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VoIP savings seen in productivity and long-distance charges

VoIP systems are helping companies see quicker ROI and more immediate costs savings.

About two and a half years ago, Brinks Hofer Gilson & Lione decided it was time to junk its aging Rolm private branch exchange (PBX) and roll out Voice over Internet Protocol (VoIP) across the company.

The move was long overdue, according to Rod Sagarsee, CIO at the Chicago-based intellectual property law firm. In order to keep the 17-year-old PBX up and running 365 days a year, 24/7 -- a business necessity -- the firm was paying escalating costs in technician overtime, third-party service fees and parts. In addition, moves, adds and changes required changing the wiring at two locations.

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After researching the VoIP market for eight months, Brinks chose Avaya Inc.'s VoIP platform. The basic infrastructure, including the main VoIP system, switching backbone and redundant off-site backup system, was installed in January 2006. By early summer 2007, "We had exceeded full ROI from a strict monetary standpoint," Sagarsee said. "If you were to include productivity enhancements, ROI was exceeded from day one."

The paybacks on long-distance charges alone have come to $18,000 a month, according to Sagarsee. All calls among offices are now internal and free of charge, riding over the same private DS1 lines. Most overseas calls are also free, traveling over a virtual private network connection.

On top of the long-distance savings, the firm has realized huge productivity benefits from IP telephony applications like "follow me" (in which calls are automatically routed to a user's device or location) and unified messaging. During the president's recent visit to Japan, for example, he could take client calls coming into the main office on his laptop via IP Softphone. "He said it was fantastic," Sagarsee said.

Making the VoIP decision

During the past few years, VoIP has gone from an upstart technology to the inevitable next step in telephony. "If you're replacing aging equipment or going to new facilities, you don't have much choice: It'll be IP," said Irwin Lazar, principal research analyst at The Nemertes Research Group Inc. in Mokena, Ill.

However, midmarket CIOs still have a difficult decision to make: whether to upgrade to VoIP one office at a time, as each PBX becomes fully depreciated and/or obsolete, or to go with a companywide roll out.

For a firm like Brinks, with approximately 400 employees, a few branch offices and a single PBX that was clearly on its last legs, the decision was fairly straightforward.

However, the decision becomes more complex for larger companies with 1,000 or more employees, dozens of sites and several phone systems of varying age and viability.

Costs of a companywide rollout

Insight Financial Credit Union Inc., a $438 million company with about 150 employees, saw clear benefits to replacing its aging PBX and a mishmash of interoffice connections with a converged voice/data infrastructure, according to Eleanor Woods, the firm's vice president of IT.

Orlando, Fla.-based Insight Financial recently installed Siemens AG's HiPath VoIP infrastructure, which delivers "superb" voice quality, according to Woods. "Siemens' network advisor worked with Sprint to work out any QOS issues," she said.

We had exceeded full ROI from a strict monetary standpoint. If you were to include productivity enhancements, ROI was exceeded from day one.
Rod Sagarsee
CIOBrinks Hofer Gilson & Lione
The move to VoIP caused a big drop in Insight Financial's monthly long-distance bills: "In the past, one of our branches paid $1,100 per month for a frame relay data circuit and another $1,100 for voice," Woods reports. "Now it's $750 for voice and data together" over high-speed ISDN connections."

For some midrange companies, however, whether a companywide VoIP rollout makes financial sense will depend on a number of factors.

A 2007 Nemertes Research survey of 100 companies found that organizations save between 15% and 40% on wide area network costs by moving to VoIP, with the lion's share of savings coming from overseas calls. Cabling a new building to carry both voice and data IP traffic provides 40% savings; upgrading an older facility with separate voice and IP wiring saves considerably less.

During the next few years, converged voice/data IP networking will start to take off in the enterprise, less because of cost savings than "because it integrates with how you run your business," Lazar said.

For companies like Brinks and Insight Financial, whose businesses depend on voice communications, VoIP's disaster recovery capabilities are critical. "If our old PBX failed, we lost our phones, and potentially revenues," Sagarsee said. "If the VoIP switch fails at Chicago headquarters, the backup system in Ann Arbor keeps the phones running."

For Insight Financial, the biggest VoIP advantage was the ability to respond more efficiently and effectively to customers. Since the HiPath system was installed, call center abandon rates (when a customer hangs up while waiting on hold) have plummeted from as high as 30% to below 2%, according to Jody Walls, the union's vice president of operations. The bottom line, according to Wall: "VoIP has enabled us to communicate better as an organizational entity."

Elisabeth Horwitt is a freelance writer based in Waban, Mass.

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