Transcript (ROI) for IP Communications

Return On Investment (ROI)
for IP Communications
WWIPC Partner Summit
1/28/2002
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© 2002, Cisco Systems, Inc. All rights reserved.
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Business Trends Driving the
Focus on ROI/TCO
• Three years of declining corporate profits and shrinking
capital expenditure budgets
• Focus on back to basics approach to capex, requiring a
solid business case before technology purchase is
approved
• Greater involvement from business decision makers who
are more focused on business impact of technology
• Focusing capex on only mission critical projects (“need to
have” vs “nice to have”)
• Failures of previous IT investments to produce expected
returns
•IT now accounts for 46% of all capital expenditures
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The Growing Importance of ROI
•The percentage of customers who require ROI
justification has doubled in the past 2 years
83%
90
80
70
60
42%
50
40
30
20
10
0
2000
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Source: Darwin Magazine
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ROI Helps Accelerate the Sales Cycle
•The ability to help customers determine ROI (55%) is the most
often cited means to speed up the adoption of IP Communications
55.3%
60%
50%
42.0%
40%
30%
20%
32.6%
25.1%
32.1%
29.1%
25.1%
10.8%
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OTHER
ANALYST
RECOMMENDATION/MARK
ET RESEARCH
ROI DOCUMENTS OR
DATA
RFP/IMPLEMENTATION
PLAN
CASES STUDIES/SUCCESS
STORIES/TESTIMONIALS
TRAINING CLASSES WITH
CROSS FUNCTIONAL IT
COLLEAGUES
0%
TRAINING CLASSES WITH
PEERS OF SIMILAR
EXPERTISE
10%
END USER TRAINING
PERCENT OF RESPONDERS
What would help speed up the Decision Making Process?
Source: Cisco TDM Survey, October 2001
4
Cisco Network Investment Calculator
(CNIC) Program
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What is CNIC?
• A web-based ROI/TCO calculator designed to
simplify the business case development process
• A tool that allows the calculation of ROI for multiple Cisco
solutions, including IPT, Contact Center, Unified
Messaging and upgrades to the data network
• A comprehensive program that provides web-based
and instructor led training and user support to
increase Cisco sales and partners comfort level with
financial analysis
• A rich ROI database with thousands of customer data
that has been crafted into presentations, case
studies and white papers to assist the selling effort
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Why is ROI/CNIC Important to Selling
IP Communications?
• ROI can be used to influence which projects customers
will dedicate resources against for evaluation
• Much of IP Communications value proposition is based
upon ROI/cost savings
• Customers are prioritizing rapid payback projects that
generate cost savings and tangible business benefits
• A business case with ROI data can improve the
likelihood of a project being approved by 60%*
• A business case with ROI data can reduce the sales
cycle by 30-40%**
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*Source: Gartner
**Source: IDC
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Holistic Approach to ROI
A single ROI calculator
for multiple Cisco
solutions
A central support
resource that Cisco sales
and partners can depend
on for fast answers
CNIC
User Support
Standardized
approach to
building ROI
models and
engaging with
customers
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E-learning and
instructor led
training on ROI
Training
Best Practices
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Mapping ROI to the Sales Cycle
Level 1 – ROI White papers
Level 2 – ROI Case Studies
Level 3 – ROI Snapshots (ROI Lite)
Level 4 – Custom Analysis with CNIC
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The ROI for IP Communications
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Hard Cost Savings
Network Administration
Equipment/Maintenance
•Reduction in cabling costs for new facilities
•Reduction in infrastructure cost at remote sites
•Improved productivity of network support
staff
Elimination of certain PBX related tasks
via centralized call processing
Consolidation of skill sets
•Increased utilization of core networking assets
•Consolidation of message store/back-up systems
•Reduction in PBX upgrade/expansion costs
Centralized application and network
management
•Reduction in the costs of Moves, Adds and
Changes (MAC’s)
•Reduction in ongoing maintenance costs
Toll-Bypass/Integrated Access
•Toll-Bypass savings for intra-company traffic
Domestic: Material if call volume is substantial to offset declining toll rates
in neighborhood of 2-5 cents or if organization lacks size to negotiate prime
rates with carriers
International: Still significant with average toll-rates of 12-15cents
•Consolidation of voice and data access
-Reduction in number of dedicated voice lines
-More efficient use of existing bandwidth
