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This chapter is from the book

Unified Communications Return on Investment (ROI)

When organizations choose to deploy a new technology, there is always an investment that must be made. This investment is commonly referred to as a capital investment or capital expenditure (capex, for short).

Return on investment is the performance measurement of how an organization will see a benefit on the investment made. When a UC solution is deployed, there are various types of cost savings, and these savings make up the ROI. This next section outlines what investments an organization must make when deploying a full UC solution as well as the factors for realizing ROI.

Unified Communications Investments

Some organizations will have invested in UC prior to making the decision to move to a UC solution; however, it is still important to understand what these investments are and ultimately how they can be paid for (ROI).

Consider the Capital Investments

The term capital investment in terms of UC is described as the cost to deploy the solution. When UC is deployed, many components can contribute to a capital investment. Some organizations will categorize certain purchases. For example, some organizations will spread purchases out over five or more years, resulting in a distributed capital investment, or amortization. Regardless of how an organization chooses to categorize its purchases, the following expenses are most commonly referred to as “capital expense” (or capex):

  • Licensing

  • Data center hardware (servers, storage, and so on)

  • Media gateways (PSTN gateways, Session Border Controller [SBC], and so on)

  • End-user hardware (headsets, IP phones, cameras)

  • Implementation costs (staff and professional consulting services)

  • Network upgrade investments (hardware and other “setup” fees for network upgrades)

The capital investments will vary depending on the organization. Regardless of the size of the company, these investments will be significant.

Consider the Operating Expenses

In addition to capital expenses, organizations also have to consider an increase in certain operating expenses (or opex, for short). Although UC solutions reduce operating expenses overall, it is common for organizations deploying UC to increase IT operating expenses.

When organizations consider capital and operating expenses for UC, there will be a common theme: an increase in network costs. Network investments tend to make up the most significant capital and operating investment for organizations deploying UC. In a worst-case scenario, existing enterprise telephony is not IP based, and because of this, organizations are not equipped to run real-time voice over their IP networks. This results in a major investment in network expansion.

In an optimal scenario, the organization is already using an IP-based telephony system, and the new network investment must now account for increased usage such as conferencing and video.

The first scenario often requires a complete network overhaul. Multiprotocol Label Switching (MPLS) circuits and Internet connections must be increased, and that often comes with upgraded hardware. The second scenario involves network optimization. This is a combination of increasing bandwidth and optimizing connections to provide priority to UC traffic (quality of service).

Monitoring for quality of experience (QoE) and quality of service (QoS) should be a mandatory step in managing a successful rollout of Skype for Business Enterprise Voice.

Consider the Committed or “Dual-Run” Costs

One factor in calculating ROI that is often overlooked is committed costs. These costs can also be referred to as dual-running costs. In most scenarios, an organization cannot simply turn off a legacy system and immediately stop paying for it. Not only is there a transition period between systems, but there are often committed costs associated with a contract or lease. These committed costs can be attributed to hardware leases as well as support and service contracts. Many organizations will also choose to amortize capital investments over any number of years. Hardware investments must be depreciated before they can leave the books. Organizations typically have the following committed costs when deploying a new UC solution:

  • Investment depreciation—Many organizations depreciate hardware over five years in order to spread out that capital investment.

  • Hardware lease costs—Some organizations lease PBX hardware and PBX endpoints instead of purchasing them. These can have committed lease periods.

  • Dual-running solutions—Costs to run legacy equipment and the new UC solution while migrating off the legacy solution to the new UC solution.

  • Support contracts—Support contracts typically include a multiyear agreement between the organization and the vendor.

Before return on investment can be realized, these costs must be accounted for.

In summary, a UC solution is not purely cost savings. There will always be a significant investment to successfully deploy UC. However, the benefits of a true UC solution can lead to a rapid ROI, which ultimately makes UC worth the investment.

Audio Conferencing Return on Investment

It is common for many large organizations to spend millions of dollars a year on audio conferencing from a third-party provider. When deploying a UC solution that includes audio conferencing functionality, organizations tend to see a significant cost savings. This cost savings is typically the largest UC ROI factor for businesses.

