Justifying VOIP for the SME

The business case for large companies is claimed to be widely known and easy to prove, though many of the example cases and justifications I have read are based on the sort of wish fulfilment that only Cinderella's fairy godmother can bequeath. But if your telecoms budget runs in 6 or more figures the odd couple of grand is not going to be noticed.

For personal users and paper shops, justification is personal and has little to do with facts and numbers.

For the Small Medium Enterprise, where £sd counts, things are a lot less clear cut and requires some careful investigation before trying to squeeze the cash out of the PTB.

Know Where You Are Starting From

Calls

Find the various phone bills and examine them, line by line.
Ignore the carriers claims for their call rates. Tip. 40% of bills are over charged. Try and get a credit note at your peril.

What are the real rates being paid per minute called and per called minute (after all the minimum call charges have been included)?

What is the average call length? (Anything over 3 minutes would be unusual).

Where do the calls go and what proportion of the bill are they?

Ignore the hype! Free calls using VOIP do exist, but not to anybody your business calls and in general VOIP call charges are not significantly better than PSTN rates.
Everything pales into insignificance when you see what you are paying to mobiles!

All the above you are doing at least once a year anyhow, so you don't get caught by the 'Amazing Deals' like the '10p for an hour' scam that doubles your bill.

Telephone Lines

How many lines do you think you have?

How many lines do you really have?

What is the maximum number of lines in use at any time?

What do they do?

Realistically a 256K up ADSL line can handle 3-5 simultaneous calls (depending on who you use), there is scope to delete a few lines, eventually. But remember:

ADSL is not tremendously reliable.

Analogue lines are often configured as In or Out

ISDN lines are usually on 3 or 5 year contracts.

If you have 8 channel ISDN30 then you can't drop any.

Fax and alarms need lines.

PBX

What features does your PBX offer now?
What features do the users use?
Has anybody ever asked for anything it doesn't already do?

How many extensions are being used?
Do you really need that many?
Do you need more?
Most Digital PBX owners can pretty well stop reading here. There is no financial or usability justification for VOIP if you answer NO to points 3 and 6

What does the maintenance contract cost?
How long before you can get out of it?

Network

Can your existing network cope with VOIP?
It is not bandwidth that is the problem parse. But the lines must be free of interference and dropped packets. Be prepared to replace sockets if they are more than about 7 years old.

Is your network room and switch room the same place?
Connecting the two can be a major cost.

Congratulations! You now have enough information to start costing and dimensioning your new telephone system!

Suggestions for Justification

It goes without saying you must always prepare your justification with a careful consideration of who it is being prepared for. Know Thyne Enemy!

Having taken your quotes for new exchanges, thrilled at the wonderful things it can do if you spend more money than you have (and know nobody would use if you did), possibly dabbled with an Asterisk test system. Eventually, you will put all the numbers in to a spreadsheet.

Typically a PBX is amortized over 3-5 years (depending on the number of digits in the price), but in these uncertain times PTB will collectively suck on their teeth like builders if you offer a payback over more than 2. Your justification will show no benefits inside 4 years (if you have been honest with the call charges). It is not going to happen without sprinkling holy water on the old PBX or drawing in other factors:-

Look at the Sales Reps phone bills too!

Do not dismiss build your own solutions like Asterisk, provided you have the skills to support it.

Look at the mobile phone contract. Many contracts now have options for group workers and home numbers. Add in the cost of a premier cell to fit on the exchange (if you can't get it as part of the contract) and group worker tariff and reduce the calls to mobiles by 90%. You may even be able to kill a few mobile phones too!

Look at the network performance, can upgrading the network be charged against more general features?
A couple of seconds shaved off the MD accessing his favourite website is worth thousands in a marginal case!

Is there any other project that might cover part of the cost?
A supplier VPN could cover the cost of ADSL conversion and rental? Can you bully suppliers (or customers) in to using your flavour of VOIP?

Never say it will do something clever to improve usability, unless you are very certain it will work.

And Finally

Do not forget the users!
They are going to blame you!

Even though you have involved everybody and his dog in getting your VOIP system running. There will be somebody in Sales who thinks that the combined staff of British Telecom frying breakfast on her old telephone line is perfectly good reception, but will complain of how unusable her new 'phone is the moment she has to touch the volume control.


