Investing in IP Telephony Joe Paiva, Co-Author of Information Technology Strategies © 2002, published by Prentice-Hall

“VoIP Mythology” X When was the last time a customer paid $30/year per phone for a telephone hardware warranty in addition to service? Who costs more to staff: a Telephone Tech or a Cisco CCNE? X X X

“VoIP Mythology” X There are many Full Feature PBX/Key Systems priced in the $400-$600/phone range. Only a few IP Systems are in this price range. VAR Cost for a 8x25 System with Voic NEC DS 2000 TDM PBX: $ Cisco ICS 7750 with 7940s: $ X X X

“VoIP Mythology” X Just because it is IP, does that mean people will use it? And if they do, will it really save any money? Do 80% of your staff really use all the features in the old TDM switch they already have? X X X

So Why Did We Invest in IPT?

There Really Is an Equation ! ROI =  p+pmt(1+r/t) n ROI Can be calculated quantitatively!

Factors to Consider r = interest rate; cost of capital Cost of capital should be adjusted for Actual/Nominal Cost of Capital Risk/Confidence in Projected Savings

Factors to Consider n = number of payments Adjustments for number of payments The realistic life-cycle of the system

Factors to Consider p = principal Initial Principal values must be adjusted for the entire acquisition/installation cost Internal labor costs (fully burdened) Premature upgrades to data networks The cost of the system itself (and installation)

Factors to Consider pmt = payments Payment Values must include Negative & Positive values (savings and add-on costs) How long will savings realistically endure (intraLATA rates will come down) Future COTS hardware decreasing costs Off-setting higher warranty costs Future decreaases in labor units Off-setting higher labor unit costs

Single Office High employee turnover (   MACs) TeleCommuting Requirements (Home Workers) Rapid Growth of Staff Size Anticipated Relocations Low Employee Turnover No TeleCommuting Allowed or Needed Downsizing / Low Growth Business Owned Location; Not Moving Pro IP TelephonyNot Pro IP Telephony

Multi-Location Heavy local calling between locations “Hoteling” staff High employee turnover (   MACs) Independent operations Static staffing Long distance between offices (no IntraLATA) Pro IP TelephonyNot Pro IP Telephony

Large Office / Campus Most Calling Within Campus Multiple Business P&L Units “Hoteling” staff High employee turnover (   MACs) Need for Telecommuting Static staffing Most Calls “Off Site” Majority of Users have no “Feature Requirements” Pro IP TelephonyNot Pro IP Telephony

Special Deals Road Warrior “My custom ….” “I Need to Work out my Miami Office in January….” I Love My Key System Marge has been answering my calls for 20 years Pro IP TelephonyNot Pro IP Telephony

Conclusions ROI Can (& Should) Be Calculated Quantitatively: ROI =  p+pmt(1+r/t) n. IP Telephony Can Pay Huge Dividends in the Right Situation. Skip the Hype and Euphoria; Look at the Real Numbers.