The ROI of unified communications

Approach can improve business processes, save time, make employees more productive

How unified communications can improve your company's bottom line.

Unified communications is certainly moving to the front burner at most companies. According to the 2007 Nemertes benchmark, "Building the Virtual Workplace," 79 of 100 enterprises interviewed were planning to deploy unified communications over the next two years.

And most of the building blocks of a unified-communications architecture are in use at most companies. Ninety-six percent of benchmark participants report the use of at least one tool, such as audio, video, Web conferencing, IM or a presence application.

The challenge for many IT executives is to make the business case for unified communications. This can be tricky, because purported productivity benefits can be hard to quantify.

However, business cases do exist. Companies see unified communications as a way to improve internal communications and increase productivity. There also is the potential for cost savings.

Determining the upfront cost

Implementation expenses for each enterprise will vary based on the capabilities of existing and planned systems. Nemertes has gathered cost information on overall spending on collaboration from organizations that have made investments in unified communications.

The data shows that, on average, enterprises are spending $557 per employee (based on 13 hours at an average loaded hourly rate of $44 per hour) to implement their collaboration applications, with the majority of dollars spent on installation rather than planning or troubleshooting

Nemertes also found that organizations tend to underestimate the amount of time they should devote toward planning. Companies often are under pressure from executives to implement the new technology -- whether VoIP or collaboration -- so they don't fall behind the curve.

When we ask IT executives to provide advice to their peers about these types of projects, they consistently say, "Slow down!"

Bottom line: Don't rush and spend time assessing the market and the players, and planning your implementation.

Getting JITFTE with it

Deployment of unified communications has the potential to dramatically improve business activities that involve direct interaction with customers. For example, contact-center agents receiving calls from customers interested in products can quickly and easily locate subject-matter experts (SME) regardless of location by applying business rules combined with presence information to determine the best person to receive a call. The agent doesn't need to be an SME; rather he needs to have the capability to quickly locate an SME and bring him into the call.

Nemertes has coined the term Just-in-time-Fetch-the-expert (JITFTE) to describe this scenario. This model is most applicable for organizations that place a heavy emphasis on getting information to clients, often with geographically dispersed support teams.

In these organizations, effective customer interaction is critical to overall business success. For example, investment managers may need to apprise their clients quickly of events that might affect their portfolios. Community banks might need to answer specific questions about mortgages or loans. Closing a sale might require involvement of an individual with specific vertical or product knowledge who is located in a separate geographic region.

In these scenarios, unified communications helps improve close rates by giving sales teams better access to support resources via the use of presence. Mobility services enable people to be available regardless of location. Salespeople can locate SMEs in rapid time to help close a sale.

Presence-enabled unified communications serves to virtualize corporate resources, enabling individuals to find the experts they need regardless of location and quickly include them in a call, Web conference, videoconference or audio bridge.

The goal of this approach is to determine if unified-communications technologies can speed the process, leading to such tangible benefits as increased sales or higher customer retention/satisfaction rates.

Take the scenario of a professional-services firm that bids on 75 projects a year and has a typical close rate of 75%, for an annual revenue stream of $8,437,500. If the firm is able to apply unified-communications technologies to close just 1% in additional business in a year, the tangible benefit is $112,500. This benefit increases rapidly as close rates improve, with a 5% increase in close rates providing a benefit of $562,500.

Given the high rate of adoption of elements of unified communications, such as VoIP and IM, models such as JITFTE provide incentive for enterprises to begin to integrate those applications to provide a unified communications experience to their users.

One non-IT-related professional-services firm says unified communications helps its mobile employees become more productive, which translates into more billable hours -- an estimated $20,000 more per individual.

The communications-enabled business process

Deployment of unified communications can set the stage for companies to improve business processes by integrating communications services with enterprise applications. Integration using standard protocols, such as XML-based Web Services Description Language and Simple Object Access Protocol, can transform stand-alone communications applications into components of a service-oriented architecture.

By taking advantage of these Web Services interfaces, companies can integrate specific business processes with their communications systems. For example, a business event such as a manufacturing alarm, inventory shortage or medical emergency can trigger notification of key personnel, automatic creation of meet-me conferences or establishment of a Web conference.

