Hard Soft Savings Gains Hard Soft Time

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					     Cost Justifying the Upgrade

                Alfredo Rizzo
          Session Outline

• Understand the Cost of Purchase and
• Define One-time/on-going/incremental
• Understand Hard Savings
• Understand Soft Savings from
  Productivity Gains
• Methodology
          Enterprise Telephony:
        The Changing Landscape…

The U.S. market for traditional PBXs and key/hybrid systems
 with more than 10 phones declined by 20% in 2001. During
    the same period, IP LAN Telephony shipments tripled.

“Justification for IP telephony will focus on increasing the
Number and Quality of Applications over current telephony
alternatives - (0.8 probability)”

                                      Gartner Dataquest, 2002
        Cost – The Network

• Start with the network:
  – Do you have a Local Area Network that
    is switched to the desktop?
  – Does your LAN infrastructure support
  – If voice will traverse the WAN, do your
    routers support QoS? It may be that
    they can with a firmware upgrade, but
    sometimes not
        Cost – The Network

• Will VoIP calls be traversing firewalls?
  – Do you have a firewall solution for SIP?
  – Consider all corporate firewalls, both
    internal and on the edge.
• If using VPNs, will your VPN solution
  support the volume of VoIP sessions?
    Cost – Cabling and Power

• Does your cabling support the
  required IP phone drops, or will you
  be using phones with built-in 2-port
• Providing UPS power to IP phones
        Cost – The IP-PBX

• Cost of the switch
• Cost of the phones - are they
  proprietary or standards-based so
  that you can choose from multiple
• Cost of the professional services
• How is E911 provided? This is
  sometimes a hidden cost, be careful.
        Cost – The IP-PBX

• Cost of the training – your
  IT/telecomm team should be able to
  administer MACs, Auto Attendant, dial
  plan, Unified Messaging, and fax
  services autonomously.
• Cost of remote user support – will you
  need SOHO VPN devices and IP
        Cost – Remote Sites

• Remote Survivability - not an option.
  – Local PSTN Gateway (coming up)
  – Proxies (there are good free ones), or
    router upgrades
  – Be sure to PICC those analog circuits
  – E911
            Cost – Gateways
• IP/PSTN Gateways: (get a diagram)
  – Does your server support both TDM and IP
  – If not, then what will convert TDM calls to IP?
    Alternatively, do you have a carrier that can
    provide you with SIP trunking?
  – Will you be tie trunking to legacy gear?
• Will you be using FXS Media Gateways to
  drive analog phones – i.e., in the contact
  center, lobbies, conference rooms and
             On-going costs

•   Warranty on your gear
•   Maintenance Support for break/fix
•   Upgrades - Professional Services
•   Annual Software Licensing Fees
•   PC Server hardware has a shorter life
    span – 5-6 years typical max with
    extended warranties
           On-going Costs

• You must now administer QoS,
  firewall / VPN strategies with VoIP
• WAN bandwidth will need to increase,
  but this should be offset by toll
  savings and the ability to offer
  telephony applications to remote sites
  without having to deploy application
  Quantifiable Savings – This Stuff
        is Getting Cheaper!
• The low-hanging fruit:
  – Toll by-pass (can be significant)
  – Infrastructure savings:
     • Cabling (a weak argument?)
     • Remote offices – key systems or remote cabinets
  – Cost of MACs
• Standards-based platforms drive pricing
  – IP phones are now cheaper than proprietary
    digital sets, and will soon be dirt cheap
  – PC Servers with mainstream OS
        Quantifiable Savings
• All Maintenance contracts, across all
• All-software IP-PBX solutions are here.
  This will affect your hardware investment
  (IP Telephony cards) and maintenance
• Using XP’s RTC API makes your PC a SIP
  endpoint. USB headsets and analog
  phone connectors are inexpensive devices
  ($40 - $50)
     Any Revenue Increases?

