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What is the standard to do a cost analysis as well as ROI?

Learn about why a VoIP cost analysis and ROI are both prudent ventures in this expert response.

How do I do an analysis for VoIP on my network? We have twenty-four sites, of which five are bigger sites (200-300 users) and the rest have ten to twenty users. Management wants a cost-savings analysis, though we already did a two month analysis -- taking into consideration our Telkom accounts and the savings of using VoIP with our service provider. They are not entirely satisfied and want us to do a one year analysis. Is this necessary and what is the standard to do a cost analysis as well as ROI?
It is typical with such a large resource and capital investment to spend more time and do a more robust analysis, so your executive's request is not unusual -- and is in fact, prudent. Typically, for VoIP, we recommend doing an analysis of the costs and benefits over a three year period.

The key with any analysis is to try to keep it simple and straightforward -- not make it a project in data collection and analysis paralysis.

As an overview, consider the following line items to include in the analysis to make it robust enough for approval, but not overkill.

Some of the opportunities for savings and potential benefits include:

IT / Telecommunication Cost Savings
  • Reduced phone bills -- save up to 60% on current call costs by routing inter-office voice calls over data networks
  • Reduction in old Centrex contracts -- which tend to be pricey
  • Consolidation of calling plans and rate reductions

Increased Administrative and Support Productivity

  • Convergence -- one network, one management means it is easier to direct solution
  • Reduce moves, adds and changes -- as it is easier with an IP-based solution; changing hardware reconfiguration to plug and play; or simple software reconfigurations

Increased employee mobility and productivity

  • Unified messaging -- voice mail, e-mail, fax
  • Personal Assistant features like Find-Me/Follow-Me
  • IP voice and video teleconferencing

Business capability and agility

  • Virtual call centers
  • Integrated applications
  • Enhanced customer service-oriented applications

Costs to consider include:

  • VoIP central system hardware and software
  • Phone set upgrades or replacements
  • Network upgrades
  • Managed services
  • Implementation labor and services
  • IT training
  • User training
  • Transport cost increases (T1 lines)
  • Application development or integration
  • Other change costs: write-downs, support increase initially, potential downtime
  • Potential risks to consider that might drive up costs or undermine benefits include:

  • Network readiness and upgrade investment underestimated due to poor readiness assessments and planning
  • User adoption/training -- users do not adopt or use new features as expected
  • IT capability and maturity -- IT staff is not productive; improvements do not occur as expected
  • Quality of service (QoS) issues
  • Security
  • To help you on this project, I recommend visiting the Alinean website for a free ROI analysis tool that includes a robust VoIP model.

    Another suggestion would be to ask your service provider, and perhaps one or two alternative providers, to work with you to develop their own independent analysis. Although each vendor may have some bias or agenda, working with them to personalize the analysis and challenging various assumptions as well as looking at several different analyses, can help you in preparing your own presentation.

    This was last published in May 2006

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