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Wringing Savings From VOIP
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January 20, 2003 (Computerworld) -- Achieving a speedy return on investment from voice-over-IP (VOIP) technology has proved difficult, in part because upfront costs can be high and traditional long-distance phone charges have dropped in recent years.
It's also easy to forget to include some of the behind-the-scenes expenses involved in VOIP when calculating its ROI. That's because so many companies have underestimated the complexity of running voice applications on corporate IP networks. Adding voice requires that all elements of the corporate network be tested -- and in some cases replaced or upgraded -- for VOIP applications. Companies may even need additional staffing to manage the converged traffic on IP networks.
Nevertheless, users and analysts say that a return can be achieved -- though it may require more careful planning, and the payback may take longer than first expected. Most analysts have pushed out the time it takes to gain a return on VOIP to an average of 19 months, compared with earlier estimates of less than a year.
Chicago-based Grant Thornton Inc., a global accounting and auditing firm, has set up a converged network in the U.S. featuring centralized management, five-digit dialing for calls between offices and employees, hub-based voice mail and unified messaging. With 51 offices and 2,800 employees nationwide, "we really wanted our geographically dispersed sales teams to be able to communicate more quickly and easily, enabling us to provide faster, more flexible service," says Kevin Lopez, national manager of telecommunications at Grant Thornton.
The new network has been in place since last spring. Grant Thornton has cut communication costs by routing voice traffic over its wide-area network and eliminating toll charges. It has also reduced network management requirements and consolidated 28 stand-alone systems into four hubs -- all without replacing its existing private branch exchange (PBX) and digital phones.
The payoff? Grant Thornton has saved $800,000 in its first year on intracompany long-distance toll charges and $160,000 on equipment lease payments, Lopez says.
The company had already implemented a wide-area data network based on frame-relay circuits and routers from Cisco Systems Inc., along with an Avaya Inc. PBX and 28 Octel Corp. voice messaging systems. The firm added Avaya Cajun routers for VOIP when it consolidated the systems into four primary hubs, to handle voice and data traffic. And to guarantee the quality of service, a permanent virtual voice circuit was provisioned for each office location.
Grant Thornton selected Avaya to provide VOIP functions because the supplier was best able to leverage its existing PBX and digital phone investments, and because of an aggressive leasing plan that lowered the firm's monthly costs, Lopez says.
For Grant Thornton, the savings in administration and monthly recurring costs were too great to ignore. Now, says Lopez, the company is looking to enhance the network so it's more robust and to improve visibility into the network by using specialized systems management tools. "And in the next year, we hope to boost bandwidth for audio- and videoconferencing, which will further reduce our costs," he says.
According to analysts and corporate customers, the key to achieving an ROI on VOIP is to plan carefully. Businesses should conduct an IT audit of their network infrastructures, including current data and voice traffic patterns. If users skip this step and don't know their current costs, they won't know whether the VOIP migration has saved them money.
Stephen Leaden, president of Leaden Associates Inc., a telecommunications consultancy in Washingtonville, N.Y., says users seeking an ROI from VOIP should start with the WAN, where you can "expect 20% savings from Day 1." That's because VOIP capabilities are more mature in WAN products than they are in localized customer premises equipment and PBXs, he says.
A recent report by Gartner Inc. says that IP PBXs typically lack several of the richer features offered on circuit-switched PBXs. If IP PBXs offer 90% of the features available on traditional PBXs, that will equal 100% user dissatisfaction, as well as trouble tickets that the IT help desk can't fix, according to Gartner.
Leaden advises VOIP users to distinguish between their WAN and local PBX implementations. "These are separate, independent projects that need never merge. It's best to go with mature WAN-based VOIP implementations first, to gain a slow, steady, yet clear return," he says.
ROI Strategies
Analysts say the best way to increase the ROI of voice/data networks is to layer on various benefit-producing applications, including fax, audioconferencing and videoconferencing.
For an even faster ROI, use VOIP as the wide-area transport mechanism between multiple internal locations, because that reduces T1 costs and doesn't require the addition of specialized digital phones.
Cutting T1 costs was the key at Rye, N.Y.-based catalog retailer Lillian Vernon Corp., for example. In late 2001, Lillian Vernon replaced an aging automated call distribution (ACD) system with a VOIP-enabled multimedia contact center, reducing the number of T1 lines used from six to two.
That move saved the company $100,000 during 2001's peak holiday sales season, says Ellis Admire, director of MIS operations. "By converting voice calls from analog to digital signals, we can carry up to 72 calls on a single T1 line, vs. the previous high of 24 simultaneous analog voice calls," Admire says.
The eQueue multimedia contact center from eOn Communications Corp. in Atlanta lets customer service representatives handle e-mail and Web contacts with the same ease as a phone call. Admire says eOn's VOIP-enabled ACD system was chosen because it uses open, Linux-based technology that is up to date and reliable. "[EOn] was able to show us customer examples, while others, such as Aspect and Rockwell, weren't," he says.
Besides monthly savings in T1 leasing fees, Admire says the added skills-based routing features, along with the ability to converge voice and data over T1 lines, make VOIP-enabled ACDs worth a close examination. (Skills-based routing is used to route calls to customer representatives with specific skills, such as the ability to speak Spanish or offer specialized support.)
H.B. Fuller Co. in St. Paul, Minn., expects a payback on its new VOIP deployment in about a year, says Kevin Wetzel, manager of global network services at the manufacturer of adhesives, sealants, coatings and paints.
VOIP technology finally proved reliable and sturdy enough for use this past summer, Wetzel says. The reliability comes from the addition of centralized processing, which reduces the overhead of having multiple local processing locations and provides remote-site recoverability. So if a WAN circuit fails, the calls can still be completed.
H.B. Fuller uses VOIP at 30 sites globally, incorporating about 3,500 digital phones. Most of the sites are in the U.S., with the remainder scattered throughout Europe, South America and the Asia-Pacific Rim, in places where the cost savings were almost immediate, Wetzel says. The network uses Cisco's CallManager and other related call center and unified-messaging products.
The savings vary dramatically -- from 20% to 80% -- depending on the application and the age of the analog phone systems replaced. But Wetzel says the average savings delivered by switching from traditional analog phone services to VOIP has been about 50%.
By the end of this year, H.B. Fuller hopes to expand the VOIP network to 41 locations in 30 countries. That will mean more toll-bypass savings - where international regulations permit - and will reduce travel and long-distance bills when employees use the internal audioconferencing capability.
Over the next four years, Wetzel estimates that H.B. Fuller will save about $2 million because of its VOIP investment, thus proving that it's possible to achieve an ROI with this challenging technology.
DePompa is a freelance writer and editor in Germantown, Md. Contact her at bdepompa@aol.com.
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