VoIP's hidden costs

Don't let these sneaky project expenses blow your VoIP budget.

Don't let those sneaky project expenses blow your VoIP budget.

You've squeezed every bit of efficiency from your IT infrastructure and have started thinking the time might be right for voice over IP and its promised grand benefits.

After all, one physical infrastructure for voice and data is more efficient than dual networks. What vendors don't always mention is that achieving impressive ROI requires budgeting for potentially hidden costs.

VoIP implementation costs can range vastly, from $20 to $150 per user (with a typical installation being in the $20-to-$30 range), vendors say. Of course, larger companies have more negotiating power with vendors to bring their projects in at the lowest per-user costs. Beyond that, if you want your costs to be as low as they can be, you'll need to avoid surprises. That starts with an accurate financial assessment. In addition to the IP PBX and gateways, consider these items for your project budget:

A comprehensive traffic study.

Users say your VoIP project should begin with a comprehensive network and telecom usage-pattern analysis, whether performed in-house or by a consultant. A thorough check of the network with a detailed traffic study is "a beautiful thing," says Kevin Lopez, national manager of telecommunications for accounting services firm Grant Thornton in Chicago. "It will help you know what kind of trunking and bandwidth you need, see what you are going to do and where you are going to do it."

Lopez learned that lesson the hard way. To standardize its voice across multiple offices and ultimately reduce costs, Grant Thornton has undergone a multiphase project to upgrade telecom equipment. As part of that project, about 18 months ago it implemented an Avaya VoIP system for sending IP-encased voice over a frame relay network connecting 48 offices nationwide. In November, the company will begin using IP over T-1 lines, and implement quality of service for voice calls.

But Grant Thornton had not performed a comprehensive voice traffic study before implementing the VoIP service. It wasn't until after deploying VoIP that Lopez discovered a large percentage of long-distance calls were between employees. While that was good news - as it meant a 40% reduction in long-distance fees - had Lopez known about that calling-pattern beforehand, he could have provisioned bandwidth differently. He now is reconfiguring some trunks to better handle the traffic flows, he says.

VoIP traffic studies should include analysis of bandwidth usage, availability, calling rates, latency and jitter, says Jorge Blanco, a vice president for Avaya's converged systems and applications group. Such analysis is typically within the abilities of network staff. But should your staff be too overloaded, your VoIP vendor can do it for $5,000 to $10,000, Blanco estimates. In-house or not, the budget should reflect expenses incurred in a traffic study.

Infrastructure upgrades.

VoIP depends on a state-of-the-art switched network. If you still use shared links to the desktop and have a closet full of ancient equipment, you're looking at a forklift upgrade. Tying VoIP into an overhaul could be wise, as its cost savings can help offset the expense of new gear faster than an upgrade for data applications only.

But even a network that is up to snuff likely will need some infrastructure tweaks. Modest server and router upgrades were in store for Steve Eager, director of network and systems administration for NFL Films, the filmmaking arm of the National Football League, in Mount Laurel, N.J.

Upon moving into a new building in April 2001, NFL Films converted its nearly 500 phones to a Cisco VoIP system. That meant licensing Cisco's CallManager software and buying Cisco-certified servers to run that software and Cisco routers to handle the traffic uptick VoIP would cause. Eager also purchased in-line power blades for the company's Cisco 4006 switches. In-line power supplies electricity to IP phones through Ethernet wiring, so electrical wiring and jacks are unnecessary. All told, Eager says he spent about $150,000 for network-related upgrades and saved at least $200,000 in wiring costs. Plus, he avoided buying a new PBX system for the new building, which he estimates would have cost $250,000.

Moving to voice over IP requires spending money on IP PBXs and other equipment. But how much to budget even for that depends on your approach to the VoIP rollout.

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Consider, too, if you want to run data on your VoIP network regularly or only on an as-needed basis. At Grant Thornton, Lopez retained an existing Cisco router network for data transport. "If the Cisco routers go down, we can failsafe over to the Cajun routers. We spent a little bit more money, but have a built-in failsafe," he says.

Such a tactic means higher upfront costs, although it could result in long-term savings compared with a back-up plan that has useful equipment sitting idle, waiting for the main gear to fail.

IP phones.