The Gower track record:

I am committed to VOIP, I am here too much not to be and firmly believe it has many merits to warrant it.
I am not committed to change for changes sake.
One of my many hats is Method and Cost Engineer and I have carried cost studies on upgrading exchange systems for local companies as an independent consultant. The results are always much as described. There are savings to be had turning to VOIP, but not for the sake of using VOIP. It has to be linked with a more root and branch review and structured policy, mobile call costs, integrated CRM, networking etc. should all be considered if at all possible. And when you can then savings of 40-50% on the telecoms budget suddenly become very viable![/list]

Reply from rgower on Mar 19, 2006 - 03:28 PM

PBX Features, Users and CRM

On a PBX system with 40-50 users, less than half will know how to use the recall button and you won't need the fingers of one hand to count the number who use hold or mute.
Voice mail, if you have it, is received by five people and at least one of those will never actually use it because they have forgotten how. Odds are high this person will be a senior manager or director.

From this two factors stand out:

1/ Companies are quite happy with this state and it comes under the standard training policy, “Everybody can use a telephone/computer from birth, why should they need to be trained?”

2/ PBX sellers will sell you more add on features at extra expense. The chief ones being CTI and CRM.

CRM is good if you are really stuck for a genuinely valid justification, it is (or was as people are getting wise) an excellent buzz phrase and Directors love it- You can spend money like water, with the full approval of the Board and achieve exactly SFA. Just ask Job Centre Plus or the NHS!

The basic concept of the phone ringing and you knowing not only who is phoning, but everything about them down to the size of their underwear before you answer has both demonic and logical appeal. But this is not CRM, it is CMS and well beyond your PBX budget. It also ignores the fact that your callers all suppress CLI, so still involves people shouting across the room 'Ere Mavis, it's that spotty guy from Twiddly Wotsit, are you in?' Without putting the phone on hold!

What you will get for your £10 grand CRM system is a shared address book, calender, possibly an e-mail client and if you are unlucky an extra page called 'Prospects', which in the twinkling of an eon you can create, or lookup, an entry, just like you do in ten seconds in your free desktop diary or filofax. Even if you have a dozen road-warriors logging in twice a day to fill in the Prospects side of the system, it is still a damned expensive version of MS Outlook!

The only way that CRM can be made worth the effort is if it can be tied to some useful information, e.g. Stock levels, customer ordering history, pricing etc. as well as the size of their underwear i.e. Turn it into a CMS system.

Unfortunately many of even the so called 'open' CRM systems from vendors use the term in the same fashion as one might use if calling on the President of the United States for tea and cakes at 3:00AM without an invitation and a boot load of explosives. They might not actually shoot you, but an all expenses spared holiday in Cuba is a distinct possibility.

If you have to go this way and want to sleep with any sense of innocence at night, tear up your new PBX justification, start one for CRM and write a half decent ERP system. You can replace the PBX using the small change.

You might even be able to train the users on how to use the telephone!

Choosing a System

The important questions:-

What do you realy want the system to do, apart from make telephone calls, if anything?

How big does it need to be, extensions, trunks etc.?

Does it need analogue and ISDN lines for fall-over?

What other features are needed?

Does it need to integrate with anything?

Does the system work in a way that suits your users? If stepping up from an analogue system, the sight of all those buttons on system phones is terrifying!

How long do you want the system to last before having to upgrade/replace for bigger and better?

Are you happy to do any expansion yourself, or do you need an installer do it?

Do you mind being locked to a single vendor for handsets?
Can you get still get support if the supplier disappears?

Thinking of the supplier, can you get on with them? Get references!

If the system is not too big, heavily used or integrated, then a local Asterisk integrator might be more suitable?

It looks like a long list, but you are going to be blamed for the system for the next 10 years, so it makes sense to have all the answers to start with and helps imeasurably being able to tell the supplier what you want.

Reply from middletn on Mar 19, 2006 - 08:29 PM

Good comments.

