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VoIP should be more about cost reduction than ROI
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ArchivesOne of my regular blogging and reporting beats concerns IP Telephony. For those of you who don't know, that entails making phone calls over the Internet.
In the case studies I write about for Von (Voice over the Internet) magazine, I often speak to companies asking about what quantifiable ROI they have achieved after fully or partially replacing their existing phone systems with VoIP (Voice over Internet Protocol) solutions. When ROI is calculable, it often takes the form of how quickly the capital expenditures for new VoIP-facilitating equipment has been exceeded by the month-to-month savings of making VoIP calls over the Internet or proprietary connections, rather than over traditional phone company networks.
ROI seems to take about a year or less. But sometimes, ROI is not the main goal. Almost as often, the implementers of these strategies tell me about operational efficiencies involved in tying together distant offices, and being able to use the advanced call configuration, voice-mail, call routing, and tracking controls of VoIP.
At the just-concluded VoiceCon Spring 2006 meet in Orlando, the CEO of IP telephony vendor Avaya Inc. framed the issue well. "We don't believe IP telephony is a cost-reduction case," said Don Peterson. "I fundamentally believe that the real value is not cost reduction, but how it changes the business."
In the article I've just linked to (OK, I'll do it again) Computerworld Magazine's Matt Hamblen provides additional examples. He cites IP telephony solutions provider Nortel Networks customer Erlanger Health System of Chattanooga, where the technology facilitates quicker nurse response.
Specifically addressing Avaya CEO Don Peterson's comments, Yankee Group analyst Zeus (I like the name and the imagery) Kerravala issues this thunderbolt: "Peterson is absolutely correct," he tells Hamblen. "Business productivity is what you have to focus on. "You get more bang for your buck by focusing on productivity rather than cost reduction."
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Anyone that says "VoIP is not about cost reduction" is lying. VoIP has only started to really take off because of Vonage in the consumer/retail space and Skype in the student/kiddie space. Both of these services are about free or cheap. In the business space, early adopters are primarily reaping the rewards of cheaper phone service. The reason big, old companies like Avaya (it's really still Lucent/Bell and not a nimble company) say it's not about cheap is because they are still charging enterprise/rip-off prices for their gear and need to fool people into buying their overpriced stuff. Look around and the truth is that 99% of VoIP implementations are "plain vanilla". There is no magic next generation features. Just plain ole telephone calls and voicemail. If they want us to start thinking there is newtech here that adds more value than just lower cost, they gotta stop the vaporware and start really providing something new besides just another way to make a phone call.
Comment By: Robert E Spivack | 3/14/06 at 12:00 PM VoIP should be more about cost reduction than ROIAnyone that says "VoIP is not about cost reduction" is lying. VoIP has only started to really take off because of Vonage in the consumer/retail space and Skype in the student/kiddie space. Both of these services are about free or cheap. In the business space, early adopters are primarily reaping the rewards of cheaper phone service. The reason big, old companies like Avaya (it's really still Lucent/Bell and not a nimble company) say it's not about cheap is because they are still charging enterprise/rip-off prices for their gear and need to fool people into buying their overpriced stuff. Look around and the truth is that 99% of VoIP implementations are "plain vanilla". There is no magic next generation features. Just plain ole telephone calls and voicemail. If they want us to start thinking there is newtech here that adds more value than just lower cost, they gotta stop the vaporware and start really providing something new besides just another way to make a phone call.
Comment By: Robert E Spivack | 3/14/06 at 12:00 PM VoIP should be more about cost reduction than ROI