When deploying a UC solution like Skype for Business Server 2015, organizations can bring all of their audio conferencing internally instead of using a third-party audio conferencing provider. Previously, organizations would pay per-minute audio conferencing charges for services that provided a dial-in conferencing bridge and audio conferencing. When this is brought in-house, those costs are reduced. The costs for audio conferencing are replaced by the costs to maintain the UC system and the inbound PSTN trunks for dial-in conferencing users. Many organizations are leveraging SIP trunks for this functionality to further reduce costs. On average, organizations will reduce their dial-in conferencing usage by 85%. That 85% reduction accounts for users who are now leveraging a UC client to join a conference using IP audio. The remaining 15% accounts for users who are still dialing in to the audio conference through the PSTN.

When the ROI of a UC solution is evaluated, it is important to not completely remove audio conferencing costs from the total cost of ownership (TCO). A small portion of the costs that are removed are replaced by new costs. This can include PSTN trunks, PSTN gateways, bandwidth, and additional server hardware if needed. Additionally, many organizations require the use of a third-party audio bridge for advanced conferencing scenarios. This functionality is often referred to as managed conferencing. These scenarios include operator-assisted meetings, or very large audio conferences with more than 1000 participants.

Realizing ROI with Centralized Telephony

As mentioned in earlier sections, most organizations have a distributed PBX system. When an organization is considering UC, one option is to replace the distributed PBX systems with a centralized UC telephony platform. The centralization of the telephony platform can have many benefits.

Reduced Hardware Footprint

When an organization chooses to centralize its telephony platform, the hardware footprint is greatly reduced. This can provide ROI by reducing hardware purchase costs, hardware maintenance costs, and facility run costs.

Reduced Support Costs

Often when organizations move to a centralized telephony environment, the costs to support the environment are much smaller than the costs of a distributed system. If support of the legacy telephony solution was outsourced before, the outsourcing contract might be reduced. If this was completely supported by internal staff, staffing can often be reduced or allocated to other tasks.

SIP Trunk Opportunity

Using SIP trunks is a relatively new trend in telephony. They provide the capability to purchase PSTN services and have them delivered over IP connections rather than traditional T1/E1 PRI connections. Although SIP trunks do not require a centralized deployment model, a centralized telephony deployment does introduce the opportunity to deploy SIP trunks more easily. The combination of centralized telephony and SIP trunks is ideal for realizing cost savings.

Many organizations have a vast number of PRI connections delivering PSTN services. The problem with PRIs is that they come in only one size (23 voice channels per trunk in the U.S.). SIP trunks allow organizations to have more control over how many channels are purchased. In simple terms, if you were a mid-size organization that needed 40 voice channels to support your call load, this would result in two PRIs. Those two PRIs would require two T1 connections. The end result is double the cost for a very small capacity increase.

These are the three ways in which SIP trunks allow you to reduce your PSTN costs:

  • Reduction in the number of voice channels—Organizations that deploy SIP trunks typically see a 40% reduction in the number of actual voice channels, because the capacity is much easier to predict and control. This reduction in voice channels also comes with a cheaper, more flexible delivery method: IP. Many times this is delivered through an MPLS connection from the provider directly to the organization’s data center, but there are services that target small- and mid-market customers that also deliver these services over the Internet.

  • Shared usage—Organizations can reduce their voice channels even more in a centralized telephony model. When the PSTN trunks are centralized, they can be shared across all of your sites. This works very well in organizations spread across multiple time zones. In fact, SIP trunks can be optimized based on time zones to provide capacity where it is needed, resulting in a large amount of cost savings.

  • Flexibility—SIP trunks introduce the ability to increase or decrease capacity as needs change. Time-division multiplexing (TDM) connections often require additional physical line configurations to accommodate capacity changes. With SIP trunks, this simply becomes a matter of provisioning by the provider in many cases. SIP trunk providers are also able to offer advanced functionality, including failover routing as well as multiple area codes and international numbers on the same connection, something that TDM trunks are simply not able to do.