However, a few points. Customers I've seen of late, who are interested in VOIP and who have a traditional PBX is this. When they ask their supplier to extend or upgrade systems as little as two years old, they're told that a) it's increadibly expensive, b) getting them(the parts) will prove difficult. It's my guess the manufacturers have seen the VOIP writing on the wall and are either moving into the area, or scaleing back on R&D

I have never sold a VOIP system based on call saving costs. I have sold it on pure flexability. The fact that most companies are sick and tired of being ripped off by the ridiculous costs of traditional systems also helps.

I find it incredulous that anyone contemplating a new system would not go VOIP, amazing, yet the sales still go on. Bizare.

Reply from rgower on Mar 19, 2006 - 11:24 PM

I don't sell the things, I justify them and it has been observed that call costs will not pay for a system for themselves. Nor does the difference, if any, in support and maintenance costs.

I've happily given on the potential of extending an existing system as well. Personally I put it down to our far-eastern friends habit of having a new version every day with a matinee on Saturday. Toshiba seem particularly prone to this, it does not affect GPT or Mitel nearly as much. Again, just because it costs a £1000 for a new extension card is not an automatic reason for spending £7000 on an IPBX.

There is the fabled flexibity, which is always overstated by those who sell the systems and too often results in claims of the improbable and impossible (you may be one of a very small number who don't?).

Flexibility is only of value if it means you can do something with its own value, that you could not do before, or do as efficiently. Remote extensions are good, but may not be enough in itself, but can be used as part of the justification like everything else!

Which brings us back to, look for otherthings that will help carry the case.

Anything else is not justification. It is vanity, wishful thinking and change for the sake of change.

Reply from ianplain on Mar 20, 2006 - 12:30 AM

As with all things there are many levels. You have the Panasonics, Toshibas and Goldstars for which Middletns comments hold true. But then you have the big hitters Mitel, Siemens Ericsson and Nortel where they dont on many levels. R&D, These all stopped R&D for TDM at least 4 years ago, Parts are avalible and in most cases they can be "upgraded" to Voip very easily. Mitel for example it is cheaper to upgrade to a 3300 from a Microlite than to do a software upgrade(keeping ALL your existing sets and cards, which can be now nearly 20 years old in the case of alog cards or 10 years old in the case of Digital handsets). I know of very large deployments where the only VOIP is intersystem even though the controllers are IPPBXs.

What will be intersting is how the low end compete with the * based solutions that are here (Xorcom TS1) or coming very soon. (TBA), These will hit both the low end system makers who are just starting to take note and the Guys out there selling AAH to punters. The TS1 will be in the end £399, I have spoke to people trying to sell the same AAH for £1K and being suprised when the customer goes to a TDM solution or half the cost or a Mitel for £500 more, But I also have a customer who was told by their dealer that this VOIP is new and untested!!! Makes me wonder what ive been doing then for the last 5 years.

Basicly at one end the customer wants loads of features at little or no cost and at the other they need bucket loads of sets and have a budget. The problem is Voip can do both but at the small end the Hardware cost can be too high and at the other unless its OSS the licence cost can be too high.

Personaly VOIP is just another way of moving the diferences in air presure form point a to point b, and to be honest thats all it is. Dont forget we were muxing voice and data in the 80s and 90s with Tricoms etc, Nohing is realy new, Its just diferent

But then again I started my training on Strowger Exhanges and have seen a lot since.

Ian

Reply from middletn on Mar 22, 2006 - 12:19 AM

Hmmm, so let me get this straight, Joe public out there is happy to spend 500 on an embedded @home system for a critical part of his business and will trust himself it'll work? VOIP is the easy bit, making it work with QOS, NAT, bandwidth etc is the hard part. Those Xorcom unit's look great (shipping at 80 pounds, + tags, title, tax) brings it up to 500 without any interface cards.

Unless joe becomes an expert in these things, I believe there's still a margin for making the things work. If not, a whole bunch of us are going to be out of work. My philospohy has always been, that I don't make a profit out of the hardware. It's my time they're paying for. If someone is charging 1k for an @home on a PC, then they'd better make hay while the sun shines, as it won't last for long.

However, while the major PBX vendors charge 6k for a small system, it's still a good deal. At some point Joe will wake up to the fact he's been ripped off all these years.

