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Convergence: VOIP/UC Business Case
Robin GareissExecutive Vice President, Sr. Founding Partner
www.nemertes.com
Agenda
About NemertesBusiness Case for VoIP & UChDriversDrivershGetting StartedhTeam ApproachTeam Approach
Implementation and Management CostsRecommendationsRecommendations
© Copyright 2010 Nemertes Research
About Nemertes
Analyze business value of emerging technologiesAdvise Fortune 100-2,000 b i iti l IT t t ibusinesses on critical IT strategiesBenchmark realityh 2,500+ IT executives share strategies,
costs, vendor satisfaction.
A l h 1 30 Analysts have 17-30 years experience, including operationalF d d 2002Founded 2002
© Copyright 2010 Nemertes Research
Pre-Approved Business Case: Required?
Pre-Approved Business Case Required?
© Copyright 2010 Nemertes Research
Why Create a Business Case?
85% of organizations 85% of organizations are working with
decreasing or flat IT budgets.g
Organizations that Organizations that require a business
case are less likely to put projects on hold.put projects on hold.
© Copyright 2010 Nemertes Research
Building a Business CaseAccurate assessment of current costsh Implementation operational capitalh Implementation, operational, capital
Identify business & process benefits h Engage business units to understand problems your technology can solveEngage business units to understand problems your technology can solve
– We didn’t need to schedule a follow-up call to answer that question? – We didn’t have to search for that information? – We had the benefit of X’s insight when we needed it on this project?
Confer with business process owners to validate improvement & gain buy- inTest-drive a prototype to uncover problemsMeasure “before” and “after” results!Measure ROI, TCO, NPV
© Copyright 2010 Nemertes Research
Sample
HQ & Branch Analysis
$3 003 840
TCO Overview for IP Telephony
Your annual IP telphony savings with Avaya:
Prepared for: IT Staff Large Global Company
Cost Analysis The Nemertes Cost Analysis Tools has calculated the following results for your organization. This section provides an overview of the cost benefits of this technology.
$3,003,840
$1,978,447
$2,907,905
7
$15,019,199 with Avaya
Years for cost analysis:
Five-year financial gain
Your annual IP telphony savings with Avaya:
Your annual IP telephony savings with Cisco:
Your annual IP telephony savings with Nortel:
0.06%1%Percentage of IT budget
Percentage of revenue
Annualized VOIP Cost Savings
$3,003,840 $2,907,905
$$2,500,000$3,000,000$3,500,000
Cost Analysis
$30,000,000
Avaya Cisco Nortel Existing TDM
$1,978,447
$0$500,000
$1,000,000$1,500,000$2,000,000
Avaya Cisco Nortel$0
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7
Your MAC Costs will be reduced by…………...…. $1,502,514Your Voice trunks will be reduced by…..………. $75,262
$171 429
Benefit Highlights The Nemertes Cost Analysis Tools has calculated the following annual savings with an Avaya solution:
Your Equip Maintenance will be reduced by……..… $171,429Your Local Loops will be reduced by……..….…. $52,185
You can establish 5-digit dialing, intercom, transfer calls, and implement other features between sites.
Your mobile workers can 'log on' to phones in any office receive calls & voicemail there
Additionally The Nemertes Cost Analysis Tools has calculated the following productivity benefits with an Avaya solution:
Standardizing on a VOIP product family will prepare your network for collaborative applications.
© Copyright 2010 Nemertes Research
Your mobile workers can log on to phones in any office, receive calls & voicemail there.Your mobile workers can use wireless VOIP phones to enable mobility within the corporate LAN.
© Nemertes Research 2009
Team Approach
Identify business/technology liaisons within ITId tif “ t ” h lIdentify “grassroots” helpBudget time for discussions with business-unitshLeaders in HR, sales, finance, customer service, legal, etc.Leaders in HR, sales, finance, customer service, legal, etc.hAlso discuss with managers and staff
Don’t ask technology questions—focus on what problems with their jobs, processes customer relationships revenue generation etcprocesses, customer relationships, revenue-generation, etc.Understand business problems, and relate your technology knowledge to solve themAssemble UC teamhMulti-disciplinary team—network, telecom, application development, contact
center, security, business unitsEngage team in all UC-related decisions
© Copyright 2010 Nemertes Research
Steps for Success
© Copyright 2010 Nemertes Research
VOIP Business Case
Is a VOIP business model still necessary?hYes! Now seeing 12-month paybacks as crucial in many industries for any
new IT investmenthExecutives want to see hard- and soft-dollar costs/savings.hLooking for ROI, TCO, and NPV
Challenges existhDo I need to budget for network upgrades? (54% do upgrade)hWhat are the true implementation and operational costs?hDo I need third-party management tools?hHow much should I invest in training?hHow quickly should we move to unified communications?