IP phones come in two flavors, hardware handsets and "softphones." Softphones are client-side code hooked up to digital handsets. Prices vary, with an IP handset ranging from $150 to $700 - depending on the brand and features - and licenses for softphones running about $80 per user, for a 50-user pack. Prices for IP hardware handsets are dropping but remain high enough to be of questionable value, even their vendors admit. If you're moving into a new building and can justify the cost with the savings obtained from in-line power - as was the case for NFL Films - they could be a good choice.

Soft IP phones are an attractive, money-saving alternative. OneUnited Bank found the ideal option. It moved to VoIP when consolidating calling plans for its 12 offices that it operates in three states, says Jim Barry, CIO at the Boston firm. The bank ditched its Centrex and voice mail services in favor of Shoreline Communications' Shoreline4 system, including soft IP phones but not IP handsets that would have cost about $600 apiece. Instead, Barry decided to rely on generic digital handsets. "I saved $60,000 on the phones alone. Do I really need to see a stock-quote stream display on my phone? No," he says of the applications he forwent by skipping the Shoreline IP handsets.

But don't shortchange your VoIP users by passing over IP phones altogether, users say. "If I had to pick one of my favorite Avaya products it is the IP softphone," Lopez says, naming mobility as the reason. Hard or soft, IP phones let users roam while retaining their phone numbers, internal extensions and calling configurations (speed dials, transfer/conferencing functions). Softphones are responsible for many of the worker productivity gains commonly associated with VoIP.

Inherent cost of the VoIP system architecture.

The cost of maintaining the VoIP network depends on the vendor's architectural approach, some researchers find. In a study Shoreline commissioned, The Tolly Group determined that VoIP product architectures fall on a continuum, from most complex (and expensive) to least complex (and expensive). "Cisco and Shoreline represent the extremes," says Kevin Tolly, The Tolly Group CEO, and a Network World columnist.

Cisco, at the complex end, has what Tolly dubs an "invasive" architecture, where VoIP is an integral part of the data-switching infrastructure. "To extend, install, maintain and upgrade your voice infrastructure, you have to perform open-heart surgery on your switching infrastructure," he quips. This forces VoIP system upgrades into the higher-labor-cost, off-peak hours (although Cisco has products that support real-time maintenance), and it traps users into whatever equipment, pricing and patches the vendor issues.

In contrast, Shoreline treats VoIP more like an application, Tolly says. Or, as OneUnited's Barry describes: "Cisco anticipates a purely Cisco solution. Shoreline anticipates that you'll use its switches, and after that what you use is up to you." Barry offers the generic digital phones he chose as a mix-and-match example.

Because OneUnited does not use Cisco data switches, going with a Cisco VoIP network would have meant hiring a high-priced Cisco Certified Internetwork Engineer, a cost avoided with Shoreline, Barry says.

When it comes to figuring out how quickly your investment in voice over IP will pay off, some savings are obvious, others, not so.

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On the other hand, NFL Films' Eager, who had a fully trained staff maintaining its Cisco data gear, chose Cisco's VoIP equipment to get single-vendor technical support. This was a soft cost-savings, he says.

Tolly refutes this as much of an advantage, insisting that "VoIP phones and switch ports should be mix and match" without much incompatibility.

In any case, think through the potential of hidden costs in the VoIP switch architecture you choose.

Performance monitoring tools.

One final but significant cost comes from performance monitoring, as VoIP will require tools you likely don't own. "Voice is the least forgiving IP application. Any more than a half-second delay makes a voice connection unusable. You need to track not just uptime, but latency," Tolly says, adding that tools such as Agilent Voice Quality Tester or NetIQ Chariot can cost $50,000 and for a large WAN with many remote sites, "cost can easily be in the six figures."

You'll have to budget for some major training. Telecom protocols such as H.323Session Initiation Protocol and G711 have steep learning curves and are foreign territory for data guys, Tolly says. Likewise, if you're going to ask your company to put its voice lifeblood in your data network veins, you'll need a method to audit performance. Tolly recommends buying service-level agreement (SLA) monitoring tools, from Packeteer or Sitara Networks. Doing so will require enough funds to place SLA monitoring at every significant remote site at roughly $2,000 per box.

While VoIP can have its long-term financial benefits and hearty ROI, calculating the costs is surely the first step.

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