What VOIP does do, however, IMHO is move comms to the IT department. Traditionally this has been the remit of some non techy person. Perhaps this shift in responsiblity will lead to better utilisation. Then again, it might have a negative effect.

Reply from rgower on Mar 23, 2006 - 11:15 AM

Again it is a case of horses for courses.

At the smaller end of the scale (say 8 extensions) I can see a real demand for a system that costs £2-300, plus a day for the local electrician to drape a few cable runs, that simply plugs and goes. Such a device would be ideal for smaller offices and retail stores. Whether the TS1 hits the spot I don't know.

At the other end are the bigger systems with 100+ extensions, and best left to the genuine professional installers with their various specialist network analysts and telecoms engineers.

In the murky grey area between is where the choices have to be evaluated and costed carefully, simply because every instance needs something different.

I regularly talk to a couple of IT managers in local manufacturing companies: While my 40 extensions will happily co-exist on a single network with nothing more than a VP to divide them, another has had to seperate his 20 telephones on to a totally seperate network because his CADD/CAM gobbles 70% of his gigabit ethernet, the third has a wardrobe sized IP Realtis system because head office has told him he needs it for his 60 users.

Reply from middletn on Mar 24, 2006 - 11:41 PM

rgower :

Again it is a case of horses for courses. At the smaller end of the scale (say 8 extensions) I can see a real demand for a system that costs £2-300, plus a day for the local electrician to drape a few cable runs, that simply plugs and goes. Such a device would be ideal for smaller offices and retail stores. Whether the TS1 hits the spot I don't know.

OK, reality

I'm looking at a quote here from a certain major telco.

Specs

VOIP system (internal only)

PBX with 1 ISDN 2e card (2 logical channels)
2 Phones
Plus cat5 cable install

Cost 1,600

People are still paying these prices and think it's reasonable!

My point is, don't underestimate the value of your VOIP skills. If you come in at 1,250 you'll get the deal. Why offer 300 + a couple of phones? Yes the price will plummit, but nobody wins in a price war.

Reply from rgower on Mar 25, 2006 - 01:14 AM

We both know that people are seriously puddled to pay £1600 or even £1000 for a two phone ISDN system. TBH they are verging on daft to pay BT's £200 install fee for the ISDN line (without good reason), there are perfectly good single line systems available that offer multiple extensions for £100, heavens there are ADSL modems that offer two lines and VOIP for £50. But there will always be some who will want a 'professional install', just as there are some who will employ electricians to replace light bulbs, when you find them make hay.

On the same token, there will always be companies that will buy their exchange purely on the justification that the flashing LED's on the front matched the beat of a Pink Floydd album and they deserve to get stiffed too, if only for their choice of music!

But the fact remains that there is a much bigger market for whoever produces an eight line version of the Zoom X5V.

Also, don't forget, neither I nor the thread is about selling VOIP. It is a hard look at justifying VOIP in a sector that is too big to use a 'home solution' and too small to gain from the bells and whistles that are being bolted into the big corporate systems.

If that means a few people realise they can't justify spending £10K on Pink Floydd emulating LEDs and over-rated hype, but can buy your £1200 Asterisk and gain real savings, then we can all go home happy?

Reply from ianplain on Mar 25, 2006 - 01:45 AM

Quote:

PBX with 1 ISDN 2e card (2 logical channels) 2 Phones Plus cat5 cable install Cost 1,600

but if you break it down,

Labour £400
2xcat5 points £100
2xphones £300
ccu £800

So to hit £1250

Labour £300
2xcat5 points £100
2xphones £250
ccu £600 <<<<< based on £300 for PC and £300 for Isdn2 card

But you have to prove reliabilty and cover you R&D costs somehow.
This is why at this size * is not competitive.

Now as you scale it up it is a different matter

For example large * solution comes in at £200K all in, against £160K just for the licences of another brand, If you add hardware and sets its more than double the *. The saving is only due to the licences, each * server is £4K the same as the competitor.

At the moment the xorcom box is the first mainstream, another one will be along in the Summer from a major player, and Digium themselves are playin with a OS/* solution as well, but when I asked about it this week they were a bit coy.
Also Linksys/Cisco are bringing out their baby system in the UK, Lets not forget it wasnt long ago a 1(isdn2)3 extension PBX cost £99 and this is the price it will go back to, The AVM is getting there.

