Sally Flood shows how you can plot out a plan to get the fullest
return on your investment in converged network technology. The key
is finding the financial strategy that matches your network
strategy
When staff at House of Fraser telephone colleagues, the call
doesn't travel over a conventional phone network. Instead, the
conversation is transmitted over the same IP network that carries
all of the retailer's computer data. By removing the need to
provide both phone and data networks, House of Fraser says it has
saved £30,000 in cabling and call costs for each of its 50 UK
stores.
Cutting telecoms costs is a common reason for adopting convergence,
says Graham Followell, senior business development manager at BT.
However, this risks missing the true costs - and benefits - that
convergence offers. "Customers often try to build a business case
based on replacing their phone system with this new network, but
the numbers won't stack up that way," he says. "Looking at
convergence as an infrastructure project is only the tip of the
iceberg."
So, how should IT executives build a business case for convergence?
The first step is to get a good understanding of all the costs
involved in building and running a converged network. "The major
cost of any convergence project is making sure that your new,
single network is up to the job," says Mark Blowers, a senior
research analyst with Butler Group. "Can your data network support
business-critical applications, voice, video, multimedia, and
ensure they all work well?"
Most companies will need to upgrade the network to support the
quality of service (QoS) demanded by convergence. This may mean
investing in new backbone capacity, intelligent switches,
management software and WAN services such as IP-VPN (virtual
private network) to connect remote offices and workers. "You might
save money by reusing some of your existing IT infrastructure, but
you will at least need switches and some gateway device so you can
prioritise voice on the network," says Martin Northend, head of
convergent platforms at Siemens Communications.
The network management software required to keep a converged
network up and running can be expensive, says Blowers. In addition,
convergence means running everything on one network, which
introduces more risk. This means that companies will need to invest
in extra redundancy and disaster recovery systems.
IP handsets are still more expensive than conventional telephones,
and could add considerably to the cost of convergence. As a rule of
thumb, connecting two workers in different offices costs three
times as much using an IP network as a conventional telephone
network, says Christophe Ameline, business development manager at
Alcatel. That doesn't mean IP handsets are a bad idea, but that
they should be used wisely, Ameline says. "If you have lots of
sites and your call costs are very high, then it may be worthwhile
to use IP handsets," he says. "But if you don't need voicemail and
other features, or if you already have cheap calls between branch
offices, then it may be wiser to use IP telephony on the trunk, but
leave the handsets as they are."
Once you have added up the cost of network hardware and software,
consider what the installation will cost. Convergence can be a big
project, and customers almost always need specialist consulting and
systems integration, says Northend. "It can take months, and you
will need to factor in the downtime that may happen during
installation, or the increase in manpower that's required," he
says.
The biggest issue for most companies may not relate to technology
at all. Convergence brings about enormous cultural changes in your
organisation, and these should be factored into any business case,
says Blowers. "You may have different departments for telecoms and
data networks, and those people will be reallocated, retrained or
made redundant. All those options have associated costs, and can be
tricky."
Substantial savings
Introducing convergence can also affect end users - and your return
on investment. "Technology is only as good as the people who are
using it," says Alcatel's Ameline. "Trying to get builders to put
down their mobile phones and use a soft phone on a PDA is a very
hard thing to do. Your return on investment (ROI) figures might
show payback in 18 months, but be aware, it might take a year for
you to persuade people to make full use of your new
technology."
Finally, consider the running costs of a converged network.
Although it's tempting to think your outsourced IP-VPN has no
running costs, have you factored in the time it takes the IT
manager to drive to the site for monthly meetings, or to make
changes to the network configuration?
These costs should be balanced against the likely benefits and
savings of convergence. These can be substantial - most companies
should see an immediate reduction in comms costs of 10%-15% as a
result of convergence, according to analyst the Butler Group. In
addition, building converged networks is 10% cheaper than
traditional systems, and running costs should be 15% cheaper.
Once a network is up and running, one of the biggest savings is
likely to be in adds, moves and changes, says Ameline. "On
conventional networks, if you have an office move, someone has to
run around unplugging phones and rerouting cables, but with
convergence that's all done by the IT manager on a screen," says
Blowers. "It's an area where you can make enormous savings."
