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The Costs of IP Telephony: Get Specific!

The decision to replace your current business communications system is more than financial. Beyond cost savings, a change can free up IT resources, enhance business intelligence, increase workforce productivity, and deepen customer relationships.

But ignore total cost of ownership at your own risk. Yesterday's TCO has evolved along with technology, and today the smart money monitors "total cost of operations," which establishes comparative benchmarks for both on-premises and cloud solution investments.

Include the Kitchen Sink

When calculating competing TCOs, you must determine capital, implementation, and operational costs including all subcomponents:

  • PBX, endpoint devices and licenses, servers, other hardware
  • Staff time, third-party consultants and integrators, equipment maintenance, third-party managed services, training and certification
  • Endpoint licenses for on-premises apps and monthly subscription fees for cloud services

Let the Pros Do the Math

Calculating the myriad scenarios of system replacement, and running the numbers for all the popular IP telephony and UC vendors, is the raison d'etre for industry analysts.

Robin Gareiss, president of Nemertes Research, has prepared an issue paper that compares vendors and assesses total cost of operations for on-premises and cloud deployments of unified communications and collaboration solutions: "How to Keep UCC Costs Down as Complexity Grows." In her report, she expands scenarios for organizations with 100, 750, and 1,000 employees. The results compare the TCOs of popular vendors like 8x8, Avaya, Cisco, Microsoft, Mitel, ShoreTel, and Vonage.

Here are some key findings, but generalizations can be deceiving. To get the most actionable information from the Nemertes report, you'll want to review the issue paper in detail, as "averages" are affected by the performance of individual vendors.

  • Small businesses achieve the most dramatic savings. If you're a small business and haven't upgraded your phone system for a while, listen up: You could be saving at least $218 per employee per year by making a change. And if you deploy the solution with the lowest TCO you could save a staggering $984 per employee, per year, for five years.
  • Medium-sized businesses can match the savings of bigger companies. On average, a business with 750 employees that installs a new on-premises system could save as much as an enterprise twice its size, around $280,000 annualized per year. However, this performance offers mid-sized businesses less potential upside than deploying a cloud solution with the right vendor.
  • Large enterprises produce the biggest TCO swings. The Nemertes study clearly demonstrates the importance of cloud vendor selection to companies with 1,500 employees. There's nearly a million-dollar annualized delta between the highest and lowest vendor TCO, from an annualized $635,000 loss to a savings of $325,000. That's a huge difference of almost $5 million in five years.

Your Situation, Your TCO

Doing your vendor homework will save you the frustration (and let's face it, the embarrassment) of choosing the wrong phone system. Get prepared to evaluate your choices with clarity and make the right decision for your entire organization.

Download the Nemertes TCO paper, "How to Keep UCC Costs Down as Complexity Grows," now.