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."
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."