VoIP Benefits and Obstacles

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VoIP Benefits and Obstacles

VoIP enthusiasts promise many benefits over the traditional PSTN. A great deal of industry excitement has been generated about the potential cost savings, the new calling features, and the reduced infrastructure of converged networks in a VoIP implementation.

There are two main types of benefits to VoIP—hard benefits and soft benefits. Hard benefits come with a clearly-defined cost savings. For example, replacing a PBX with a VoIP server may save a company a specific amount of money every year. On the other hand, soft benefits don't necessarily save money, or, if they do, they don't always save an easily calculated amount of money. But they have the potential to affect the bottom line in the future if, for example, your decision to innovate with unified messaging today means that your company is ready to make another technological leap in the future. Although both types of benefits are critical to the final ROI, most organizations focus more on the hard cost savings, because they are easier to quantify. Oftentimes it is appropriate to clearly differentiate between hard and soft benefits to improve the credibility of the business case with financial decision makers. The next section takes a closer look at three broad categories of VoIP benefits: cost savings, new features, and convergence.

Cost Savings

Expenses are almost always a driving factor in IT spending decisions. You or your boss has probably asked, "How can we do business more efficiently, with lower costs?" Cost is no less a factor if you are looking at a VoIP implementation. The cost of VoIP can be intimidating, with the need for plenty of new equipment (remember the components discussed in the introductory chapter?) and possible infrastructure upgrades. A large initial capital outlay can be cost prohibitive for some organizations.

However, these likely costs should not scare you away. Many companies are now offering equipment-leasing plans to reduce the initial capital outlay and let you spread the expense over several years. It is also a good idea to stage the deployment gradually as a means of easing the costs. Each organization generally has a variety of sites. These sites could be small branches, regional offices, or global headquarters. They could be new facilities or existing facilities that require a replacement for their current PBX. The ROI for VoIP is often different across these different site types and deployment scenarios. Many successful VoIP implementations recognize these differences and use them to guide their insertion strategy for VoIP.

The best approach to a VoIP implementation is to view it as an investment; it is intended to provide returns in capital and productivity savings. The cost savings from VoIP are likely to occur in several areas. Figure 2-2 shows a good estimate of where you can expect to gain the savings.

Figure 2-2. Contribution to VoIP Cost Savings

From "The Strategic and Financial Justifications for Convergence," Cisco Systems white paper, June 1, 2001 (http://www.cisco.com/warp/public/cc/so/neso/vvda/iptl/cnvrg_wp.htm).

The following sections consider these cost savings as they apply to capital, expenses, and productivity.

Capital and Expense Savings

When VoIP technology first appeared, a major enticement was "free phone calls." It has been said that there is no such thing as a "free lunch," but is there indeed a "free VoIP phone call?" Sort of. In the PSTN, the network is owned by the telephone provider. When you make a call, you are billed for the usage of this network. Long-distance costs can vary depending on the distance called (location of caller and callee) and the time at which the call occurs. And long-distance telephone calls can be a major line item in an organization's budget. In a VoIP implementation, the network is an IP network, and calling distance does not matter. If you own the IP network or are already paying an Internet service provider (ISP) for bandwidth, then VoIP employs an infrastructure that is already paid for, so VoIP calls could be considered free.

Long-Distance Service Savings

Long-distance rates on the PSTN have decreased dramatically over the same years that VoIP has matured. Assessing the cost of long-distance service is complicated because different rate structures apply to different types of calls. If you call inside your local area, one rate may apply, whereas another rate may apply to calls beyond this area. Yet a third rate may apply to calls that cross national boundaries. Throw in the myriad wireless calling plans with free long distance, and the cost savings from VoIP may be difficult to gauge.

Consider interoffice calls. Nowadays, large corporations typically find themselves with offices or supply chains spread out over many geographical locations, in countries all over the world. What is the cost of telephone communications with these offices and suppliers? To calculate this cost, you need to know how many telephone lines or how much call bandwidth you have going in and out of each office, and your typical long-distance bill. Depending on the configuration of your network and the locations of the calls you need to make, your long-distance tolls could plummet after implementing VoIP. After all, there is no distinction to be made on a data network between an international link and a regional link.