In one scenario, a shortage in a warehouse could trigger an IM to all product inventory managers, along with a proposed conference-call meeting time, and additional information about the trends leading to the shortage, enabling the organization to quickly address the underlying causes and reestablish the proper pipelines. In this example, an organization can reduce the losses associated with an outage by $6,250 to $25,000 through faster communication to quickly react to a supply-chain disruption.

Most companies see the benefits in integrating unified communications with business processes. About 46% of enterprises surveyed are planning to integrate business processes with communications applications, while another 20% are evaluating communications-enabled business processes.

ROI: Justifying investment

Any IT investment must accomplish one of two things: reduce costs or increase revenue. Positive ROI is achieved when either of those values exceeds upfront and ongoing investment costs. Assuming that companies on average can expect to spend roughly $560 per person on their unified communications implementations, in an organization size of 10,000 employees, this translates into a need to demonstrate some combination of $5.6 million in cost savings or increased revenues, typically within a payback period of one year or less.

Sounds like a tall order. But what if you can demonstrate that elimination of phone tag as a result of presence-enabled communications reduces the time workers spend chasing down each other and retrieving voice mail messages by 30 minutes per employee per day?

If you figure that employees make an average of $30 an hour (that includes salary and benefits), this translates into potential cost savings of $15 per day, per employee. That comes to 123 hours per employee, per year (based on 245 workdays in a year), for total savings of $36.75 million, based on our 10,000-employee scenario. Of course, this assumes that the time saved is used for other productive purposes.

So if we assume that a 10,000-person organization implements unified communications at a cost of $5.6 million, a savings of 30 minutes per day per person easily justifies the investment. Even if we assume only half of the saved time is reused for productive business activity, we still see a positive return of $15.5 million.

Migration: How to get from here to there

The road map for implementing unified communications will vary greatly within each organization. One option is to purchase a complete unified communications system, such as Nortel Multimedia Communications System (MCS) 5100 or Siemens HiPath OpenScape.

Another option is to integrate best-of-breed components such as IP telephony systems, IM applications or hosted services, Web conferencing platforms or services, videoconferencing and calendaring/messaging components to create their own unified communications architecture.

Most companies we interviewed were adopting an IM-centric approach to unified communications. That is, they planned to deploy Microsoft Office Communicator or IBM Lotus Sametime as the real-time communications dashboard and integrate other applications into their chosen IM platform.

Fortunately, almost all unified communications application vendors have delivered or announced capabilities to integrate their products with Microsoft or Lotus IM.

Companies can expect to pay $30 to $70 per user for IM applications capable of serving as a real-time communications dashboard, plus associated server costs. For example, an organization of 10,000 employees would see an approximate cost of $60,000 for Microsoft Live Communications Server 2005 with a three-server configuration (not including hardware costs).

Beyond integration of IM, Web/audio/video conferencing and VoIP, companies can add calendaring applications, enabling presence status to change as someone goes into and out of meetings.

Presence status can be displayed in in-boxes, such as within Microsoft Outlook or Lotus Notes, or across other integrated applications, such as mobile clients, shared workspaces or other office applications. The ability to deliver these capabilities will vary across vendor-product lines.

Finally, enterprises can integrate their unified communications systems with business process applications as described above, either via open Web-services standards or via gateway devices, such as Avaya's Communications Process Manager.

Implementation tips

Unified communications offer a tremendous opportunity to improve enterprise efficiency, streamline tasks, improve workflow, shorten project life cycles and improve customer interaction.

A successful implementation requires that companies understand these benefits, determine specific business cases that are applicable to their own organizations, and develop a migration strategy that takes both architecture and organizational factors into account.

Enterprises should integrate architectural planning functions for all communications applications through converged teams or cross-functional communities charged with creating an organizationalwide road map for adoption of unified communications.

This requires integration of infrastructure planning with application planning, but is essentially to realize the overall value that unified communications brings, not just as a way of combining application interfaces, but also in integrating communications services with business processes.

Finally, enterprises should work with their strategic vendors to determine unified communications road maps, paying special attention to evolving partnerships between companies and the opportunities those partnerships present.

Lazar is principal research analyst and program director, Collaboration and Convergence, Nemertes Research. He can be reached at Irwin.lazar@nemertes.com.

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