1. 16426_10_2002_c1_Kisch © 2002, Cisco Systems, Inc. All rights reserved. Return On Investment (ROI) for IP Communications WWIPC Partner Summit 1/28/2002

2. © 2002, Cisco Systems, Inc. All rights reserved. 2226426_10_2002_c1_Kisch Three years of declining corporate profits and shrinking capital expenditure budgets Focus on back to basics approach to capex, requiring a solid business case before technology purchase is approved Greater involvement from business decision makers who are more focused on business impact of technology Focusing capex on only mission critical projects (“need to have” vs “nice to have”) Failures of previous IT investments to produce expected returns IT now accounts for 46% of all capital expenditures Business Trends Driving the Focus on ROI/TCO

3. © 2002, Cisco Systems, Inc. All rights reserved. 3336426_10_2002_c1_Kisch The Growing Importance of ROI The percentage of customers who require ROI justification has doubled in the past 2 years Source: Darwin Magazine 42% 83%

4. © 2002, Cisco Systems, Inc. All rights reserved. 4446426_10_2002_c1_Kisch ROI Helps Accelerate the Sales Cycle The ability to help customers determine ROI (55%) is the most often cited means to speed up the adoption of IP Communications What would help speed up the Decision Making Process? Source: Cisco TDM Survey, October 2001

5. 56426_10_2002_c1_Kisch © 2002, Cisco Systems, Inc. All rights reserved. Cisco Network Investment Calculator (CNIC) Program

6. © 2002, Cisco Systems, Inc. All rights reserved. 6666426_10_2002_c1_Kisch What is CNIC? A web-based ROI/TCO calculator designed to simplify the business case development process A tool that allows the calculation of ROI for multiple Cisco solutions, including IPT, Contact Center, Unified Messaging and upgrades to the data network A comprehensive program that provides web-based and instructor led training and user support to increase Cisco sales and partners comfort level with financial analysis A rich ROI database with thousands of customer data that has been crafted into presentations, case studies and white papers to assist the selling effort

7. © 2002, Cisco Systems, Inc. All rights reserved. 7776426_10_2002_c1_Kisch Why is ROI/CNIC Important to Selling IP Communications? ROI can be used to influence which projects customers will dedicate resources against for evaluation Much of IP Communications value proposition is based upon ROI/cost savings Customers are prioritizing rapid payback projects that generate cost savings and tangible business benefits A business case with ROI data can improve the likelihood of a project being approved by 60%* A business case with ROI data can reduce the sales cycle by 30-40%** *Source: Gartner **Source: IDC

8. © 2002, Cisco Systems, Inc. All rights reserved. 8886426_10_2002_c1_Kisch Holistic Approach to ROI Best Practices Training User Support CNIC A single ROI calculator for multiple Cisco solutions A central support resource that Cisco sales and partners can depend on for fast answers E-learning and instructor led training on ROI Standardized approach to building ROI models and engaging with customers

9. © 2002, Cisco Systems, Inc. All rights reserved. 9996426_10_2002_c1_Kisch Mapping ROI to the Sales Cycle Level 1 – ROI White papers Level 2 – ROI Case Studies Level 3 – ROI Snapshots (ROI Lite) Level 4 – Custom Analysis with CNIC

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15. 156426_10_2002_c1_Kisch © 2002, Cisco Systems, Inc. All rights reserved. The ROI for IP Communications

16. © 2002, Cisco Systems, Inc. All rights reserved. 16 6426_10_2002_c1_Kisch Hard Cost Savings Reduction in cabling costs for new facilities Reduction in infrastructure cost at remote sites via centralized call processing Increased utilization of core networking assets Consolidation of message store/back-up systems Reduction in PBX upgrade/expansion costs Improved productivity of network support staff Elimination of certain PBX related tasks Consolidation of skill sets Centralized application and network management Reduction in the costs of Moves, Adds and Changes (MAC’s) Reduction in ongoing maintenance costs Toll-Bypass savings for intra-company traffic Domestic: Material if call volume is substantial to offset declining toll rates in neighborhood of 2-5 cents or if organization lacks size to negotiate prime rates with carriers International: Still significant with average toll-rates of 12-15cents Consolidation of voice and data access -Reduction in number of dedicated voice lines -More efficient use of existing bandwidth Equipment/Maintenance Network Administration Toll-Bypass/Integrated Access

