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VoIP, death and taxes -- Are they all inevitable?

CIOs should not be asking if their companies should adopt VoIP, but when.

How is Voice over Internet Protocol like death and taxes? "It's inevitable and unavoidable," said Jeff Snyder, senior analyst at Gartner Inc. "It will happen to everyone."

By 2009, Gartner Dataquest, which is a division of Gartner Inc., predicts that 97% of all telephone systems will be pure IP or hybrids of traditional telephony with IP capabilities. If Gartner's prediction is true, and a bevy of experts say it is, then CIOs should not be asking if their companies should adopt VoIP, but when. More importantly, they should be planning how to make it happen on their terms.

The first question a CIO should ask is: Does my company need VoIP now?

If the company's digital PBX telephone system has outlived its lifespan of five to seven years, the answer should be yes, said Joe McGarvey, senior analyst for Current Analysis Inc. Many companies implemented new digital PBX systems in the wave of year 2000 IT upgrades, so those systems are now reaching the end of their lifecycle.

Moving to VoIP also makes sense if the company is moving to another site or expanding its number of sites. Implementing VoIP technology at those sites may make sense at this time, even if all the capabilities of VoIP are not utilized immediately.

Hard-dollar savings

Gartner Dataquest calculates that for 90% of companies today the hard-dollar savings of upgrading to a VoIP telephony system are not justified if the telephony system does not need upgrading and all that is needed is a single-site phone system with a savings on toll charges.

That's not to say that hard-dollar savings aren't a good reason to use VoIP.

For companies with distributed networks across several sites that are managed centrally and those that employ remote workers, there can be substantial cost savings in toll charges, particularly charges for site-to-site calls. Companies that fit this profile can see up to 60% savings in toll and long-distance charges, according to Tom Pisello, CEO of Alinean, an IT return-on-investment analysis firm based in Orlando, Fla.

Benefits of VoIP

VoIP is a good choice today for multiple-site companies with a PBX or Key system at every single location, Snyder said. For these companies, VoIP cost savings come from eliminating the need for on-site staff to manage the systems and reducing the need for site-specific maintenance contracts with local providers. "The transition to IP telephony means that all can be managed centrally and costs are reduced dramatically," Snyder said.

Alinean reports that companies that have converted to in-house, centrally managed VoIP systems have seen savings of $25 per month per user.

While more difficult to quantify, the soft benefits -- such as improved communications and enabling usage of converged applications -- of a switch to VoIP can surpass the hard benefits. For example, according to experts, empowering remote workers and diversified teams of workers with improved telephony capabilities, such as video conferencing, messaging and paging, can improve efficiency and boost production.

"Advancing critical business initiatives, such as customer service and improved communication with employees in the field, may be hard to quantify in dollars, but they are critically valuable benefits," Snyder said.

VoIP enables the convergence of communication applications -- videoconferencing, voice, instant messaging (IM) and e-mail -- and business applications, like databases. "A CIO should be looking for any application that can benefit from being tied into a voice communication environment," Snyder said.

If a warehouse runs dangerously low on a product today, for example, the typical inventory application sends an e-mail to a manager. With converged communications via VoIP, the application would access database information to determine where the manager is accessible and then send out messages via the appropriate medium, either voice, IM or e-mail. Or VoIP could extend call center functionality by enabling customer service representatives to locate a sales rep, engineer or developer and see if that person is available to contact a caller via phone, IM or e-mail.

Cost of convergence

After checking out these and other benefits of VoIP, a CIO has to ask: Will the costs of moving to VoIP be greater than the hard and soft savings?

Converting to VoIP can be very expensive for companies that don't have high-capacity networks. In working with more than 40 companies switching to VoIP, Pisello found that very few companies already had the bandwidth to support VoIP without an upgrade.

Typically, for every 120 users of a VoIP system, there needs to be a T1 line, according to Pisello. A company may need to add multiple T1 lines to provide the quality of service and performance expected of VoIP telephony. The good news is that bandwidth is not an issue for companies with Fibre Channel networks.

VoIP system also requires intelligent hardware that handles the routing of calls and supports applications. According to Pisello, a company can anticipate a one-time cost outlay of between $300 and $800 per user for that hardware.

A company will also need to upgrade its phone sets to get the advanced capabilities that IP delivers to telephony. Typically, that will add an initial cost of between $200 and $400 per user, Pisello said.

There is another option, however. Utilizing "soft phone" technology, or in other words, using the users' PC as a phone instead of adding a separate phone set, can cut that cost to about $50 per user, Pisello said. Also, Bluetooth devices are becoming more popular as a soft phone option.

The labor costs for the IT staff to implement, manage and service the system has to be factored into the equation. Training of users and support for users in the advanced capabilities of the new phone system are added costs. Generalizations about these costs can't be made, because they are specific to each implementation.

Despite the relatively high buy-in costs of VoIP, our experts agree that most companies will save money with VoIP over time. For the well-planned and executed VoIP implementation, there can a big payoff in worker productivity and efficiencies gained with centralized management.

Maxine Kincora is a technology writer in Berkeley, Calif. She can be reached at

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