Bypassing the PSTN and making telephone calls on an IP network is referred to as toll bypass. Toll bypass occurs when a PBX or an IP PBX is connected to a VoIP gateway, which is then connected to an IP network, as illustrated in Figure 2-3. The call traffic goes from the PBX to the VoIP gateway instead of from the PBX to a PSTN switch, thus avoiding the toll, or cost of using the PSTN. As a result of the PSTN toll rate structure, companies with a large number of international sites are likely to see more cost savings from toll bypass than companies that make most of their calls within the United States.

Figure 2-3. Toll Bypass

Savings may not be immediate or automatic, however. Many organizations should not convert to VoIP completely, or all at once. The PSTN lines may still be needed for some time during the migration phase, and some companies may want to keep the PSTN as a fallback network. But, in most cases, the long-distance costs associated with PSTN usage should decrease after a VoIP implementation.

Single Network Infrastructure Savings

The popular acronym KISS—Keep It Simple, Stupid—applies to your IT strategy. Maintaining separate network infrastructures is neither simple nor cheap. VoIP offers a single network infrastructure built on an IP network. How does this result in savings?

  • A single network can lower the cost of network ownership. Instead of buying or leasing a PBX and network infrastructure for PSTN calls, you can spend the money on IP network infrastructure. Both voice and data traffic can take advantage of the enhancements. These savings allow VoIP to provide a lower total cost of network ownership.

  • Similarly, VoIP can provide a reduced incremental cost of network ownership. For example, what is the current per-user cost for phone service? How does adding a new user affect this cost? Adding an additional user to a traditional PBX system may require upgrading to a new PBX with greater capacity, thus increasing the per-user cost of the system. By contrast, most campus LANs have nearly unlimited capacity, allowing a new VoIP user to be added at a reduced per-user cost. Incremental costs also extend to the addition of new corporate offices, which can often be easily and cheaply added to a VoIP-enabled data network.

  • A single network is easier to expand and change. Consider this scenario: You have 10 T1 links for your PSTN traffic (supporting up to 240 calls) and a DS3 link for your data traffic. (As mentioned in Chapter 1, a DS0 link, with 64-kbps capacity, is a standard building block of the PSTN. A DS3 link has a 44.736 Mbps capacity.) The T1 links are operating at maximum capacity, but your DS3 link has plenty of bandwidth available. Your organization is growing. Instead of purchasing another T1 link for the increased call volume, moving to a VoIP implementation would let you use the available capacity on the DS3 link to carry additional voice traffic.

  • A single network offers reduced wiring costs, especially in new construction. Instead of wiring for both data and voice, you pull one set of wiring. Wiring for both voice and data can be accomplished in many different ways, so proceed carefully. For example, you never want your IP phone and computer to share a hub; if you run a database query while you are on the phone, you could get reduced call quality. Such trade-offs are discussed in more detail in Chapter 5, "Quality of Service and Tuning."

  • A single network can easily incorporate wireless infrastructures. Wiring a home or office for a data network can be expensive, so many organizations are turning to wireless networks using 802.11 technology. These wireless LANs support IP network applications readily, making VoIP easy to implement in this type of environment, but there are trade-offs with regard to security and potential performance issues.

  • Several VoIP manufacturers offer centralized call-processing architectures. Centralized call processing enables an organization to consolidate its core call-processing equipment in one or several sites and then extend voice services to each site within the organization. For many firms, this enables them to remove PBX and key systems from each site with the enterprise while providing similar and oftentimes superior features and functionality to the branch sites. Centralized call processing is a compelling method to reduce equipment, maintenance, and support costs. It also enables many organizations to standardize the voice services that they deliver to their employees. Instead of requiring internal or outsourced resources to manage each PBX or key system, a centralized team can now manage the entire organization's voice services from a single site.

Productivity Savings

Another set of quantifiable benefits in a VoIP implementation involves savings due to productivity improvements in your IT operations. When you are thinking about moving to VoIP, be sure to consider what the new demands will mean to your IT staff, who may already be overloaded. At first glance, it may seem to be a paradox—that rolling out VoIP could offer IT savings, both for capital and staff. However, a VoIP implementation can bring IT staff savings in several areas, as discussed in detail in the following list:

  • Management and support savings— For a traditional PBX phone system, you need one staff to manage the telephony system and another staff to manage the data network. With a VoIP system, these jobs usually merge. The convergence of infrastructure may make it feasible to reduce the internal staff required for support and management of the two separate infrastructures. However, these savings may come with a high initial cost for training. Managing a converged network requires a consolidation of skills. VoIP thus requires significant training for the data-networking group learning telecom skills, or for the telephony group learning data-networking skills. One way to try to estimate the training costs associated with VoIP is to compare a VoIP deployment to the rollout of other business-critical technologies. For example, the move from office memos and "snail mail" to an e-mail system was quite a leap technologically and required extensive training to deploy and manage. A VoIP deployment has similar characteristics.

