VOIP Savings Come in All Forms; Business Case Evaluation is ImperativeVOIP Savings Come in All Forms; Business Case Evaluation is Imperative

No two companies are alike, so IT leaders must insist on a comprehensive business case tailored to their specific business.
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All those finance and spreadsheet junkies out there know there comes a time in building a business case when results from all the calculations start putting a smile on your face.

In this economy, it's more important that ever to build a solid business case to protect your project. In 2010, 77% of companies report flat or decreasing IT budgets (down from 86% in 2009, but still....) So when the budget axe looms, make sure you can document why it shouldn't fall--at least not on the VOIP project.

The most compelling way to make that happen is by using compelling figures from a business case. In our research, we have found several key areas that can show cost savings. Obviously, these all vary, depending on the specifics of your rollout--and you must balance them with the implementation, capital, and operational costs of the project.

The savings side of the equation includes the following:

Cabling--In greenfield rollouts, you can reduce the number of Ethernet connections per desktop to one or two, down from three to four. The average cabling cost per drop (including installation and materials) is $170. Even reducing the number of drops by one results in $850,000 savings for a 5,000-person office.

Capital (hardphone vs. softphone)--Increasingly, companies are adopting softphones as a replacement for IP hardphones. Nearly 70% of organizations are increasing their adoption of softphones, and only 18% of companies have no plans for any softphones. Considering that the average company spends between $200 and $400 for each IP hardphone, on average, the softphone movement can help decrease one of the most--and in some cases, the most--expensive part of a VOIP implementation. Softphones typically cost $50 to $150 per license, plus another $50 for a USB headset.

In-house conferencing--Some organizations have found huge cost savings by bucking the latest trend of selective outsourcing. By bringing audio- and Web-conferencing servers in house, you may save some significant dollars by reducing monthly conferencing costs. Putting an average number on this one is difficult because it depends on how extensive your conferencing costs are and what percentage of those calls can come in house. This savings generally applies to large, global organizations that have sizable global conferencing requirements—and that also has an internal staff that can manage the servers.

Hosted offerings--On the flip side, though, some companies do see savings by going toward hosted or third-party services. This doesn't apply to every company, but those who need 24 x 7 service (and don't have the staff and/or expertise to provide it) and who need new equipment (but don't have the capital budget to fund it) may fund decent savings with hosted offerings. Several offerings for small and midsize businesses charge $35 to $50 per user, depending on what services or applications are required. Meanwhile, the average first-year implementation, capital and operational cost for VOIP per person are $1,100. So, it's fairly straightforward to make the case for a hosted VOIP offering—if the company is accepting of third-party services and if there is a service available to all the areas you need to reach.

MACs and maintenance--This continues to be one of the big areas of cost savings for VOIP. Using a third party, Moves, Adds, and Changes cost anywhere from $65 to $400 per MAC, depending on the city and the response time required. Move to VOIP, and internal staff can handle it easily for about $8 to $10 per MAC. Additionally, companies are reducing maintenance charges. This year, 61% of companies reduced maintenance contracts throughout the organization with an average savings of 12%. In some cases, telecom staffs brought the maintenance functions in house. In others, they reduced the level of service. But for new or expanding implementations, by using a centralized architecture, they were able to reduce the number of PBXs on which they need a maintenance contract.

Staff reductions (IT, receptionists)--Staff reductions must be another part of the analysis. On average, companies ultimately reduce the combined telecom/network staff by one position, but this doesn’t always happen right away. It typically takes companies two years to build the expertise they need in order to effectively manage and maintain the network. The average salary is $77,000 in addition to a 30% loading factor. Another staff position often reduced is receptionists. By using VOIP to streamline communications between numerous branch locations (rather than operate each as its own island), companies can use automated attendant features for locations that do not require an in-person receptionist for visitors. Basically, one receptionist can handle up to five locations and transfer calls over the IP network rather than asking customers to hang up and dial a different number. The average salary of a receptionist is $35,000 to $45,000, also with a 30% loading.

Network & SIP trunking--On average, companies save 23% on their network costs when moving from a separate voice and data network to one that’s converged. This figure is highly dependent on what the company has in place today. I have never seen a true applies-to-apples comparison for a network convergence project. Not only can you expect some architecture changes--the speed of the circuits and ports typically changes, as well. Companies also are moving to SIP trunking in droves. More than half of companies are deploying SIP trunking today, versus 31% last year. Companies report saving up to 60% when they replace ISDN PRI lines with SIP trunks.

There are other ways companies save money with VOIP implementations. The key is that no two companies are alike, and where they derive savings depends on current and future state of the organization. It’s imperative for IT leaders to insist on a comprehensive business case, examining the factors described here and others that may be pertinent to their specific businesses.