Tech talk: Plan your business case for voice over IP

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Tech talk: Plan your business case for voice over IP

Most firms can expect long-term savings if they switch from TDM PBX phones

Suppliers have been pushing voice over IP (VoIP) to European enterprises for years, but for large firms VoIP adoption has been slow. However, all enterprises acknowledge that they will have to replace their time division multiplexing (TDM) PBXs and phones.

For users with PBXs that have years left on their depreciation schedules, a shift to VoIP might not be that urgent. A move to VoIP will raise many tough questions about network architecture, Lan and Wan preparedness and security that busy chief information officers might want to avoid.

Migrating from TDM
Forrester examined how five types of business would fare using VoIP. The five scenarios it modelled were: a domestically focused business; a large international firm with many branches; a complex multinational such as a bank; a domestic-only firm; and a large national retailer.

Enterprises can rip out their old equipment and replace it with new IP PBXs and IP phones. This scenario requires big, upfront investment - costs of £108 per IP PBX port and £136 per IP phone - but promises lower public-switched telephone network and operating costs. This scenario also offers indirect benefits, such as reducing complexity by putting voice, video and data on one IP network and integrating telephony into call centre and customer service apps.

By IP-enabling existing PBXs and giving IP phones to 20% of staff, a company can keep its existing PBXs but add two upgrades to support IP: IP trunk cards for PBX-to-PBX communication and a hardware and operating system upgrade to support IP phones.

IP desktop screen phones would be given to 20% of staff - primarily knowledge workers, remote employees and sales people - to allow them to navigate corporate directories and use unified messaging.

The most basic of packet voice benefits - the PSTN bypass - requires neither PBX replacement nor IP phones. Enterprises can cut costs by installing £51 IP trunkcards into legacy PBXs from suppliers such as Avaya and Nortel Networks, and divert switched voice minutes to IP lines.

The most cash-strapped and conservative enterprises can choose to stick it out and keep their existing PBXs and phones and wait for packet voice technology to mature further and cost less. Although this scenario entails no capital investment, it does not reduce ongoing costs.

Any firm at the end of its PBX lifecycle can also invest in a new circuit PBX system at a cost of up to £204 per port. For enterprises that want help with migrating to VoIP, telcos such as BT offer consolidation of existing enterprise PBXs onto a single network.

Instead of owning and managing networks in-house, enterprises can outsource their tele-phony solution to service pro-viders that will host PBXs in their networks. This can be delivered using either IP Centrex or IP PBX technology. Telenor in Norway offers a fully managed service that includes ISDN connectivity.

IP-enable existing PBXs
A business can save £8m over five years by installing a VoIP Wan compared with keeping its existing circuit-switched PBXs. If the company operates in countries with low telecom costs such as Scandinavia, where PSTN costs are 50% lower than the Western European average, the benefits would shrink to £4m.

With IP trunking, the enterprise gets exactly the same call savings as with new IP PBXs. To get these benefits, the firm only needs to spend £680,000 on trunking card solutions instead of spending £2.9m on new IP gear. While the user enjoys the call savings it can wait for the suppliers and telcos to sort out the interoperability, voice quality and phone price challenges before making the jump to IP desktop phones.

Companies with many teleworkers and large call centres will get benefits from just spending £318 more in present value terms on IP phones for 20% of the workforce. However, enterprises that deploy this solution will still save 26% over the status quo.

UK firms save most with VoIP
Paying some of the highest PSTN and bandwidth prices in Europe, UK-based enterprises can save millions of pounds on PSTN bypass by using VoIP. Bypassing the high PSTN charges in the UK will generate £18m in savings over five years. These savings are only partially offset by higher Wan bandwidth costs, the capital expenditure associated with a new IP PBX, or the rental charges for hosted solutions.

Hosted solutions
Hosted solutions generate big savings and take the pain out of VoIP. One example is a managed hybrid VoIP and TDM voice solution such as BT's VoIP Port. For a spend of £3.8m on rental and set-up fees to BT and on IP phones for 20% of their users, BT VoIP Port clients will achieve £18m in call bypass savings. The hosted VoIP scenario with IP desktop phones for 80% of employees can generate many productivity benefits for just £1.3m more over five years. Although BT VoIP customers each have to spend £9.5m more over five years on Wan bandwidth, they receive professional help in managing their infrastructure in a secure and cost-effective way and can move to VoIP at their own pace.

Mesh network architectures
By putting voice over an existing MPLS VPN mesh network and by increasing bandwidth compression to 24kbps per call instead of the 40kbps used for hub-and-spoke, firms will get a better class of service and higher savings than in the hub-and-spoke scenarios.

Driven by much lower bandwidth costs, the savings through VoIP will increase to between 2% and 32% compared with the status quo. Take the large UK firm with a big international presence. With a mesh architecture in a hosted VoIP scenario, it will save £3.8m over five years compared with hub-and-spoke. For very large, complex multinational firms headquartered in average-cost countries and in the UK, keeping the TDM PBX ceases to become the cheapest option. Suddenly, the IP-enabling and hosted VoIP scenarios generate cost savings of between 2% and 10% compared with keeping the TDM PBX.

Forrester recommends that large firms based in expensive PSTN and bandwidth-cost countries such as the UK rent a hosted VoIP solution from proven telco firms such as BT. Users that have upgraded their hub-and-spoke architecture to a mesh network architecture using MPLS VPNs will gain even bigger savings from moving aggressively to VoIP.

This article was written by Lars Godell with Bernt Ostergaard and Nuutti Rautiainen from Forrester Research, www.forrester.com

Options for bandwidth costs

VoIP strategies beyond IP-enabling are expensive in Europe because of the high bandwidth costs.

In particular, the high local tail-circuit costs limit the attractiveness of network-based services such as hosted VoIP. By using multihoming technologies from suppliers such as Internap Network Services and bandwidth optimisation products from suppliers such as Peribit Networks, enterprises can cut 20% to 60% from their Wan costs.

By replacing costly leased lines with cheap SDSL and ADSL alternatives for small branch offices, users should aim to save 20% to 30% from their Wan costs.

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This was first published in June 2004

 

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