ShoreTel, Avaya, NEC Most Affordable IPT Providers as Overall Costs DropShoreTel, Avaya, NEC Most Affordable IPT Providers as Overall Costs Drop

Microsoft opex--a bone of contention last year--dropped substantially, but it's still the most costly to operate.

In the past year, real-world IP telephony costs have dropped by 28%, while integrated unified communications costs have increased by 83%, according to the annual study of IP Telephony and UC Cost Data from Nemertes Research.

Nemertes gathered data from nearly 200 companies this year, asking about their IP telephony and UC costs. (See methodology at the bottom of this post.) The surveyed companies come from a range of industries and sizes. No vendor sponsored this research; vendors were included based solely on responses received from those surveyed. Vendors included are: Alcatel-Lucent, Avaya, Cisco, Microsoft, Mitel, NEC, and ShoreTel. Unify and 8x8 came close, but did not garner enough responses to be counted individually.

For IP telephony, here are some highlights for 2014:

* The median, first-year cost per end-unit (handset, audio bridge, etc.) is $935, down 28% from $1,305 in 2013 and driven primarily by lower operational costs.

* Overall capital and operational costs decreased from 2013-2014, but implementation costs increased.

* ShoreTel, Avaya, and NEC are the most affordable, as measured by first-year costs. Microsoft and Alcatel-Lucent are the most costly. Cisco and Mitel are in the middle. (See Figure below)

* Microsoft, which generated buzz in last year's study because of its high costs, continues to be...well, expensive. But it's not as expensive as it was last year, indicating the learning curve is moving along as we predicted.

Overall, the results align with my expectations. We anticipated costs would drop for IP telephony this year, as vendors continue to aggressively negotiate on the capital and licensing costs and IT staffs strengthen their expertise in the technology.

We also projected Microsoft's high costs would come down (and will continue to decrease) as IT staff learn how to use Microsoft for telephony (or if they can't, switch to another provider rather than spend large sums of operational expense on something they can't get to function they way they want). Microsoft continues to attract companies by appealing to C-level IT executives with attractive--though not the lowest--capital and licensing costs.

Several companies, however, tell us integration between multiple vendors is not smooth sailing, and specifically that both Cisco and Microsoft tell them: Pick one!

Differences in per-unit costs are fairly substantial between larger and smaller rollouts: Typically, smaller rollouts cost twice as much per end unit compared to larger ones. Capital, though, is not the big cause. Rather, it's operational costs, followed to a lesser extent by implementation. With operational costs, the economies of scale kick in for larger rollouts, thus decreasing the cost per unit.

For UC, the 2014 research highlights are:

* The median first-year cost for integrated UC is $954 per end unit, up from $522 last year.

* Overall median costs have increased for all vendors, with the exception of implementation. IT staff, or more commonly, third parties, are installing UC without much fuss.

* Operational costs, however, increased substantially as companies add or integrate new apps to their UC suite. Capital costs also increased year over year for the same reason.

* Avaya is the most affordable for integrated UC at $817 per end unit; Microsoft is the most expensive at $1,265 per end unit.

Based on the interviews, the cost increase for UC is not the result of vendors increasing their prices. Rather, enterprises are buying more apps for each employee and even integrating stand-alone apps into the primary UC suite. As a result, it's more to buy and manage, and a bigger learning curve that requires third-party assistance, training, and more people internally. UC costs per unit may continue to increase for a few years before leveling off and then decreasing.

I will be presenting these findings in more detail (i.e., differences by sizes of rollouts by vendor, and drilldowns into the type of cost--operational, capital, or implementation) at next week's Enterprise Connect conference in Orlando. The information on the session can be found on the Enterprise Connect website.

The study also includes analysis on the costs for IP telephony/UC management and adoption, the use of virtualization and its effect on costs, adoption and costs of softphones and mobile clients, the effect of self-service features on operational costs, and the differences in cost between cloud and on-premises solutions. I'll be writing more about these areas in future blog posts, so stay tuned!

Methodology Summary: We conducted this research from January through March 2014. The largest concentration of rollouts (75%) happened between 2011 and 2013. We conducted both live interviews and electronic surveys of pre-qualified IT decision makers (who, in the survey, underwent stringent integrity checks to ensure they were answering questions attentively). We asked for the following information for both IP telephony and UC and divided by the number of endpoints in each:

* Capital: Includes PBX, endpoint devices and licenses, servers, and other hardware required for IPT.

* Implementation: Includes staff time and third-party consultants and integrators.

* Operational: Includes staff time, equipment maintenance, third-party managed services, training and certification.

Get the data from Robin Gareiss at Enterprise Connect Orlando 2014!