Ian

Reply from rgower on Mar 25, 2006 - 02:04 AM

Quote:

2xcat5 points £100

Forgive me for being OT, as I'm only involved in making the things and their costs, but I do know what BT aren't paying because we were too expensive, so are Cat5e sockets and cable really that expensive to buy?

Never mind. Just looked at Rocom's website. There is money in selling this stuff ain't there!

Reply from rgower on Mar 25, 2006 - 01:58 PM

Picked up a nice booklet from my local water supplier at the VOIP show (24” of rain a year and we buy water from a Scottish electricity company because it is cheaper than buying Welsh!) called 'A complete guide to Voice over IP'. Remembering it is produced by somebody who wants me to part with money because everybody is doing it basis, it is actually quite well balanced. Yet it nicely depicts just why SMEs ought to be very careful in sifting the hype when selecting VOIP.
So here are a few choice snippets:

(VOIP) Reliability is up to circuit-switched standards. Well, sort of. Up and down the Thus backbone it may well be the case they have sufficient redundancy to cover failure of an odd switch. But it is not the case between you and them, there is simply too much to go wrong without backup. Lose a line for whatever reason including power cut and you lose all your telephones

In IP networks that are OPTIMISED for VoIP, voice quality is now considered as good as circuit-switched telephony- Optimised is the important word here. It can mean big money, certainly more than £30 for an otherwise quite acceptable Dynamode switch. Otherwise even the most grotty telephone line will perform better

IP phones can be plugged into the network at any point, offering new levels of flexibility and mobility, - Be honest, how many people really move around that much? Also remembering that if they take the phone, they need to take the power supply unit too and somebody has to patch them in. Besides my PBX has a wonderful feature called Forward On No Reply, which covers most of my wanderings otherwise moving an extension is little more than 12 key presses.

and they give access to advanced features and applications. Would you actually use them?

Operations are dispersed across many different sites and inter-site communications are important.
Growing numbers of employees are working away from their desks (e.g. at home), but need to remain in contact.
Good points all. If relevant to you.

The cost of managing and operating separate infrastructures for voice and data is becoming prohibitive. People tend to have a telephone network and a data network that goes to everywhere already and it sits there not being used and costing nothing. Upgrading to structured cabling is very expensive

Reply from Crouch on Aug 15, 2007 - 07:26 AM

Good articles I thought. I have learned something useful! I regret I read them so late! Thanks to all the authors!

Reply from joeljose420 on Aug 28, 2008 - 01:16 PM

Agreed, cost and things do sometimes outweigh the merits of a "substantial" overhaul or a decent startup. But keeping the merits in mind, its only logical(both business wise and tech wise) that any organization that needs a "communication" infra, have a planned chart of migration or initiation to a "adequate" voip structure.
there is no one-size-fits-all approach to voip implementation. everyone needs only as much share of the pie as they can digest. One thing is certain, its the best pie in the room and all wants a good part of it.. and why not?

For me, The idea of convergence and rich media solutions, by itself make a strong case for a planned migration/initiation to modern facilities(that not only includes voip, but also many others)

Reply from Janusun on Nov 08, 2009 - 08:08 PM

VoIP is like any business, you look for cheap prices and you get cheap quality. People seems to forget that price is not the only thing important here, you don’t switch to VoIP to have to dial 20 times to get through, and when you do, you have to guess what they are saying.
At the heart of the VoIP hype, many people tried to become ITSPs, but very very few understood that to do it well you needed a lot of money and that the technology was not mature enough. Because of that, so many people had bad experiences and decision makers are reluctant to switch. Do not rely on VoIP magazine or so called VoIP award, remember that are subsidized by the manufacturers not the users!
As it was very well said in the other posts, VoIP is not a replacement for the telephone network but an alternative that is much cheaper and that can provide loads and loads of great services that the traditional network can't.
Users will always complaint that it doesn’t work like a normal telephone and will have no pity when criticizing it!

Voip User Forum Index » The World of VoIP » Business VoIP