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How do you determine the ROI of a unified communications system?
How do you go about determining the ROI of a unified communications implementation? What factors & forecasts should you consider when putting together such a proposal?
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5 Answers
Historically, UC systems were expensive and difficult for many companies, especially SMBs, to deploy. Recently, the market has become more commoditized(not fully but closer than before), the prices for these systems have been dropping, and customer usage has been on the rise.
However, figuring out a company’s ROI can be tricky because it depends on where a firm is starting from and where it wants to go. If an SMB has already deployed a VoIP switch, then it probably won’t take as much of an investment to move to UC as a company with a legacy PBX. New cloud based services further compound the issue. Vendors claim they are less expensive than premises systems but that is not always the case.
There are also sometimes hidden costs. If you deploy this system, you will be increasing the volume of communications within the organization, so a company may need to add more bandwidth in order to support its users. Sometimes, the end user devices, say the desktop phones, also need to be upgraded.
Going through an ROI is a time consuming and sometimes difficult process. Chances are most managers are pretty busy already and would only want to start the process if it seemed likely that a move to UC would be beneficial. While there are some potential benefits, moving to UC is not a No Brainer. So a logical time to start such an evaluation would seem to be when a company is about to extend a contract on some part of its voice system. Here, you would need to go through an evaluation process anyway and you can take a look and determine if now is a good time for you to consider moving to UC.
Good question Kelly, figuring ROI in this case can be tricky. It's important to capture good information to be sure you're comparing apples to apples.
I generally prefer to begin an ROI with a prior (or current) state analysis. This should include hard costs (from paid invoices) as well as estimated soft costs related to support hours maintaining the separate systems, patches, upgrades, etc. Once these costs are compiled, you should have a decent view of the total cost of ownership or TCO. Next it is helpful to capture the prior level of service (key features and capabilities) as well. This gives a comprehensive assessment of what you were getting for the money you were spending. This can sometimes be a heavy lift but is made much easier if you have a well integrated ERP solution.
Once these factors are gathered, you should then gather (or project in the case of a CBA) the same information for the unified solution. It's important to capture the key features and capabilities because they add considerable value that may not be immediately apparent from a purely monetary perspective.
Once the data is gathered for the prior state and future state, you have the information you need for a good ROI.
If your prior infrastructure is at or beyond its end-of-life, you should compare the cost of an upgrade to the costs of the unified solution alternative. Subtract the cost of the OLD solution from the cost of the NEW. A positive number is your net investment. If the difference is negative, there's an immediate savings and it should be added to your return. Your maintenance savings in dollars and cents over the capitalization period as well as the estimated value of increased functionality and reduced support costs make up the rest of your return.
Not sure I would spend cycles trying to figure this out. Metcalfe's Law still stands. The more users on the network, aka users of unified communications, the more valuable (ROI) it is. The trouble with unified communications these days is getting the usage numbers high enough to attain a positive ROI. When it comes to usage of unified communications, less is definitely more ROI.
http://www.ctoedge.com/content/less-more-when-it-comes-unified-communications
Mike, you make a good point, in many cases the marginal cost of gathering all of the metrics can be greater than the benefit of knowing the specific ROI. In these cases, a reasonable estimate can suffice.
That said, in a larger organization where implementing a unified communications infrastructure will result in a significant capital investment, it is not safe to assume that the number of users (or connections) on the network is a clear indication of the network's value as Metcalfe's law suggests. In fact, applying Metcalfe's law to determine the value a migration from separate communication systems to a unified solution would generally indicate a reduction in value because of the reduction in total network entry points. In the real world, the reduction of required entry points streamlines communications and increases value.
I agree with the views here that ROI is difficult to gauge, esp for an SMB-scale deployment. The ROI mindset around a telephony system is hardware-based, and rooted in a capital expenditure. UC is really a service, and is much more about software than hardware. ROI makes sense if you have a lot of phones to manage, but even, IP phones can be pretty inexpensive, and not at all comparable to a PBX or IP PBX.
As mentioned about, TCO is another way to look at this, and that's the metric that I hear used more than ROI for UC. I like this metric better because it reflects a broader range of costs associated with UC. In some cases, costs will go down, and in other cases, away completely. To, me ROI focuses too much on what's being spent to enable UC, whereas TCO tells you more about the everyday costs to use it.
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