17. © 2002, Cisco Systems, Inc. All rights reserved. 17 6426_10_2002_c1_Kisch Examples of Business Benefits Real Estate Savings Better utilization of real estate by leveraging extension mobility to increase worker to workspace ratio from 1to1 to X to 1 Significant savings in high-rent areas like NY, London, Chicago Platform for New Applications Unified Messaging – Improved productivity per user by 25-40 minutes per day Audio Conferencing – Ability to offload SP provided minutes (8-12 cents/minute) for smaller conference calls to internal service offering Ability to standardize infrastructure and extend corporate capabilities to branch offices

18. © 2002, Cisco Systems, Inc. All rights reserved. 18 6426_10_2002_c1_Kisch 2800+ Customer Analysis to date (program started 10/01) Total # of Partners accessing CNIC: 284 Incremental revenue impact of $25-35M in FY03 Strong representation across all major verticals All types of deployment scenarios (greenfield, centrex, centralized call processing, replacement of new/old PBX, lease/buy) Different size deployments ranging from a 100 phones to 45,000 phones Flash cuts to 5 year migrations Global focus including U.S./ Europe/Asia/Latin America Summary of Customer Engagements thru Q1 2002

19. © 2002, Cisco Systems, Inc. All rights reserved. 19 6426_10_2002_c1_Kisch Summary of ROI Findings Source: Converged Network Investment Calculator 7/02 Positive Net Present Value 68% of the time Average payback of 16-18 months Average annual savings per user of $334 Average # of phones in analysis = 600 phones Equipment & Maintenance Toll-Bypass/Voice/Data Access Network Administration Avg. % Contribution to Cost Savings 48% 32% 20%

20. © 2002, Cisco Systems, Inc. All rights reserved. 20 6426_10_2002_c1_Kisch Key Drivers of Positive ROI A compelling event is driving the decision New facility End of useful life of PBX/Expiration of lease Planned upgrade of data infrastructure Phased approach to deployment starting with the most financially viable sites Ability to leverage centralized call processing Deployment has number of remote sites that can leverage CCP Dynamic organization with substantial employee movement

21. © 2002, Cisco Systems, Inc. All rights reserved. 21 6426_10_2002_c1_Kisch Key Drivers of Negative ROI In some cases, a significant data network upgrade is necessary to provide the foundation for reliable voice Difficult to justify on hard cost savings alone the replacement of a relatively new PBX at a single site Delays in the deployment of the technology delay the realization of benefits Failure to take advantage of key value producing features of the technology Aggressive pricing from traditional PBX vendors

22. © 2002, Cisco Systems, Inc. All rights reserved. 22 6426_10_2002_c1_Kisch Summary of ROI Findings - Deployment Scenarios Green Field TDM Centrex Replacement Multi-site CCP Older PBX Replacement Newer PBX Replacement (Months) 6 0 12 18 24 Paybacks vary based upon deployment scenario, with green fields producing the most rapid payback Source: Converged Network Investment Calculator 7/02

23. © 2002, Cisco Systems, Inc. All rights reserved. 23 6426_10_2002_c1_Kisch ROI Findings – By Vertical RetailEducation Government Financial Services Healthcare (Months) 6 0 14 18 28 18 14 6 13 Source: Converged Network Investment Calculator 8/02 Payback in Months

24. © 2002, Cisco Systems, Inc. All rights reserved. 24 6426_10_2002_c1_Kisch “If You Build it, They Will Come”… (5 Steps to the CNIC Business Case) 1.What’s the Value Proposition/What are the Primary Cost-Benefits Drivers 2.Break the Analysis into Manageable Pieces 3.Built on Solid, Fundamental Financial Modeling 4.“What-If” capabilities 5.Pre and Post Deployment Analyses

25. 256426_10_2002_c1_Kisch © 2002, Cisco Systems, Inc. All rights reserved. Cisco Contact Information

26. © 2002, Cisco Systems, Inc. All rights reserved. 26 6426_10_2002_c1_Kisch Cisco Contact Information Cisco Network Investment Calculator Home Page http://www.cisco.com/partner/cnic Cisco Network Investment Calculator Web Training http://www.cisco.com/partner/cnic/training.shtml Cisco Network Investment Calculator Instructor Led Training Contact: Mike KischDave Hume Phone: 408-902-3112Phone: 919-392-8601 E-mail: mkisch@cisco.comE-mail: dhume@cisco.com Cisco ROI White papers/Case Studies/Presentation http://www.cisco.com/partner/cnic/understand.shtml

