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"There are many horror stories around VoIP and IP telephony deployment
. There are also many successes.
PROGNOSIS management and monitoring tools make the difference.Successful VoIP deployment relies on careful planning, thoughtful infrastructure
preparation, and a management platform designed for IP telephony's unique real-time performance requirements."
Source : PROGNOSIS
The Return on Investment of IP Telephony Management
Internet Protocol is also known as :
Internet Protocol Suite,
Voice Over Internet Protocol,
Embedded Internet Protocol,
Internet Program Protocol,
Internet Official Protocol,
Reset Internet Protocol,
Internet Protocol Information,
Internet Service Provider,
User Datagram Protocol,
Transmission Control Protocol,
Internet Protocol Technology,
Internet Stream Protocol,
Internet Message Access Protocol,
Accountable Internet Protocol,
Internet Protocol Numbers,
Internet Protocol Standards,
Faster Internet Protocol,
Emerging Internet Protocol,
Internet Protocol Tutorial,
Internet Protocol Basics,
Internet Protocol Detail.
Whether companies are just starting, continuing, or finished with their IP
telephony deployments, one thing’s for certain: They need to manage their
newly converged networks. They must deliver voice traffic over the IP network
in a way that is consistent and predictable, with sound quality on par with or
better than TDM.
Many IT managers view that task as much easier than it actually is. As
such, they don’t spend enough time evaluating management and monitoring
tools, nor do they budget appropriately—until they have had enough problems
to force them into a quick purchase to solve an urgent problem.
In reviewing overall costs of IP telephony, Nemertes has found the
financial figures behind buying IP telephony management/monitoring tools—or
managed services that do the same—are very compelling. Nemertes has been
tracking VOIP costs for four years and interviewed nearly 400 organizations
during that time. This paper will review 2007 trends in VOIP costs and
associated management/monitoring tools.
Unlike its TDM predecessor, IP telephony is not a closed-network, singleapplication
environment using its own network resources. Rather, IP telephony is
part of an overall unified-communications infrastructure, where multiple
applications compete for finite network resources. As a result, IP telephony
implementations require new monitoring and management tools and skills. But
is the cost of these IP telephony management tools worth the benefit? Nemertes
Research has conducted an analysis evaluating the operational and capital costs
of IP telephony, and has concluded that companies using IP telephony
management tools demonstrate a compelling return on investment.
IP Telephony Cost Assessment
To fully understand IP telephony management/monitoring costs, it’s
important to have a baseline understanding of IP telephony in general. Nemertes
measures the following:
- Operational start-up: These costs include planning, installation and
troubleshooting. We calculate the number of total hours spent on each
function and multiply that by the average hourly rate of the staff involved.
Also included are the outside consulting costs companies incur.
- Capital: These costs include IP switches and phones. Nemertes gathers
average costs of gateways, network upgrades related to the VOIP
implementation, IP video and audio bridges, management tools, unified
messaging, and traditional voicemail. But to keep data consistent year over
year, we run analyses on phones and switches.
- Ongoing operations: These costs cover the number of hours the network or
telecom staff spend monitoring and managing the IP telephony system.
We then translate that into dollars.
|VOIP Users for Capital Assessment (Banded)
||Operational Startup Per User
||IP Switch/Phone Per User
||Maintenance Per Unit
|Fewer than 300 units
|More than 5,000 units
Table 1: Average VOIP Costs
On average, companies spend $355 per IP telephony user or end station to
get the technology up and running. Of course, the per-user costs vary based on
the size of the rollout. Those with smaller rollouts, defined here as fewer than
300 end points, spend an average of $588 per unit on operational startup costs,
while those with more than 5,000 end stations spend only $132 per unit. (Please
see Table 1: Average VOIP Costs, Page 2.) IT staffs can leverage the work they
must do to implement the switches across more users, so the per-user cost drops.
We found an increase in per-user costs among companies with 1,000-
4,999 users for two reasons: In some cases, companies had implemented a large
and expensive IP PBX with ultimate plans to support 10,000 or more users from
that switch. Because they only have rolled out to, say, 3,000 users, the per-user
cost is higher than it will be when the deployment is completed. In other cases,
when companies increased the size of their rollout or had a few thousand
employees, they needed to add to their IT staffs, which increased operational
The type of vendor or carrier selected affects rollout costs. Most IP
telephony vendors, including Alcatel, Avaya, Cisco and Nortel, offer branch-office
products that aim to simplify the operational startup—and thus, the associated
costs--at remote sites. Other vendors, such as 3Com, Mitel, NEC and ShoreTel,
focus on the small and midsize markets, or those with fewer than 1,000 end
stations. Though they do serve larger rollouts, their products are aimed at
simplifying smaller IP telephony deployment. Service providers and VARs offer
hosted services that offload the start-up from the internal team and push it to the
Year over year, per-user operational costs have increased among all
vendors for a couple of reasons. First, many organizations are hiring Managed
Service Providers (MSPs) to help with engineering or installation, and that
increases the operational costs. Second, many larger enterprises started their
VOIP projects within the past two years, and they are spending significant time
up front to launch large projects, but they cannot divide that time among the
potential user base—again, resulting in larger per-user costs.
