UC Overlay Approach: Big TCO Winner for Enterprises

From the beginning, the argument for Unified Communications has been clear:

We have a dozen or so new technologies that can change how people and enterprises work! If you can examine the work in your enterprise, you can probably find the places where these new technologies can provide breakthroughs for your people and your operations by streamlining communications. This is the reason that the UCStrategies tag line since 2006 has been, “Communications integrated to optimize business processes.” It’s the optimization, not the technology, that makes the difference.

But what does this cost? Is UC going to break the budget? Well, not so much, when we look at the facts. For the past two years, we have run three parallel RFPs at Enterprise Connect:

1. Unified Communications without buying a new IP-PBX. In other words, just keep your current PBX and “overlay” UC functionality for the users. Almost all of the UC vendors support this configuration; even the IP-PBX vendors will configure their systems, without phones, to work with an installed, legacy PBX.
   
   
2. Unified Communications as part of buying a new IP-PBX. In this case, the RFP asks for an entirely new IP-PBX, phones, and features with all the UC functions included.
   
   
3. Unified Communications as part of an IP-PBX in the cloud. Essentially the same as for RFP 2, above, but the solution must be provided as a cloud (or at least a hosted) solution.

All three RFPs were on the same template of a 2,000-user, three-location enterprise. The UC functionality included Presence; Instant Messaging; audio/video/document sharing from the UC client on PCs/Macs/tablets/smartphones; audio/video/document sharing conferencing; mobility features for laptops/tablets/smartphones; and the software for communications-enabled business processes (CEBP).

Following Enterprise Connect the three consultants who conducted the RFPs normalized the total cost of ownership (TCO) for all vendors across all three RFPs. This made sure that the TCO for UC without a new PBX included maintenance and hardware refresh of the continuing installed PBX. Also, since the hosted or cloud solutions usually included trunks and toll costs, similar premise-based costs were added to the TCO for the other two solutions. You can download and read an overview of the report here. Remember, the core prices for products, licenses and services were submitted by the vendors!

The results are very clear, with two key messages, as shown in the following graphic of the TCO for each of the three options, by year:

The key messages are:

• The most economical way to add UC to your Enterprise is to add exactly UC to your enterprise, not to buy UC as a set of features in an IP-PBX package. Even though UC without buying a new IP-PBX solution (Overlay) includes the costs and the staffing to continue to run the current PBX, it is still about 20 percent less costly, on average, than installing and owning UC with the new IP-PBX.
  
• The hosted and cloud options are not yet competitive with on-premise solutions. Sure, there are some less expensive cloud providers of Voice over IP (VoIP), but these RFPs required inclusion of the new UC features, in which case those cloud costs increase significantly. The UC overlay solution can be purchased for less than 50 percent of the five-year cost of the cloud or hosted solution. Of course, the On-premise and Overlay solutions require up-front investments, but those investments can be easily (and cheaply, these days) financed to smooth out the cash flow; the cloud-based or hosted solutions usually require multi-year contracts, too.

Besides the TCO advantages, there is also the huge advantage that the Overlay solution allows the enterprise Telecommunications and IT teams to focus directly on the UC solutions, without wasting months, quarters or even years in replacing the PBX and phones before they can even begin with the new UC solutions that are the real reason to make the new technology investment in the first place.

Let us know what you think. If you have questions, please post them hear or write to me.

7 Responses to "UC Overlay Approach: Big TCO Winner for Enterprises" - Add Yours

Art Rosenberg 9/26/2013 10:56:11 AM

Interesting results, but everything is obviously still evolving.

Inasmuch as PSTN telephony will slowly be subsumed by more "contextual," multi-modal, IP based connections, your suggestions about the "overlay" approach makes the most sense for a graceful migration to the future of business communications.

Online "click-to-call" contextually from online applications, messages, documents, address lists, etc. will displace separate dialing of traditional PSTN phone numbers, and connectivity through the Internet (WebRTC) will facilitate greater choice of mode for UC-enabled, person-to-person contacts (not just voice). This will be driven by the adoption of personalized smartphones as the prime endpoint communication devices used by both consumers and business users with 'dual persona" sand-boxing to separate personal and business user roles on a single device.

