Cutting the costs of VoIP

How to reduce hidden costs and find secret savings in a VoIP roll-out.

One of the key issues in implementing VoIP is cost. Until around 2005, organisations that implemented VoIP did so because of its real or perceived cost savings over traditional telephony.

In many cases, they did find substantial savings by eliminating costly third-party contracts for moves, adds and changes (MAC), reducing the amount of cabling required in new buildings, or leveraging idle capacity in their data networks. Indeed, those savings existed, but so did additional costs - effectively negating any net savings for the first 12 to 18 months.

For the past two years, cost savings has been a secondary driver to "future-proofing" the network. IT executives see IP as the platform for the future, and they want to be prepared for new applications - starting with voice - within a converged infrastructure. As a result, they are more accepting of VoIP's hidden costs, such as consulting, training and ongoing maintenance.

The focus has shifted from proving the business case of VoIP vs TDM to the business-case vendor comparisons. In other words, it's no longer a matter of whether a company switches to VoIP; it's a matter of when.

In Nemertes' benchmark research, 55 percent of the 120 IT executives who participated said they started their VoIP implementations within the past two years. Still, only about 18 percent of companies surveyed have completed their VoIP roll-outs, and those are primarily small and midsize businesses (SMB).

As IT staff assess VoIP, they want to evaluate the cost components - and how key vendors compare. During that time, Nemertes has been tracking VoIP costs for four years and has interviewed nearly 400 organisations.

What companies spend on VoIP depends largely on a few factors: how large their deployments are, which vendors they use and how they design networks. The trouble is that most IT executives cannot calculate accurate costs until they are well involved with their roll-outs, particularly with respect to start-up and ongoing operational costs.

It's vital to understand the cost components of VoIP. For example, it's great to find very low-cost VoIP deployments, for instance, with an open source solution. But if that solution requires significant training and programming and support is mediocre, it may be worth spending the extra money to go with a solution that is not open source.

VoIP cost metrics

Nemertes tracks VoIP costs in the following categories:

  • Operational start-up: These costs include planning, installation and troubleshooting. They cover the amount of hours staff spends on each function multiplied by the average hourly rate of the staff involved. They include the outside consulting costs companies incur.

  • Capital: These costs include IP switches and phones. Although Nemertes gathers the average costs of gateways, network upgrades related to the VoIP implementation, IP video and audio bridges, management tools, unified messaging, and traditional voice mail, the comparisons presented here do not include these additional figures.

  • Ongoing operational: These costs cover the time and money companies spend managing and maintaining their VoIP systems. Operational start-up costs

On average, organisations spend US$355 per IP-telephony user for operational start-up. The per-user costs vary, based on the size of the roll-out. Companies with smaller roll-outs, or those with fewer than 300 end stations, spend an average of US$588 per unit on operational start-up, while those with more than 5,000 end stations spend US$132 per unit.

IT and telecom staff distribute their initial planning time, as well as the time spent installing the IP PBX, among more users as the roll-outs get larger. So it makes sense the per-unit cost decreases as the roll-out size increases. With smaller roll-outs, those costs don't get divided by as large a group, so the per-user cost is higher.

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