Organizations spend a median of $29,000 on consulting costs related to
their VOIP implementation, an increase from last year’s figure of $23,125. The
range, though, is wide--from $500 to $2 million.
Deployment Costs—Capital (IP Switch & Phone)
Capital costs have stayed fairly constant year over year. Average spend is
$843 per user for IP phones and the IP PBX. Like operational startup-costs, the
per-unit price for capital is higher for small rollouts ($1,157) and lower for large
rollouts ($504). (Please see Table 1: Average VOIP Costs, Page 2.)
Companies spend an average of $309 on each IP phone. The range is $204
(Avaya) to $416 (“Other” vendors, which is a compilation of IP telephony
vendors, including Alcatel, Siemens, NEC, 3Com and others, that didn’t have
enough statistical response to be counted individually.) The reason there is such
disparity between vendors’ handset costs is because of diverse customer
requirements and large product portfolios. Most IP telephony vendors offer
handsets that span quite a price range ($100-$450), depending on what features
customers want, who uses the handset, and the anticipated lifespan of the device.
As a result, the range in average prices varies accordingly.
Ongoing Operational Costs
Nemertes also tracks how much companies spend to operate, maintain
and manage their IP telephony implementations. Naturally, these costs vary
based on the size of the rollout, which vendor(s) they use, whether they use
management tools and if so, what type, and what other applications are
integrated in with IP telephony. In general, though, we find that the more users
on the system, the more each IT staff member handles. In other words, the peruser
cost generally drops drastically when the rollout size increases.
Companies spend an average of $473 per unit per year to operate IP
telephony systems. This figure takes into account the number of people hours
spent maintaining and managing the system internally, multiplied by the average
hourly rate of those people. Additionally, it includes the cost of third-party
management services. Those costs combined, divided by the number of end units
on the system, provides the per-unit cost.
For small rollouts with fewer than 300 users on the system, the per-unit
cost is $1,152. It drops drastically for those with greater than 5,000 units online.
Those organizations only spend $37 per unit. (Please see Table 1: Average VOIP
Costs, Page 2.) The ratio of IT/telecom staff member to end unit increases. Most
of the work required is at the switch or the management/monitoring system. So
there is not a proportional correlation of IT staff member:employee as the
number of employees on the system increases.
Companies also spend between 12% and 17% of the original capital cost on
maintenance, which includes software or firmware upgrades on equipment and
IP Telephony Management Trends
As stated, managing IP telephony is more complex and involves more
moving parts than TDM telephony. That’s why IT decision-makers increasingly
are evaluating monitoring and management tools specifically designed for IP
telephony. These tools go beyond traditional network management products by
delving into the IP telephony application and providing data points such as
latency, packet loss, mean opinion score (MOS), and completed calls.
Companies typically deploy these tools within 12-24 months following an
IP telephony deployment (with some exceptions). Initially, they implement IP
telephony believing their existing network-management tools, coupled with the
often-rudimentary monitoring features that come with the IP PBX, will be
sufficient in maintaining solid voice performance. Typically, when the rollouts
exceed five locations and after some time has passed (statistically, as stated, that
time frame is 12-24 months), the IT managers realize they do not have enough
information to effectively detect and prevent problems, analyze the cause of
performance slow-downs, or resolve issues.
||Recommended Management Budget
||Number of Users
||Fewer than 5
||Fewer than 50
||Freeware, IP PBX tools,
carrier tools sufficient
||5 to 20
||21 to 250
||251 to 400
||More than 400
||More than 10,000
||$100,000+ (Depends on
the configuration and
Table 2: IP Telephony Management Budgets
The cost of IP telephony monitoring and management varies. The IP PBX
vendors include some basic features as part of the cost of the equipment, and
some, such as Avaya and Cisco, offer enhanced tools for an extra charge. IP
telephony specialty vendors and MSPs typically charge per user, with steep
discounts for large rollouts or long-term engagements. Actual dollar-spend on IP
telephony management in displayed in Table 2: IP Telephony Management
Budgets, Page 4. Costs can range from $25,000 for small companies, to $50,000
for midsize companies, to several hundred thousand dollars for large companies
and as much as $2 million for global enterprises. It’s imperative to get this line
item into the request for proposal right away—and to use these tools during the
configuration and implementation. As our research demonstrates, companies
with IP telephony management and monitoring tools spend significantly less on
ongoing operational costs than those without such tools.
