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December 2007 | Volume 10/ Number 12
Inside Networking

The Business Behind Unified Communications

Everyone is talking Unified Communications (UC), a presence-enabled communications and collaboration system, with integrated telephony and email and with a unified user experience over any device, anywhere, anytime. If you've seen it, you'll love it. However, rolling out UC needs to be justified based on a business case. Just because you can do something doesn't mean you should. Two categories of benefits from UC are emerging: improved business effectiveness and technology total cost of ownership (TCO) savings.

Business Process Effectiveness

Most business processes today involve a high degree of people-to-people or people-to-machine interaction, which inevitably introduces communication delays that can impact a company's bottom line. UC solutions integrate new and existing communication technologies and can minimize human latency in business processes by reaching decision-makers (whether mobile or at their desks), subject matter experts, and other resources more easily and quickly; and improving group collaboration across geographically distributed teams.

You'll need to make your own case for UC, but here are several data points that may help:

• An insurance company reported that the time to settle a claim after an accident had dropped from five days to two hours because of UC tools.

• Wainhouse Research (Nov 06) reported that, in one healthcare institution, nurses with wireless UC devices could respond 7 minutes faster to patients.

• In one environment in which 73% of knowledge workers travel once per quarter, at an average of $915 per trip, UC could save one trip per year as estimated in a Forrester study (February 2006). On a base of 1000, the result is $668,000 saved per year.

• For a professional services firm with an average project size of $250,000, project margin of 60%, project close rate of 75%, and 75 project bids per year, a 5% increase in the sales close rate from UC tools would result in over $500,000 margin improvement per year. (Nemertes 2007).

• A non-IT professional services firm, that we worked with, reported that its traveling workers equipped with UC-enabled mobile devices bill $20,000 more per person.

• In another customer interaction, UC enabled project managers in a manufacturing environment to be notified via IMs within moments of an inventory shortage onset. Given $25 per lost sale with 5,000 lost sales and therefore $125,000 in losses per year, a 10% reduction in inventory shortage time could lead to an increase of $12,500 in revenues.

TCO Reduction Opportunities

Along with improved business effectiveness, the value proposition for UC can also be based on technology total cost of ownership (TCO). Cost savings can be achieved in a number of areas as quantified by Nemertes Research (2005):

• Moves, Add and Changes (MAC) costs for IP Telephony average $8/MAC, compared to $90 to $131 for traditional PBXs for large enterprises.

• With IP telephony, centralized remote site management, reducing system administration costs by 50%.

• 25-50% savings in toll charges, as well as more efficient use of network bandwidth, can be achieved through network convergence. For Nortel IT, $50/month per user was saved via soft clients.

• Converged desktop cabling costs at $204/drop compared to 2 or 3 voice and data cables each at $170/drop.

In addition, customers who use a hosted conferencing solution today can achieve significant savings from a transition to an on-premises solution. Nortel IT reported savings of $5M in the first year after moving from a hosted to an on-premises solution. (Nortel Case Study: Driving Innovation and Competitive Advantage with Unified Communications, February 2007)

Finally, UC allows more workers to be home-based or located away from headquarters in lower cost centers. Nemertes (April 2006) reported savings of $8,000-$16,000 per year per worker who is either home-based or in a branch office, compared to a worker at headquarters. For example, Sun Microsystems saved $63.8M in real estate costs in 2005 through flexible working. (Forrester July 2006).

Adding It Up

Quantifying the benefits of Unified Communications may be a challenge, and will be impacted by your starting point (and thus the costs of rolling out UC). You'll need to focus on the most direct opportunities for increased business productivity and for lower cost: business effectiveness at the personal, group and process levels and direct TCO savings. With a business case in hand, you can start to reap the benefits of Unified Communications in 2008!

Tony Rybczynski is Director of Strategic Enterprise Technologies in Nortel, and has over 35 years experience in the application of packet network technology. He writes a quarterly 'Inside Networking' column in Internet Telephony magazine. Allan MacGowan is the Total Cost of Ownership Lead at Nortel and is responsible for developing cost and benefit models for Nortel and Microsoft's joint Unified Communications solution.

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