Total cost of ownership (TCO) will likely be lower because a
converged network allows you to invest in commodity products and
services. "Many telecoms systems are proprietary and you need to
hire people with experience, or use expensive support agencies
every time something breaks down," says Blowers. "With an IP-based
network, you're no longer stuck with proprietary suppliers, so you
have a lot more flexibility."
However, the real benefit of convergence comes when you use your
new network to deliver converged services to employees, customers
and partners. "By far the most important factor in any ROI
calculation is the improvements in productivity and increased
revenues that convergence can deliver," says Ameline.
For example, field service workers can use mobile phones to access
XML applications on a converged network, allowing them to offer a
faster and better service to customers, says Ameline. Incoming
phone calls to a branch office can be re-routed to another office
if the call isn't answered, but the caller won't notice any
difference.
You will also be able to offer remote working for the first time
using convergence, says Followell. "Rather than just working from
home and having access to email and calendar information, workers
can have all their applications and their phone, as though they
were at their desks," he says. "All you need to do is plug in a
headset to the computer's USB port and you're ready to go."
Case study: The Royal Society of
Medicine
Installing a new voice and data network is never
straightforward, but when you're moving into a Grade I listed
building it's particularly challenging.
The Royal Society of Medicine is a not-for-profit organisation
that offers training and professional development to the medical
profession. The society runs hundreds of seminars every year, and
offers accommodation to visiting fellows at Chandos House in
London, a newly-restored Robert Adam townhouse.
The Society decided to install a converged voice and data
network because a single network installation meant less disruption
to the fragile building.
"Convergence meant fewer cables, and that meant less risk of
damaging the building," explains Tansy Cork, head of IT services at
the Society. "For example, with each cable we had to take off
original skirting boards and put them back. It's a very skilled
process, and doing that twice would have been far too
costly."
The installation, which was completed with the assistance of
Scalable Networks and English Heritage, took almost two years, and
was a very steep learning curve, says Cork.
"Traditionally, we'd only dealt with data and we were picking up
telephony, so once we'd established what the solution was going to
be, I went on a series of vendor courses to familiarise myself with
the technology."
Although the project was expensive, the network - which went
live in September 2004 - should deliver a full return on investment
within five years, says Cork. The new network is cheaper to manage
because the Chandos House facility can be controlled by IT staff at
the Society's main office in Central London. "It means we only need
one IT team, rather than recruiting people to run another site,"
says Cork.
The next step is to roll out a converged network to the
Society's other properties in London, and then to offer remote
working and other IP services. "Although convergence has already
helped with the budget, the real benefits will come from the new IP
services we have rolled out, and things like remote working," says
Cork.
Case study: Stockton-on-Tees Borough
Council
When Stockton-on-Tees Borough Council installed a converged
network earlier this year, the priority was to create a
cost-effective solution. Convergence is sometimes seen as an
expensive option, but in the case of Stockton, the council found
that the converged network was substantially cheaper than
conventional voice and data networks.
"Our network kit was ageing, and we basically had the kind of
phones you can buy in Argos for £10," says Ian Miles, the council's
head of ICT. "We did the calculations and found that, over five
years, the cost of consultancy and updating the kit meant it would
cost more to continue with what we were doing than to move to an
entirely new, converged network."
In August 2003, the council signed a seven-year £6.2m managed
service deal with NextiraOne UK, which includes the installation of
a Cisco-based IP network for voice, data and video.
The combination of convergence and managed services produced an
immediate annual saving of £270,000, and further improvements are
expected in the future, Miles says.
The project, called SNIP (for Stockton Network Improvement
Programme), was a big undertaking for the council and there were
some challenges in calculating the total cost of ownership (TCO)
and return on investment (ROI) figures. "One of the lessons I've
learned is not to blindly trust suppliers about what's installed on
your network," says Miles. "When we got going, I discovered loads
of handsets we didn't know about, even offices I didn't know about
in some cases!"
At present, the council is only using the voice and data
capability, but the ROI should improve further in 2005 when it is
extended to video. "We want to link CCTV so that we can do things
like run passive video cameras in schools and offices overnight
that send an alert to police if there is a break-in," says Miles.
"We'd also like to extend the network to local schools so that they
can have something better than their current system, which is part
of a national programme."