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Zero-Based UC Budgeting

Time to start building the 2014 budget. With BYOD/App, Cloud, Mobile, Desktop Video, and other changes hitting the enterprise, approaching the budgeting process by continuing last year's cost model and services is not going to cut it in 2014. Transformation is occurring in the Unified Communications industry that requires UC managers to take a fresh approach, which Zero-based budgeting offers.

Zero-based budgeting is a start-from-scratch approach to planning and decision making. In traditional incremental budgeting--historic budgeting--departmental managers justify only variances versus past years, based on the assumption that the "baseline" is automatically approved. By contrast, in zero-based budgeting, every line item of the budget must be approved, rather than only changes. During the review process, no reference is made to the previous level of expenditure. Zero-based budgeting requires the budget request be re-evaluated thoroughly, starting from the zero-base.

Unified Communication budgets typically consume 10% of an organization's overall IT spend. UC follows the pattern of traditional IT spending where 80% of the budget is spent maintaining the existing environment and only 20% goes towards adding news services and features. The chart below represents a very rough high-level breakdown of the typical OpEx UC budget (figures are omitted because this is a general picture, rather than specific example).

Typical OpEx UC Budget

To reduce the existing UC OpEx budget so that ~50% goes toward maintaining the existing services, an organization should consider:

1) Cellular/Mobile--Put a $75/month cap for both voice and data, and let users figure out the best mobile solution for their devices and applications. Too many organizations support a cell phone with a data plan for email and texts, in addition to cellular data services for a laptop and/or tablet. Smartphones now offer 3/4G hotspot (WiFi) connectivity, so paying for and supporting more than one mobile-connected device should not be the norm.

2) Telecom--Continue to drive competition and get rate reductions. Part of the savings on moving to SIP trunking is forcing the incumbent carrier to get competitive. The cost of bandwidth and thus the cost to deliver voice services continues to decline by 15-20% per year. Vendors should earn their business every year.

3) Conferencing--Offer tiers of service including an IP conferencing solution that charges $10/month for unlimited voice, video, and web conferencing for up to 25 people. The quality and functionality is great.

4) Maintenance--Go to time-and-material to support the legacy TDM infrastructure that is still in place, and self-spare most of the legacy hardware. If this is too much risk for the organization to digest, then consider using a 3rd party for maintenance versus going directly to the vendor. Most vendors have a 40+% margin on maintenance.

5) UC Staff--Outsource level 1 support (24x7 monitoring and break fix), implementation for large rollouts, and consultants for specific areas of expertise. The core UC staff should understand the business requirements, other areas of IT for integration, and the existing and future service offerings.

6) Billing--Require the vendor to prove usage. Too often, telecom and maintenance bills include hardware/software and services that are no longer in use. Randomly picking 5% of the line items in a bill each month and verifying usage is one approach. Another approach is to move to fixed rate billing.

Too often, a UC manager will get caught up in managing the day-to-day demands of the job. If they do not take the time to step back and reassess what services they are offering and the associated costs, then a situation will arise where business units will look externally. Cloud and BYOD is accelerating this trend. Starting from scratch and focusing the budget on business priorities and associated SLAs and cost models, starts with the budgeting process. Good luck!