Counting Costs

UC-TCOConsider many metrics when evaluating TCO of unified communications systems.

The modern workforce has a multitude of business communication and collaboration tools at its disposal, but many of these key tools still tend to exist independently of each other. IP-based unified communications (UC) systems unite telephony, email, voicemail, messaging, mobility, conferencing and more into a single, coherent communications solution.

Although UC systems have been around for nearly 10 years, adoption rates have never really met expectations. A 2013 survey by the IT education company Webtorials found that only 21 percent of companies had fully adopted unified communications.

Sticker shock has been one obstacle to UC adoption. As with any shift to new technology, there can be significant upfront costs involved in the move to an IP-based communication infrastructure. However, organizations must be careful that their focus on price does not make them blind to value. In a benchmarking study of the total cost of ownership (TCO) for unified communications, Aberdeen Group analysts found that buyers typically place too much emphasis on upfront cost when evaluating UC systems and vendors.

“Whether organizations are making their first move to an IP phone system or upgrading to a fully integrated UC platform, they will need to make investments in hardware, software and implementation services,” said Krystal Triumph, IT & Telecom Advisor, Atlantic-IT.net. “We can help them evaluate the long-term costs and benefits of the solution so that they can make a more-informed decision.”

The Big Picture

While procurement and implementation costs certainly need to factor into the equation, this approach fails to take into account potential long-term operational, maintenance and network savings that can easily offset upfront costs. Aberdeen recommends a more thorough analysis of TCO metrics to establish a clear cost structure.

“Total cost of ownership represents a holistic measure of the complete financial impact associated with the unified communications purchase decision and should be the most important issue for any IT financial stakeholder purchasing a new system,” said Hyoun Park, Aberdeen research analyst. “To uphold corporate fiscal and governance responsibilities, decision-makers must fully examine all significant upfront and recurring costs to identify the UC solution offering the greatest value throughout the entire lifespan of the solution.”

Even if the goal is to simply reduce communications costs, organizations must consider all factors that impact TCO. To build an accurate TCO calculation, it’s important to look beyond the sales proposal in order to balance the short-term costs with long-term operational savings.

Factors to Consider

The 2013 Nemertes Research benchmarking study of IP telephony TCO separates cost data into three categories:

  • Capital: Includes servers and other data center hardware, software licenses, and desk phones or other endpoint devices.
  • Implementation: Includes internal staff time and third-party systems integrators and consultants.
  • Operational: Includes staff time, training and certification plus maintenance contracts and third-party support.

The Nemertes study suggests that product and implementation costs are fairly consistent, while operational costs can vary significantly from vendor to vendor. Buyers need to evaluate real-world data related to implementation and operations costs to calculate TCO. For example, a hybrid system with inexpensive digital phones might reduce upfront costs but could wind up limiting access to the full range of UC solutions and benefits.

“Even basic UC systems should provide voicemail, email, unified messaging, and web and audio conferencing,” Triumph said. “But it often makes sense to invest in emerging components that may well be mission-critical in the near future. These elements include a robust mobile client, enterprise-grade videoconferencing, document-based collaboration and social media integration.”

Complexity is another important TCO consideration. Mobility, collaboration and videoconferencing applications have greater network overhead than apps such as email and instant messaging.

“We always recommend a network readiness assessment as part of our evaluation,” said Triumph. “Implementing an IP phone system may require upgrades to improve bandwidth and server resources. A poor network design could negate many of the benefits an organization expects to realize from UC.”

The Value Proposition

While a host of factors can impact the cost of a UC deployment, organizations must also have a good understanding of the potential value. Long-distance savings has always been one of the chief selling points of IP communications, and while that can be significant in some organizations, it isn’t the only way IP telephony and UC deliver value. An IP-based system with centralized call control can also reduce maintenance and staffing costs.

Improvements in processes and productivity may be harder to quantify but are significant nonetheless. A recent survey sponsored by Sonus Networks attempted to identify those savings. Technology decision-makers at 267 large enterprise organizations responded that a fully functional UC infrastructure could improve productivity of selected tasks by 23 percent. By recovering 1.21 hours per employee per day, the average savings is roughly $13,000 per year per knowledge worker employee.

“Our communication modes have been discrete for too long, and the opportunity to bring them together to drive personal productivity is immense,” said Wes Durow, Sonus marketing VP.

Businesses today require multiple communications technologies to operate effectively. VoIP-based unified communications systems can integrate, coordinate and manage those technologies for maximum benefit. With so much at stake, those considering a UC system should avoid the temptation to make a decision based solely on upfront costs. By looking at the big picture and analyzing long-term operational costs, organizations will be able to calculate TCO and make the smartest possible decision.