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SIP trunking ROI: Linking VoIP islands and more

The ROI for SIP trunking goes beyond linking VoIP islands. It also presents additional cost-saving scenarios by bringing enterprises beyond the voice-centric IP PBX and reducing/eliminating the dependency on the PSTN. In this tip, learn about SIP trunking ROI, including bridging VoIP islands, telephone services, hardware, centralization and convergence as they relate to different business scenarios.

 

In the final segment of this series, I want to address the pressing question of the payoff for SIP trunking. When enterprises first decide to deploy IP telephony, they begin the process of moving away from the PSTN. There is some financial benefit, but little else changes, and with the resulting islands of VoIP, enterprises have limited ability to get beyond the Telco 1.0 scenario outlined in my first section.

SIP trunking is the next step along the path to Telco 2.0, as it allows enterprises to get beyond the voice-centric nature of IP PBXs and presents additional cost-saving scenarios. With the dependency on the PSTN reduced -- and in some cases eliminated -- VoIP islands can be bridged, and enterprises will gain far greater control over getting the most from their IT investment.

Tutorial: Connecting and leveraging VoIP islands
Read the rest of this tutorial on VoIP islands and how they can be connected and leveraged using SIP trunking.

In addressing ROI, this section discusses the most common scenarios where businesses are currently deploying SIP trunking. Before outlining these scenarios, I must explain that cost savings come from several areas, such as:

 

  • Trunking -- Aside from being more expensive, PRIs are sold in fixed increments, which often results in having to buy more channels than are needed. T1s have 23 channels available for voice and cannot be bought on a fractional basis. As such, a business requiring 30 channels must pay for 46 channels, which is really more beneficial to the telecom. SIP trunking works on a different model and is dependent on bandwidth availability, which can easily be added to suit the needs of the business. Furthermore, since voice is not bandwidth-intensive, SIP trunking can scale at relatively little extra cost. Even when using the high-quality G.711 codec, voice requires only 80 Kbps of bandwidth.
  • Telephone services -- There are more savings to be had here beyond free domestic long-distance calls and less expensive international long-distance calls. Not only does SIP trunking enable more features than legacy telephony, but many calling features that are charged a la carte by telecoms are included at no cost with VoIP -- voicemail or conferencing, for instance. The same holds for FCC and regulatory fees, which are not applied to VoIP. Some of the new features enabled by SIP trunking, such as presence and click-to-call, represent free calling alternatives that could reduce the need for DIDs or toll-free numbers. On a more basic level, IP telephony eliminates the need for MACs (moves, adds and changes) -- a constant expense, especially where staff turnover is high.
  • Hardware -- As discussed in the second article, SIP trunking eliminates the need for costly media gateways. These must be replaced by SIP-aware firewalls, which are substantially less expensive. Businesses using IP PBXs have already saved money by choosing this solution over a legacy PBX. Those who do not have SIP-enabled phones are also in a position to save money with SIP trunking because they do not necessarily need to buy a full-scale IP PBX. By having an all-IP environment, businesses can choose from a broad and growing range of PBX-caliber solutions that require only relatively inexpensive SIP-enabled handsets.
  • Centralization -- This benefit applies to multi-site businesses, which traditionally require separate phone systems at each location, as well as physical trunks to connect them over the PSTN. With SIP trunking, physical trunks are not required -- all that is needed is a broadband connection. Branch offices can be virtually linked over the public Internet and tied into head office, which is the only location that needs a standalone telephony system.
  • Network convergence -- The trend for converging voice and data onto a single network was noted earlier and is another area of cost savings that becomes more pronounced with SIP trunking. End-to-end IP optimizes the benefits of network convergence and ensures Quality of Service (QoS), both of which translate into a multitude of savings for capex as well as opex.

Taking these factors into account, the overall cost savings associated with SIP trunking can be substantial. The following are general rules-of-thumb drawn from the industry for three basic scenarios.

1. Medium-to-large businesses. These will typically have multiple locations and will do a fair amount of international calling. They are also likely to have a call center operation. Businesses in this scenario can save 50% to 60% on communications costs, and achieving an ROI in 12 months or less is feasible.

2. Small-to-medium businesses. This scenario will have fewer remote sites, so the magnitude of savings will be on a smaller scale, and there will be less need for centralization. Long-distance usage will also be less, especially for international calling. Typically, however, they will be migrating from a legacy PBX, so there will be notable savings on the hardware. The rule of thumb for these businesses is an ongoing savings in the range of 25% to 40%, with an ROI of 18 to 24 months.

3. Small businesses. The low end of the SMB market offers the weakest ROI story, but given the sheer number of businesses in this segment, it is too large to ignore. These businesses are usually single-site operations, low in tech savvy and high in price sensitivity. While many of the cost-saving benefits discussed herein will be of limited relevance, SMBs will be receptive to offerings like SIP trunking if they reduce costs in areas that are easy to understand. As such, SIP trunking and VoIP can readily find a home in this market, even if the benefit is primarily reducing long-distance charges. This does not translate into a meaningful ROI, but in this economy, even showing a small degree of savings -- 10% to 15% -- can be sufficient to win small companies' business.


 

This was last published in October 2009

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