The Business Side of PBX ProcurementThe Business Side of PBX Procurement
There continues to be a lot of discussion of the technology of VoIP and IP Telephony (IPT). There is nothing wrong about technology, but buying or leasing an IP PBX is as much a business decision as a technology decision. Since the IP PBX is not a yet a commodity product, there are lots of hidden gotchas, difficult to understand SLAs, odd pricing models and maintenance considerations.
April 25, 2008
There continues to be a lot of discussion of the technology of VoIP and IP Telephony (IPT). There is nothing wrong about technology, but buying or leasing an IP PBX is as much a business decision as a technology decision. Since the IP PBX is not a yet a commodity product, there are lots of hidden gotchas, difficult to understand SLAs, odd pricing models and maintenance considerations.
There continues to be a lot of discussion of the technology of VoIP and IP Telephony (IPT). There is nothing wrong about technology, but buying or leasing an IP PBX is as much a business decision as a technology decision. Since the IP PBX is not a yet a commodity product, there are lots of hidden gotchas, difficult to understand SLAs, odd pricing models and maintenance considerations.I spoke to Doug Carolus, Director of Consulting Solutions and Operations for N'compass Solutions, who gives a presentation on this topic at VoiceCon, and will be leading a webinar on the subject on May 8, along with his N'compass colleague Gary Sirek.
We both agree that the IP PBX market is maturing and that non-technical issues are becoming more relevant for procurement. Many enterprises are now comfortable with making a decision for VoIP/IPT. The products have become more functional, reliable and supportable. Among the areas we both feel is difficult to deal with are the pricing elements and structures. No two vendors price quite the same. One vendor even has a point system for procurement costs.
Suggestion 1 - When creating the RFP, arrange a pricing matrix that the vendors have to complete for their proposal. Otherwise, comparing prices will be difficult. Insist that the pricing be firm for the term of the contract. Pricing inaccuracy has been a problem in the past, so ensure the vendor holds to their bid prices.
We discussed the ROI and TCO calculations. Not surprisingly, the ROI calculations cited by the vendors are usually optimistic. The ROI should cover:
Infrastructure build out costs
Cost avoidance
Cost reduction
Hard cost savings
Soft cost savings
It appears from my own surveys that the ROI is not reviewed once the procurement decision is made. No one really seems to care if the ROI turned out to be right.
Suggestion 2 - If you are not going to really look at the ROI in a few years, then don't spend a lot of time creating it. Do just enough to get CFO approval.
The TCO, on the other hand, is a more realistic view of what the cost will be, since the enterprise will be paying for the TCO every month. Again not surprisingly, the vendors' TCO calculations are usually understated. The TCO should reflect not just the cost for today, but should include the escalating costs over the life of the system. Some of the thoughts we discussed include:
It will be difficult to predict costs beyond three years; however you may have to go out 5 or 7 years in your analysis, which will yield less accurate estimates and probably be understated.
Go back over the cost elements several times, looking for missing costs. Doug will be discussing these elements in an upcoming webinar (more on that shortly).
Factor in cost escalation for power and cooling, at 10 to 20% per year or more. Gartner predicts that energy costs will be second to staff cost in 2009.
Try to predict the degree of growth and factor that into the TCO.
Software licenses will have to be renewed and expanded including new releases that usually become a mandatory cost.
Do not forget the training and turnover costs for the IT staff.
Assume there will be maintenance charge increase.
The TCO may need to include project management, professional services and third party support.
Suggestion 3 - Go over the TCO with as many people as possible. Review it multiple times. Give yourself a chance to add elements as you discuss the TCO elements with others.
A fourth area of discussion during the upcoming webinar will be the SLAs from the vendors. The SLAs are not just for network performance. There will be issues to consider, for example:
Vendor response times
Maintenance support
What conditions do the SLAs cover
Is the support from the channel or vendor, and how do these two parties cover your installation
Another valuable subject covered during the webinar are the procurement methodologies Doug will suggest. I can not provide all of the factors that are relevant for IP PBX procurement. Listen to Doug and Gary's practical experiences that will expose you to issues and problems you can avoid.
It appears from my own surveys that the ROI is not reviewed once the procurement decision is made. No one really seems to care if the ROI turned out to be right.
Suggestion 2 - If you are not going to really look at the ROI in a few years, then don't spend a lot of time creating it. Do just enough to get CFO approval.
The TCO, on the other hand, is a more realistic view of what the cost will be, since the enterprise will be paying for the TCO every month. Again not surprisingly, the vendors' TCO calculations are usually understated. The TCO should reflect not just the cost for today, but should include the escalating costs over the life of the system. Some of the thoughts we discussed include:
It will be difficult to predict costs beyond three years; however you may have to go out 5 or 7 years in your analysis, which will yield less accurate estimates and probably be understated.
Go back over the cost elements several times, looking for missing costs. Doug will be discussing these elements in an upcoming webinar (more on that shortly).
Factor in cost escalation for power and cooling, at 10 to 20% per year or more. Gartner predicts that energy costs will be second to staff cost in 2009.
Try to predict the degree of growth and factor that into the TCO.
Software licenses will have to be renewed and expanded including new releases that usually become a mandatory cost.
Do not forget the training and turnover costs for the IT staff.
Assume there will be maintenance charge increase.
The TCO may need to include project management, professional services and third party support.
Suggestion 3 - Go over the TCO with as many people as possible. Review it multiple times. Give yourself a chance to add elements as you discuss the TCO elements with others.
A fourth area of discussion during the upcoming webinar will be the SLAs from the vendors. The SLAs are not just for network performance. There will be issues to consider, for example:
Vendor response times
Maintenance support
What conditions do the SLAs cover
Is the support from the channel or vendor, and how do these two parties cover your installation
Another valuable subject covered during the webinar are the procurement methodologies Doug will suggest. I can not provide all of the factors that are relevant for IP PBX procurement. Listen to Doug and Gary's practical experiences that will expose you to issues and problems you can avoid.
Suggestion 3 - Go over the TCO with as many people as possible. Review it multiple times. Give yourself a chance to add elements as you discuss the TCO elements with others.
A fourth area of discussion during the upcoming webinar will be the SLAs from the vendors. The SLAs are not just for network performance. There will be issues to consider, for example:
Vendor response times
Maintenance support
What conditions do the SLAs cover
Is the support from the channel or vendor, and how do these two parties cover your installation
Another valuable subject covered during the webinar are the procurement methodologies Doug will suggest. I can not provide all of the factors that are relevant for IP PBX procurement. Listen to Doug and Gary's practical experiences that will expose you to issues and problems you can avoid.
Another valuable subject covered during the webinar are the procurement methodologies Doug will suggest. I can not provide all of the factors that are relevant for IP PBX procurement. Listen to Doug and Gary's practical experiences that will expose you to issues and problems you can avoid.
