The Hidden Costs, and Savings, of VoIP

Voice over IP (VoIP) is still considered by many to be a newfangled technology. Others believe that VoIP can be economically implemented only in new or renovated construction, replacing conventional wiring schemes.

But as VoIP technology continues to evolve, it will increasingly permeate the marketplace, and implementations will become more prevalent in buildings with established infrastructures. Businesses will face a growing number of technology and service-provider options, which have to be evaluated from all sides, including strategic, operational and total cost of ownership (TCO) perspectives.

Here's a framework for businesses trying to assess the value of implementing VoIP in their organizations, along with the hidden costs and savings that could affect the TCO.

1. Bandwidth. Unlike traditional telephone systems that operate within their own networks, VoIP relies on the LAN and WAN infrastructure. As such, a VoIP system shares bandwidth with existing business communications assets. While bandwidth is normally abundant in the LAN for internal purposes, the WAN is often the most constricted point for any network -- leading to increased potential for congestion and delays in information. For a business to execute a full conversion to VoIP, it must consider an increase in network bandwidth. The required amount of network bandwidth will differ by organization based on projected users, business growth models and other WAN traffic-related activities. Overhead and intermachine communications should also be budgeted in order to realize the total costs of maintaining bandwidth obligations.

2. Network. LAN traffic traditionally consists of delay-tolerant data packets that are barely affected by network congestion, loss or retransmission. VoIP data packets, however, are extremely delay-sensitive when compared with other applications. So adding a VoIP system to a network requires careful and objective assessment of the existing network infrastructure to verify that it can support the new VoIP data packets while maintaining quality-of-service levels. The operating system capability, interoperability and hardware are critical components that must be included in this network analysis to obtain a realistic estimate for implementation. The cost for this network assessment, and associated network modifications, vary based on the size of the enterprise.

3. Security. It's no secret that everything on the Internet is susceptible to hacking, denial-of-service attacks and spying, and VoIP is no exception. So VoIP systems must be monitored and protected in the same manner as a traditional enterprise system or network. Often, administrators will prescribe a separate LAN for VoIP, known as a virtual LAN, to segment user access from the main network and improve their ability to watch for unauthorized users or service-level problems. This security measure is effective, but it does increase costs. As with the network assessment, a security assessment to obtain a baseline measure of VoIP system security posture varies with the size of the system. While necessary, this assessment adds another hidden cost.

4. Hardware. A key advantage of VoIP is the ability to exchange traditional phones for applications on the computer, also known as a softphone. While softphones still require communication devices to converse (e.g. headsets), updating or expanding softphone systems involves only a software download. This simplified process significantly reduces costs associated with upgrading service on a traditional telephone system and allows businesses to quickly take advantage of innovative features. Depending upon the results of a thorough network assessment, a VoIP system may require additional server capacity, which can substantially increase hardware and overhead costs.

5. Training and Productivity. As with any new system or policy, implementation of VoIP requires user training. This is particularly important, as the switch to VoIP can cause some user concern at first. VoIP allows users to navigate voice mail, text, e-mails, teleconferencing and call pop-ups simultaneously on a single machine. Training is essential to assist users in acclimating to the new system, easing the overall transition and demonstrating both the business and individual value of the switch.

6. Mobility. VoIP's soft phone feature offers frequently traveling employees the ability to take their office phone with them -- making and receiving phone calls anywhere via the Internet. This capability effectively reduces administration costs by decreasing separate phone lines required at satellite office locations. In addition, mobile workers are more accessible, whether overseas or a few blocks away.

Ray Kriss is director of network engineering at NetGain Communications, a Reston, Va.-based telecommunications consultancy. He can be reached at

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VoIP Goes Mainstream

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Copyright © 2005 IDG Communications, Inc.

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