Identifying Management Options
There are several options for monitoring and managing IP telephony,
including buying and using tools from IP telephony switch vendors, networkmanagement
vendors, manager-of-manager product vendors, and IP telephony
IP telephony switch vendors, including Alcatel, Avaya, Cisco, Mitel, NEC,
Nortel, ShoreTel, Siemens, and others provide varying levels of IP telephony
monitoring and management. The largest percentage of enterprises relies upon
their IP telephony switch vendors to monitor their voice performance.
Other IT managers rely upon their network-management tools (either
alone or in combination with other types of products). Vendors in this space
include Alcatel-Lucent, CA/Concord, EMC, Fluke Networks and NetQOS, among
many others. Manager of managers (MoMs) also play a role in IP telephony
management by pulling performance data from multiple tools and presenting
that information in an integrated interface. CA, EMC, HP and Tivoli are vendors
in this space. IP telephony specialty tools are made from the ground up to
monitor, manage, and troubleshoot IP telephony as an application. Vendors in
this space include Brix Networks, Infovista, Integrated Research (better known
by its product name, Prognosis), and NetIQ, and most recently, EMC through a
partnership with Integrated Research to use its Prognosis products.
The most effective way to manage IP telephony is with a combination of
tools that monitor both network and application performance. Combining these
tools with a MoM provides IT staffs an integrated view of network performance,
such as quality-of-service parameters, as well as IP sound quality and
IT staffs must choose between managing the network internally or
externally, through relationships with Managed Service Providers (MSPs). A
growing number of companies are leaning toward MSPs to get 24 x 7 oversight of
their IP telephony performance using the latest tools available. On the positive
side, this frees internal staff to work on more strategic projects, gives the
company round-the-clock monitoring of IP telephony, and leverages the expertise
of third parties who manage VOIP for a living. On the negative side, as with most
outsourced relationships, it limits internal control over IP telephony performance
and may cost more than handling it internally.
Given the costs and time involved with VOIP projects, it’s imperative to
understand the return on investment. Although savings do exist, there are some
cost increases, as well. One of those increases is in the amount of time it takes to
isolate and repair an outage or performance degradation in the IP world.
Determining the root cause of a problem--whether another application
contending for bandwidth, QOS issues, the IP PBX, a handset, a switch/router
and so on—can be very time-consuming and difficult.
Consequently, IT managers say it takes one to four times longer to isolate
and resolve VOIP problems as it does with TDM. What that equates to is difficult
to quantify in a statistically meaningful way because there are so many variables
within each company. For example, the time it takes to resolve a TDM problem
varies widely depending on the nature of the problem, and the cost to resolve that
problem also varies widely depending on whether a company’s internal telecom
staff or external vendor resolves the problem.
Nemertes has conducted an analysis of IP telephony costs and how they
vary based on the type of management tool companies use. We have found a
correlation among companies that pay attention to IP telephony management
and lower operational costs. When companies use no management/monitoring
tools for their VOIP network, their annual operating cost per unit is $1,262. If
they use an IP PBX tool, that cost drops to $405. When they use specialty IP
telephony monitoring tools, the per-unit cost drops even further to $113.
Figure 1: Annual Operating Costs Based on Management Tools
Overall, organizations spend roughly 5% to 8% of their IP telephony
capital budget on monitoring and management. Monitoring and management
costs typically run between $40 and $65 per user for capital and $4 to $6 per
user to implement specialty management tools.
IP telephony operational costs per unit drop dramatically when using
specialty monitoring tools. In crunching the numbers, we find the payback period
for the tools (capital and operational) is three to four months.
Conclusions & Recommendations
Based on the cost data and the requirements of IT staffs to offer a reliable,
high-performance converged network, we recommend project teams conduct a
thorough evaluation of their management and monitoring options prior to
deploying IP telephony. All too many companies implement their VOIP network
without factoring in time for an analysis or budget to purchase the tools they
By implementing IP telephony specialty management tools or services,
companies actually save on the ongoing operational costs compared to using no
tools or those provided by the IP PBX vendor.
About Nemertes Research:
Founded in 2002, Nemertes Research specializes in analyzing the
business value of emerging technologies for IT executives, vendors, and venture capitalists. Recent and
upcoming research topics include security and information protection, mobility and collaboration
technologies, and outsourcing.
A compelling look at the hard numbers behind costs,
benefits of IPT monitoring & management
By Robin Gareiss, Executive Vice President & Sr. Founding Partner, Nemertes