27. 276426_10_2002_c1_Kisch © 2002, Cisco Systems, Inc. All rights reserved. ROI Case Studies

28. © 2002, Cisco Systems, Inc. All rights reserved. 28 6426_10_2002_c1_Kisch National restaurant chain needed to provide a more cost effective voice service to remote sites Wanted a standard solution that would lower remote site management costs and provide a consistent level of service Wanted to greater leverage planned data network upgrade National restaurant chain needed to provide a more cost effective voice service to remote sites Wanted a standard solution that would lower remote site management costs and provide a consistent level of service Wanted to greater leverage planned data network upgrade Payback of 18 Months Net Present Value of $2.7M Achieved an annual savings of $361/per user Payback of 18 Months Net Present Value of $2.7M Achieved an annual savings of $361/per user Solution consists of 2500 Cisco IP Phones leveraging centralized call processing Updated WAN to facilitate integrated access where available Able to increase productivity of network support staff via centralizing call processing Solution consists of 2500 Cisco IP Phones leveraging centralized call processing Updated WAN to facilitate integrated access where available Able to increase productivity of network support staff via centralizing call processing ROI Case Study

29. © 2002, Cisco Systems, Inc. All rights reserved. 29 6426_10_2002_c1_Kisch Securities firm needed to replace older PBX at central site that was nearing end of useful life Needed to identify a way to reduce the costs of a constantly moving workforce Needed to simplify management of the network and improve the productivity of the network support team Securities firm needed to replace older PBX at central site that was nearing end of useful life Needed to identify a way to reduce the costs of a constantly moving workforce Needed to simplify management of the network and improve the productivity of the network support team Payback of 19 Months Net Present Value of $1.5M Achieved an annual savings of $308/per user Payback of 19 Months Net Present Value of $1.5M Achieved an annual savings of $308/per user Deployed 1500 Cisco IP Phones Deployed conference connection to offload smaller conference calls Gave the user the ability to move their phone in an effort to save MAC charges Leveraged extension mobility to improve utilization of real estate space Deployed 1500 Cisco IP Phones Deployed conference connection to offload smaller conference calls Gave the user the ability to move their phone in an effort to save MAC charges Leveraged extension mobility to improve utilization of real estate space ROI Case Study

30. © 2002, Cisco Systems, Inc. All rights reserved. 30 6426_10_2002_c1_Kisch Medium size east coast city was evaluating their future voice strategy Had a mix of PBX, key systems and Centrex Centrex contracts were coming due for renewal Medium size east coast city was evaluating their future voice strategy Had a mix of PBX, key systems and Centrex Centrex contracts were coming due for renewal Immediate Payback Net Present Value of $117K Annual savings per user of $335 Immediate Payback Net Present Value of $117K Annual savings per user of $335 Decided to deploy IP Telephony in place of Centrex service to 500 users across several city facilities as first step towards converging their network Decided to lease instead of purchase new IP Telephony equipment Annual lease costs for IPT were less then annual Centrex costs Decided to deploy IP Telephony in place of Centrex service to 500 users across several city facilities as first step towards converging their network Decided to lease instead of purchase new IP Telephony equipment Annual lease costs for IPT were less then annual Centrex costs ROI Case Study

31. © 2002, Cisco Systems, Inc. All rights reserved. 31 6426_10_2002_c1_Kisch Extension campus of large state university needed to replace existing end of life PBX Needed to be able to continue to leverage a percentage of existing handsets Was faced with an imminent upgrade cost to voicemail system and PBX Extension campus of large state university needed to replace existing end of life PBX Needed to be able to continue to leverage a percentage of existing handsets Was faced with an imminent upgrade cost to voicemail system and PBX Payback of 11 Months Net Present Value of $253K Payback of 11 Months Net Present Value of $253K Reused 1500 analog phones, while deploying 700 IP phones of various models Deployed (4) Call Managers and Unity voicemail Upgraded data infrastructure Reused 1500 analog phones, while deploying 700 IP phones of various models Deployed (4) Call Managers and Unity voicemail Upgraded data infrastructure ROI Case Study