It’s that time of year when many IT leaders make their annual “pilgrimage” (at least virtually) up the corporate hill preparing next year’s capital and expense budgets. With that in mind I thought I would share some thoughts about Return on Investment (ROI) as it relates to Unified Communications.
It was almost four years ago that Sprint IT was going through this same budgeting exercise and like most IT organizations we face similar challenges - how to do more with less, especially in these tough times. Most IT departments receive project funding for just a few reasons: 1) something is broken 2) to resolve an identified security risk or 3) to develop a business case with a compelling ROI that will ultimately drive costs out of the annual OPEX budget.
In 2006, Sprint IT thought the answer was a simple VoIP replacement strategy to eliminate an aging TDM PBX infrastructure that consisted of 490 decentralized switches scattered across the United States. After 3 failed attempts at preparing a business case that yielded an ROI of well over five years, we realized we needed to develop a different strategy altogether.
The first thing we looked at was a way to eliminate the most expensive part of our business case, which were the VoIP telephone handsets themselves. This made up nearly 70 percent of the capital request. We solved the challenge by enabling our user’s personal computers with soft VoIP clients and inexpensive USB headsets. This reduced our average user cost by nearly $300.
Second, we reviewed our annual LEC PRI TDM expenses. In Sprint’s case the LEC costs to support 490 PBX’s was nearly $9 million annually. To solve this challenge we deployed a centralized Unified Communications solution along with Session Initiated Protocol (SIP) trunking that allowed us to disconnect the legacy TDM circuits. We also leveraged Sprint’s GMPLS data network to deliver our enterprise voice calls to our users. When the UC conversion project is complete in 2011, Sprint will realize a projected annual savings of $6.7 million. To date we’ve already achieved $2 million dollars in annualized savings.
Third, we looked at the ongoing costs of supporting the software and hardware of the existing PBXs. Traditionally we would spend anywhere from $2 -5 million semi-annually for upgrades. This doesn’t include the man power or travel expenses necessary to schedule and perform the physical upgrades.
Next we examined our costs to perform moves, adds and changes. In 2007 Sprint IT performed nearly 8000 internal move requests. On average you can plan on a simple move taking as little as 15 minutes if it can be done in software or up to as much as an hour if a technician has to physically go to the IDF closet and move cross-connects.
Finally, and maybe most importantly, we looked beyond traditional PBX voice communications and took into account other collaboration modalities such as audio/video/web conferencing. This is where we found the quickest ROI opportunities and where many enterprises can find the necessary ammunition to support their UC business case. At Sprint we average more than 5 million minutes a week in audio conferencing alone. By leveraging the internal audio conferencing bridge that was included in our UC solution, Sprint IT was able to eliminate over $5 million annually from the OPEX budget.
Since our UC business case was approved nearly two years ago, we’ve realized two additional benefits not included in our ROI projections.
1) In an unrelated effort Sprint’s Real Estate team performed work space utilization studies. They learned that much of the cubicle and office space in our portfolio was empty 50-60 percent of the time. Why? Over the years our work force has become more mobile, they are spending more time in the field with our customers, working remotely, participating in teaming sessions. In short, they are working in other places than their assigned office locations. Unified Communications has become an enabler of Sprint’s real estate team’s efforts to eliminate nearly $20 million in office space across the United States.
2) “Green” dollar savings - The costs to power and cool the legacy PBX infrastructure is estimated at $700K annually. To date we’ve achieved approximately $200K in annualized savings.
All told Sprint forecasted nearly $13 million in annualized savings directly attributed to Unified Communications, but from lessons learned since the start of the UC deployment, additional saving can be found a variety of areas.