The areas previously described are the most common areas in which organizations can realize cost savings and ROI from deploying a UC telephony solution. The level at which ROI is realized will depend on how willing the organization is to adopt the centralized and shared model for the telephony infrastructure.

Productivity Improvements

When any UC solution is being introduced, an increase in productivity is one major selling point. How this increase in productivity influences ROI can be more difficult to calculate. Productivity increases are often referred to as soft costs, meaning that you cannot put a definitive dollar amount next to them. However, it is practical to make educated estimates based off of common scenarios that result in productivity increases. After the solution is deployed and used, it is possible to monitor usage and identify productivity cost savings.

A key scenario in which productivity increases can translate directly to dollar amounts is the task of checking voicemail. When you consider the process for listening to voicemail on a legacy voicemail system, it becomes clear how tedious this process is. Assume that you have a billable resource. This resource makes the company money at $300 per hour. If it takes that person three minutes per day to listen to his voicemail, it seems to be a small cost (under $2 per day). However, you must now multiply that number by all resources in your organization, say 10,000 users. That quickly turns into $20,000 dollars per day, or $100,000 per week.

When evaluating UC ROI, organizations should also consider time that is wasted for travel. Many organizations have resources that must travel to and from the office, as well as to and from clients. If you were to use similar logic as that used previously with a resource that can make the company $300 per hour, removing that travel time and replacing it with billable work will save the company money. Many organizations will charge customers travel time for such resources; however, if a business no longer has to charge for travel because moneymaking resources can work remotely with UC, that organization is now more attractive to do business with.

UC presence makes it possible for users to spend less time on common tasks and allows users to increase productivity in many other areas. When users have the real-time availability of their peers, their communications are more efficient, less time is lost, and similar logic to that used previously can be applied to calculate soft cost savings.

Reduced Travel Costs

The preceding section mentions cost savings due to travel reduction. That section outlines the increased productivity and potential “billability” of users based on less travel. This next section explains how organizations can reduce their overall travel costs.

Many organizations with a global footprint spend millions of dollars per year on travel between their sites. Today, even completely U.S.-based organizations require their employees to travel between sites. In recent years, Telepresence video was introduced as a way to reduce those travel costs. However, the complexity and cost of Telepresence systems has resulted in many organizations not realizing travel cost savings. A new and more reliable trend for travel cost reduction is to deploy a common UC solution across the organization that targets each and every end user.

Not all in-person meetings can be replaced with a conference, even if HD video is involved, but the industry is realizing that the majority of these trips can be replaced with a highly intuitive collaboration experience. When an organization empowers its end users with a tool that allows them to seamlessly collaborate with peers across the world, money is saved.

The process to calculate this savings varies across the different types of organizations. This is another cost that is hard to place a solid number on before the product is deployed and used for some time. However, as with the productivity increase, you can take estimates for common situations. Consider the travel expenses and the lost time associated with traveling for meetings and then estimate the savings when these meetings are moved to a UC conference.

There are also many tools in the industry that allow organizations to monitor the usage of their UC systems and then use that data to calculate estimated cost savings. Look for these tools to help you back up your original cost-saving estimates and show true contribution to the UC ROI.

Office Space Reduction

Another interesting trend in the industry is a cost reduction related to real estate. Many organizations are exploring the idea of a “modern work space.” These modern work spaces typically are less formal and provide more of a shared environment. The idea is that fewer users will actually be in the office, and therefore you can reduce the size of your offices, or remove some offices altogether. It is absolutely critical to have a true UC solution deployed to allow for this workspace transformation. Many organizations can save millions by moving to modern work spaces and remote work from home, thus reducing their real estate footprint.

This approach is not typically started with UC, but is driven by UC. In my experience, organizations that are exploring the benefits of this solution have already been working on this for quite some time. The amount of money that can be saved varies greatly across regions and business verticals.

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