© Copyright 2010 Nemertes Research
VOIP Costs: Key Findings
Overall, capital costs are droppingh Vendors are becoming much more competitive h Large companies saving 30%-90% off list price
when dealing directly with vendor-manufacturerwhen dealing directly with vendor manufacturer
Implementation/operational prices 20% higher the first 2 years when compared to TDMh As expertise grows, costs decrease
IT training (and cross-training) importanth Troubleshooting IP takes 1x-4x longer than TDM
More companies spending budget on management toolsmanagement toolsCost details available separately
© Copyright 2010 Nemertes Research
VOIP Cost/Benefit CriteriaCosts
Implementation
SavingsImplementationImplementation
h Time/expertise
Capital
Implementationh Cabling costs
Capitalph Switch, Handsets, Gatewaysh Network upgrades
ph Softphones v. handsetsh Centralizing voicemail/UM, servers
h Management toolsh Cabling
Ongoing operational
h Hosted Offeringsh Audio bridges
Ongoing OperationalOngoing operationalh Network/WANh Staff (internal/outsourced)
Ongoing Operationalh MACsh Staff Reductions & Retention
h Maintenance & Licensingh Training
– IT, receptionists, CC turnoverh Network, FMCh SIP trunking
© Copyright 2010 Nemertes Research
SIP trunking
Nemertes Data: Cost Components
Implementation: hPlanning, installation, troubleshooting. Internal + consulting
Capital: phCapital costs for IP switches, phones, gateways, network upgrades related to
the VOIP implementation, IP video and audio bridges, management tools, unified messaging and traditional voicemail For comparison here we unified messaging, and traditional voicemail. For comparison here, we included only VOIP switches and phones (hard phones & soft phones).
Ongoing operational: Ongoing operational: hTime and money companies spend managing and maintaining their VOIP
systems.
© Copyright 2010 Nemertes Research
Average VOIP Costs
VOIP Costs 2009Implementation 135$ Capital 408$
VOIP Costs 2009
p $Operational 570$
Fi 1 113$First-year costs 1,113$
*Figures for Avaya Cisco Nortel ShoreTel rollouts
Average Profit MarginsH d / ft 15% 38%
Figures for Avaya, Cisco, Nortel, ShoreTel rollouts
Hardware/software: 15% - 38%Professional Services: 50-55%
© Copyright 2010 Nemertes Research
VOIP Management Tools Spend
Average number of employees managing employees managing VOIP range from 1 for small companies to 10 for very large companiesy gWhen managing in-house, they add between one and six tools just to jmanage VOIP!43% buy tools 3 years after deployment (20% p y ( %between 1-2 years)
© Copyright 2010 Nemertes Research
How Did WAN Costs Change With VOIP Project?
Average WAN savings:
23%23%
© Copyright 2010 Nemertes Research
LAN Upgrade Costs
IP Telephony Implementations
Cost per end unit* Less than 500 501-5,000 More than 5,000 All sizesNumber of End Units
p y pCapital Costs Per Person
IPT Hardware $667 $411 $342 $554 LAN Upgrade $553 $280 $159 $421
LAN Upgrade: Total Average Capital $1,220 $691 $501 $975 LAN Upgrade: % of Overall Capital 45% 41% 32% 43%*End unit is IP handset, audio bridge, softphone or other end-user device.
Includes pricing for all vendors
© Copyright 2010 Nemertes Research
Closing Thoughts: Best Practices to SuccessUnderstand business problems UC can solve.Don’t rush! Spend time up front educating IT, business units, executives.h Win support internally.pp y
Tie VOIP to the overall UC project.Tie UC to corporate green initiatives.h Enables telecommuting, conferencing
Understand vendor roadmaps & alignment with your strategyy gyh Architecture & scalabilityh UC app supporth Virtualization plansh Partner expertise
© Copyright 2010 Nemertes Research
Thank You
Robin GareissExecutive Vice President & Sr. Founding Partner
www.nemertes.com