Making the case for VoIP

An opportunity analysis reveals the savings potential of an infrastructure investment.

As companies seek to justify IT projects in an era of cost-consciousness, infrastructure initiatives often get short shrift because it’s difficult to show value. Companies group budgets into opportunity categories of regulatory initiatives, operational enhancements, revenue generation and infrastructure, generally prioritizing in that order.

Convergence is a strategy that many organizations want to pursue today. VoIP rollouts can generate savings and help streamline processes, organizations and management  tools. These are all good things, yet they lack the glamour of an operational improvement or revenue-generating initiative. For a VoIP initiative to compete with these other projects for resources and funding, you must create a strong business case, ROI and budget.

Making a budget and budget case for an IT project requires a five-step process of opportunity analysis, infrastructure analysis, process/organization analysis, tool analysis and project analysis. While each step merits attention, let’s drill down into opportunity analysis. Determining the cost, savings and resulting ROI for the VoIP initiative provides the data you need to sell the project. What follows is a guideline of cost elements to consider.

Long-distance

This analysis examines domestic and international long-distance billing by physical location. Pick an analysis period that is representative of the norm and look at “on-net” calling (location to location on the company WAN ) and “off-net” calling (to the nearest logical node on the company WAN in order to hop off from there).

Domestically, with long-distance rates in the sub-penny-per-minute realm, the potential savings will be small. For multi-national organizations, however, the potential for savings can still be great … for a while. Companies that need the long-distance savings to fund hardware requirements and project implementation to facilitate a convergence strategy likely have, at most, three years to execute before the fall of international long-distance rates bears resemblance to the domestic U.S. market.

Figuring your costs lets you see what you’d save by reducing long-distance billing. A representative example is 1,000 minutes of international long-distance at a public switched telephone network rate of 53 cents per minute, totaling $530 per month in current international toll charges. Using VoIP, the rate would be, on average, 2 cents per minute or $20 with a service provider, and potentially less over customer-owned infrastructure. At this traffic volume, there likely would be no increase in bandwidth required. Therefore, from a business-case perspective, the savings that could be achieved from this single site example is $510 per month or more.

Conference calling

Organizations today generally use an external conference-calling service provider that provides immediate, unscheduled access to conferencing via a central number and individual pass codes. These services have enjoyed tremendous acceptance but are expensive, generally are based on toll-free numbers and offer little or no accommodation of international requirements beyond direct dial. Placing the conferencing service over VoIP likely will generate savings. The challenge will be planning for the unknown peaks.

Conferencing service rates range from 20 to 35 cents per minute, per user. Most of the popular conferencing services on the market provide significant bill detail. Take the overall cost of the conferencing service, minus the incremental bandwidth requirement, to derive the potential savings that accommodating conferencing via VoIP can achieve.

PBX avoidance

One of the biggest questions about VoIP is whether to convert the PBX environment to softswitch technology. The benefits can be many for organizations with multiple locations, but understand the attendant disaster recovery and other risks, and accept or mitigate them before taking advantage of the cost-savings opportunities. Your company also must include a sound plan for accommodating E-911 service for each site in the design phase of the project.

Organizations can install softswitch technology to connect multiple locations using the WAN. Opportunities for savings include actual replacement of site-specific PBX and peripherals (voice mail, auto attendant, ACD, voice response systems and the like) and the lease, amortization and maintenance agreements associated with each; the inclusion of the softswitch technology in the enterprise management system; and the ability to perform moves, adds and changes the PBX vendor traditionally performs.

With PBX and peripheral equipment for small locations costing $25,000 and up, the savings that softswitch technology offer can be substantial only if the incremental bandwidth, an ongoing monthly cost, has a run rate significantly below the PBX capital outlay over a three-year period.

Video/multimedia

Over the past several years, video largely has been accommodated via ISDN vs. the enterprise WAN. Current video requirements and costs associated with ISDN should be included in the analysis and known plans for expanding the capability of video and multimedia services. Video represents a significant challenge regarding bandwidth, and its use and utilization must be well understood before accommodating it via the WAN. Again, cost savings can be achieved if the ISDN costs for video today are above what the incremental WAN costs will be to incorporate video at no degradation to current data traffic.

We heartily recommend each step involving the transition of a current “non-WAN” service to a proposed VoIP environment be examined carefully via network modeling tools such as those from Opnet or Compuware. Network modeling will let you address and understand the network impact of the VoIP initiative on an element-by-element basis to make sound business decisions regarding what should be included in the converged environment. It also will let you understand and appreciate the interoperability considerations of introducing voice, video and multimedia to the data network and the resulting effect on the enterprise applications.