  • Maintenance, upgrades, and additions— Each time a new user is moved, changed, or added to the voice network, an organization incurs a cost. This cost can be as high as $150 per move, add, or change. In one estimate, these actions accounted for as much as 14 percent of an IT budget. VoIP uses IP protocols such as Dynamic Host Control Protocol (DHCP) to allow IP phones to automatically reconfigure themselves when moved from one location to another. Employees can move their own phones, potentially saving thousands of dollars per year. In addition, adding and changing phones become simpler, because they can often be accomplished via a software application instead of a visit by a technician. An interesting development driven by the enhanced mobility of VoIP is that many organizations are now able to move their employees more frequently to better align them with the changing dynamics of the business.

  • Enhanced mobility— Some vendors of VoIP offer number portability. This lets individuals log in to any phone within the organization and still have their extension number (and any applications or services they use) available to them even though they are away from their desk. This enhanced mobility lets many organizations institute more flexible work environments that allow them to reduce facilities and real estate costs, while increasing employee productivity and morale.

  • Reduced site preparation time— The need to string only one set of wires has also allowed many organizations to reduce the time it takes for them to set up new sites. In certain industries, this new capability is driving significant cost savings and even revenue growth.

When analyzing the cost savings that a VoIP implementation can provide, consider this important reality: Because end users don't see cost savings directly, they are less tolerant of reduced quality or reduced reliability. Employees in your sales department may not care that the company is saving two cents per minute on VoIP calls if their sales productivity is decreasing because of poor-quality calls or dropped calls.

New Features

New applications and features offer productivity improvements for both end users and IT staff. The benefits offered by new applications and features are not easily quantifiable, but arguably offer some of the most compelling reasons to consider a VoIP implementation.

VoIP technology vendors have been looking for the killer applications to drive the enablement and deployment of their products. Do new features imply new revenue for businesses that deploy VoIP? It is possible. Consider the following: VoIP allows for easier integration of voice with other applications. For example, web commerce applications offer voice as a means of helping customers place orders or talk to a customer service agent. Consider pithy business statistics like these: "A 5% improvement in customer loyalty can improve profitability by 40 to 95%"[3]and "Cutting customer defections by just 5% has the effect of boosting profits between 25% and 95%."[5]

Here are several examples of new applications and features that VoIP can enable:

  • Unified messaging— This widely anticipated VoIP application is starting to pay dividends. Now that many vendors are offering voice mail, e-mail, and fax integration, users are beginning to take advantage of unified messaging systems. The ability to retrieve your messages anytime, anywhere, and in any way makes unified messaging systems an appealing productivity booster. A 2001 study found that unified messaging can provide 25 to 40 minutes of added employee productivity each day.[4] Productivity improvements come as employees reduce the time they spend retrieving messages and faxes from the home office, as well as the sometimes-lengthy search for an Internet connection to check e-mail while on the road. With expanded options for working from home, employees who once had to face a tough choice when they needed to care for a sick child can now complete more of their work without being in the office.

  • Advanced call routing— Communicating with employees and customers in an increasingly mobile workforce and global economy can be difficult. "Phone tag" is a common inconvenience, as are time zone disparities. Advanced call routing features can help eliminate phone tag and provide better support for a remote workforce. Now employees working at home can have their business calls routed to a home telephone. And call routing can also include integration with customer relationship management (CRM) systems to look up customer information and route support calls to the appropriate technical support group.

  • Integration into business applications— The ability to chat directly from one computer to another has widespread appeal, as statistics indicating the popularity of instant messaging (IM) applications reveal. Instant messaging provides some of the immediacy of a telephone conversation, an immediacy that is lacking in e-mail communications. InformationWeek found the following: "The total minutes U.S. workers spent using the top three instant-messaging applications—from AOL, MSN, and Yahoo—increased 110% from 2.3 billion minutes in September 2000 to 4.9 billion in September 2001."[6] It also noted: "The number of unique users of instant-messaging applications in the workplace also jumped 34%, from 10 million in September 2000 to 13.4 million in September 2001."[6] Microsoft Windows Messenger, which enables instant messaging, also has VoIP capabilities. The possibility is enticing: chatting with someone in an IM session, then clicking a button and calling that person with voice, video, and text communications all integrated into a single application.