What is particularly key is that business communications has to become more customized at the end user level, in terms of the online applications required, the need for BYOD mobile accessibility, and the modes of contact controls required for job performance. All this can be developed on a "use case" business process priority basis, while legacy telephony service is provided by existing PBX systems.

siddharth joshi 9/26/2013 10:04:24 PM

This is a great piece of work and gives a fair idea of what should be the strategy of ent aiming for UC.
I was wondering if anybody has done research on the impact of UC on the employees free time and their personal life. Also has there been a research to calculate the ROI of UC tools by making employee reachable all the time through all modes?
Thanks.

Elton Santiago 9/27/2013 6:16:46 AM

Mr. Joshi, you probably will like to read this white paper: https://www.siemens-enterprise.com/us//us/~/media/internet%202010/Documents/White%20Papers/WP%20Prof_Serv_en%20LR.pdf.

shousen zhang 9/28/2013 8:37:23 PM

2,000 users is bigger ,how about 500 users or 200 users ?

Kevin Kieller 9/29/2013 1:48:57 PM

Marty,

The Enterprise Connect RFP process is very detailed and the repot you and your colleagues produce is very detailed and valuable.

That being said, ultimately the conclusions are based on the assumptions, which you do a very good job of stating; however, in talking with VPs and CIOs I believe the assumptions are changing:

- some organizations are choosing NOT to invest in the equipment and connectivity to provide 5 9's voice reliability to knowledge workers -- most have mobile phones and can continue conducting business using these. One CIO who deployed a UC softphone solution said if office network was not working then employees should go home or "go to Starbucks". For him the ROI did not justify redundant network links or voice equipment.
- many organizations are well served through softphones. Some large organizations I have worked with when moving to UC have deployed < 10% IP sets
- notwithstanding the above, in contact centers 5 9's are expected (but contact center is often run on a separate communication system from the corporate solution anyway)
- few forward thinking CEOs / CIOs are willing to invest in voicemail (aka Unified Messaging); with federated IM and presence ("are you available for a call?") and sim ring, few people make a call to a colleague/partner/supplier without knowing first it will be answered -- who has the time to play "telephone tag"?

While the TCO for an overlay UC solution is lowest based on specific assumptions. My observation is that at some (many?) organizations the assumptions themselves are changing.

Christopher May 10/2/2013 4:36:12 AM

Hi Marty
This work that you guys do around these industry RFP analyses is invaluable. Thanks.

A couple of questions ...
What allowance are you making for the customer’s internal operational costs (i.e. not the vendor cost) across the three models? Are you assuming higher enterprise staffing levels and higher skill levels for when adding UC (not to mention SI costs for implementation) with the two on-premise models to calculate the TCO comparison?

I believe that Nemertes have done some interesting Opex research for companies adding UC, which shows that in-house FTE costs rise when UC services are added to the communications mix (more elements to manage, more complexity).

There was also a very interesting blog from Jamie Libow recently that addressed some of the operational issues that companies need to consider when operating their own platforms: www.nojitter.com/post/240159077/cloud-the-answer-to-a-good-night8217s-sleep-for-the-it-manager
The points raised in this blog can't be readily quantified into a TCO, but nevertheless are very real for enterprise IT teams.

Are you allowing for features such as end-user self-care in your analysis across the three models? Self-care portals pretty much come as standard with a cloud platform these days. Self-care (or self-service, as I like to call it in the UC world) is shown to lower operational costs for IT teams, but also gives the IT team central control of their internal SLAs.

Kevin Kieller 10/4/2013 5:16:53 AM

I was at Interop New York yesterday and my discussions with different vendors reinforced that it is the ASSUMPTIONS that you make that are critical.

So often yesterday I heard "if A then you must do B". The trouble was that assumption A was not necessarily true.

UC involves many, many assumptions that are "packaged". The TCO or ROI calculations for your organization depend on the specific assumptions you make. If you make the wrong ones, or simply believe the ones a specific vendor tells you, your answers will be wrong.

The Enterprise Connect RFP process is valuable in that it clearly demonstrates the areas you need to consider and it shows the amount of work required to evaluate a number of solutions for your specific situation.

Document and prioritize your business objectives; document and validate your assumptions. Doing this might not always get you to the best solution but failing to do this is almost a path to assured disappointment.