• Can you offer a new services to your
  customers as a result of IP
• Will you capture any revenue that
  perhaps you did not before?
            Soft Savings from
            Productivity Gains
• This is the power of the solution
• A telephony solution that is converged with
  the data network and standards-based
  (SIP) will enable the integration of
  communications applications, simplified
  administration, lower TCO, and vendor
• Traditional telephony applications such as
  screen pop, recording, and ACD are now
  available anywhere that IP reaches.
            Soft Savings from
            Productivity Gains
• IT / Telecom staff will be more productive:
  – MACs are done in software, and in some cases
    can be automatic
  – GUI tools do not require as much training, and
    many times provide single point of
    administration across multiple systems
  – Integration into network services – users are
    now associated with their AD / NDS / LDAP
    accounts (also increases security)
  – Self-sufficient with Auto Attendant
    configuration, VM/UM, ACD
     New Applications - The Real
         Productivity Gains

“Justification for IP telephony will focus on increasing the
Number and Quality of Applications over current telephony
alternatives - (0.8 probability)”

                                      Gartner Dataquest, 2002
          New Applications

• Traditional telephony applications can
  be extended to anywhere IP. Remote
  offices and home offices will have all
  the functionality of the “local” users:
  – ACD with Screen Pop
  – Recording
  – Agent Monitoring
  – PBX – call control,conference calling,
    access to directories, etc…
          New Applications

• Directories – departmental and
  company listing of employees will be
  easily available “online”.
• Soft phones will become ubiquitous,
  with rich features. This should drive
  the need for a fancy (aka, expensive)
  IP phone down.
• Intelligent messaging to the phone
  allows for interactive applications
           New Applications
• Server Redundancy and failover
  – Separation of IP Telephony application servers
    and gateways will allow for incredible
• Disaster recovery
• Integration into network services increases
  security and lowers administrative burden
• Video Conferencing will be controlled by IP
  Telephony systems using the same
  protocols as voice.

• How to present to management
  – Make a strong business case
  – Get organized. Deal with costs, then
    hard and soft benefits.
  – Describe the alternatives considered:
    • Can you upgrade your legacy PBX?
    • If replacement is needed, can you replace
      with a less expensive legacy solution?

• Compare Alternative Solutions to IP
  Telephony (use a table):
  – List hard and soft costs.
  – List hard and soft benefits.
• Recommend your solution
• Walk through an ROI calculation for
  your recommended solution

•   List hard costs
•   Assign dollar values to soft costs
•   List hard savings / benefits
•   Quantify soft savings from productivity
    – Assign dollar values to each. List time
      savings and quantify them.
    – Make a conservative estimate and have
      solid data to back it up.
       ROI – Soft Savings from
         Productivity Gains
• Quantify Soft Savings (continued):
  – Some are easy to quantify (IT/Telecom staf
    time to perform user/phone administration)
  – Others are harder (home users can now se
    up ad hoc conference calls from their home
• Now we have a formula:
  ROI =       Investment (Hard & Soft)
          Savings & Gains (Hard & Soft) / Tim
   ROI – The Icing on the Cake

• Applications:
  – Start with the most powerful ones to
  – Do any address company pains?
  – Be descriptive of each and provide
    examples and illustrations if applicable
     Strong Closing Argument

• Re-cap (briefly) how you:
  – Evaluated alternatives on hard and soft
    costs and savings/benefits
  – Calculated your recommendation’s
    Return on Investment
  – Will be setting up the company for future
    competitiveness (like when you set up e-
              Bonus Section:
       How to Keep your Costs Down
• Stay STANDARDS-BASED. Among other
  important benefits, Standards drive price down:
   –   Server / OS / IP boards
   –   Phones
   –   Proxies
   –   Gateways
   –   Everything…
• Software – compare annual licensing with pay-as-
  you-upgrade options
• Version Upgrades - try to get vendors to guarantee
  a yearly price for upgrades to new releases
Questions / Comments

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