-tolerance, to varying business
models, any of which can significantly confound a contact centerï¿½s 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
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.
Thatï¿½s 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
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.
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