  • Easier to add new features— New features can be added to a VoIP implementation much more quickly and easily than to a traditional PBX. Traditional PBX systems, being proprietary in nature, tend to leave the addition of new features to the discretion of the PBX vendor. VoIP systems are built from common "off-the-shelf" subsystems. They can take advantage of client/server architecture, open development platforms, and well-known standards to speed deployment of new applications and features.

Many experts believe that more productivity applications are just around the corner. For example, Kevin Tolly of The Tolly Group, Inc. observes, "The infrastructure needs to be in place before software and application developers have any incentive to be inventive. Voice-over-IP application development will no doubt rise steeply as the number of converged networks increases."[7]


The consolidation of different types of application traffic on the same IP network is known as convergence. Putting voice, video, and data on the same network is a common example of convergence. Earlier in the chapter some of the tangible returns from convergence were examined—single network infrastructure and management savings. Does convergence offer any other benefits that are not as easily seen?

Convergence just makes too much sense not to happen. A single scalable network infrastructure that provides for all of your business communication needs offers cost and management savings. It is not going to happen overnight, but it is best to at least start thinking about it now. The question of convergence is no longer "if it will happen" but "when it will happen." Within the next few years, look for a majority of enterprises to be in the middle of converged network projects. Figure 2-4 shows the percentage of companies that are implementing converged network projects.

Figure 2-4. Percentage of Companies Implementing Converged Network IP Telephony Projects

From "The Strategic and Financial Justifications for Convergence," Cisco Systems white paper, June 1, 2001 (http://www.cisco.com/warp/public/cc/so/neso/vvda/iptl/cnvrg_wp.htm).

Voice is the easiest step in convergence because of its relatively low bandwidth requirements. After a VoIP implementation, the next step toward convergence would be to put video on the network. In many corporations today, video represents a third network infrastructure beyond voice and data. This third network infrastructure consists of dedicated ISDN lines that link conference rooms together for videoconferencing. Video streaming is also growing in acceptance for uses such as corporate training and distance learning. Adding video traffic to an IP network can reduce the need for an additional video network infrastructure and provide further benefits in a converged network.


A discussion of VoIP benefits would not be complete without consideration of the downsides or potential obstacles in a VoIP implementation. The major downsides for VoIP are cost and business risk. As mentioned earlier, the cost has to be considered as an investment. And, as you see in this section, the business risk can be reduced with proper planning and good management.

Cost and Capital Investment

The initial cost of VoIP can be high, if you start with a large project. You have to buy new network equipment, servers, IP phones, management software, and diagnostic tools. In addition, a complex network infrastructure upgrade may be required, because your current network infrastructure may not be tuned to handle VoIP adequately. Good voice quality places strict requirements on the VoIP network traffic, in terms of latency, jitter, and number of lost packets. These topics are discussed in more detail in later chapters, but for now, you should recognize that a complex network infrastructure upgrade may be required to provide quality levels comparable to those of PSTN calls.

Training also has a cost, and VoIP requires extensive training for the IT staff and users. The necessary consolidation of skill sets between the telephony and data-networking groups has already been mentioned; staff may require a whole series of costly coursework. VoIP is a relatively new technology, and personnel with the skills required for successful deployment and management may be difficult to find and expensive to hire.

Business Risk

Quality and reliability pose potentially the biggest obstacles to VoIP. This book was written to help you find ways to reduce the risks, but quality and reliability have been a concern since the introduction of VoIP. With the PSTN, you rarely have to worry about these issues. You and the rest of your organization are used to "five nines" of reliability. A converged IP network consolidates voice and data traffic onto one complex subsystem (which probably includes PSTN fallback). Today, if your data network goes down, you can at least call the IT group and report the failure. Although it is unlikely that an entire network will fail, you need to consider what happens if elements of a converged network go down.

There is also the concern about stepping into the unknown. When you begin a VoIP implementation, you won't necessarily have all the answers in place. To some extent, you will be learning as you go. However, VoIP implementations have been done thousands of times before. Although the specific details for your organization might not be known, established IT project principles, such as proper planning, assessment, and management, will carry you through. Treating VoIP as an IT project is discussed extensively in the next section.


Taking Charge of Your VoIP Project
Taking Charge of Your VoIP Project
ISBN: 1587200929
EAN: 2147483647
Year: 2004
Pages: 90

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