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Examples of Business Benefits
•Real Estate Savings
Better utilization of real estate by leveraging extension mobility to
increase worker to workspace ratio from 1to1 to X to 1
Significant savings in high-rent areas like NY, London, Chicago
•Platform for New Applications
Unified Messaging – Improved productivity per user by 25-40 minutes per
day
Audio Conferencing – Ability to offload SP provided minutes (8-12
cents/minute) for smaller conference calls to internal service offering
•Ability to standardize infrastructure and extend
corporate capabilities to branch offices
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Summary of Customer Engagements thru
Q1 2002
• 2800+ Customer Analysis to date (program started 10/01)
• Total # of Partners accessing CNIC: 284
• Incremental revenue impact of $25-35M in FY03
• Strong representation across all major verticals
• All types of deployment scenarios (greenfield, centrex,
centralized call processing, replacement of new/old PBX,
lease/buy)
• Different size deployments ranging from a 100 phones to
45,000 phones
• Flash cuts to 5 year migrations
• Global focus including U.S./ Europe/Asia/Latin America
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Summary of ROI Findings
•
•
•
•
Positive Net Present Value 68% of the time
Average payback of 16-18 months
Average annual savings per user of $334
Average # of phones in analysis = 600 phones
Avg. % Contribution to Cost Savings
Toll-Bypass/Voice/Data Access
20%
Equipment &
Maintenance
32%
48%
Network
Administration
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Source: Converged Network Investment Calculator 7/0219
Key Drivers of Positive ROI
• A compelling event is driving the decision
New facility
End of useful life of PBX/Expiration of lease
Planned upgrade of data infrastructure
• Phased approach to deployment starting with the
most financially viable sites
• Ability to leverage centralized call processing
Deployment has number of remote sites that can leverage
CCP
• Dynamic organization with substantial employee
movement
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Key Drivers of Negative ROI
• In some cases, a significant data network upgrade
is necessary to provide the foundation for reliable
voice
• Difficult to justify on hard cost savings alone the
replacement of a relatively new PBX at a single
site
• Delays in the deployment of the technology delay
the realization of benefits
• Failure to take advantage of key value producing
features of the technology
• Aggressive pricing from traditional PBX vendors
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Summary of ROI Findings Deployment Scenarios
•Paybacks vary based upon deployment scenario, with green fields
producing the most rapid payback
(Months)
24
18
12
6
0
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Green
Field
TDM Centrex
Replacement
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Multi-site
CCP
Older PBX
Replacement
Newer PBX
Replacement
Source: Converged Network Investment Calculator 7/02
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ROI Findings – By Vertical
Payback in Months
(Months)
28
28
18
18
13
14
6
0
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6
Retail
Education
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Government
Financial
Services
Healthcare
Source: Converged Network Investment Calculator 8/0223
“If You Build it, They Will Come”…
(5 Steps to the CNIC Business Case)
1. What’s the Value Proposition/What are the
Primary Cost-Benefits Drivers
2. Break the Analysis into Manageable Pieces
3. Built on Solid, Fundamental Financial Modeling
4. “What-If” capabilities
5. Pre and Post Deployment Analyses
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Cisco Contact Information
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Cisco Contact Information
•Cisco Network Investment Calculator Home Page
http://www.cisco.com/partner/cnic
•Cisco Network Investment Calculator Web Training
http://www.cisco.com/partner/cnic/training.shtml
Cisco Network Investment Calculator Instructor Led Training
Contact: Mike Kisch
Dave Hume
Phone: 408-902-3112
Phone: 919-392-8601
E-mail: [email protected]
E-mail: [email protected]
•Cisco ROI White papers/Case Studies/Presentation
http://www.cisco.com/partner/cnic/understand.shtml
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ROI Case Studies
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ROI Case Study
• National restaurant chain
• Solution consists of 2500 Cisco
needed to provide a more
IP Phones leveraging centralized
cost effective voice service to
call processing
remote sites
• Updated WAN to facilitate
• Wanted a standard solution
integrated access where
that would lower remote site
available
management costs and
• Able to increase productivity of
provide a consistent level of
network support staff via
service
centralizing call processing
• Wanted to greater leverage
planned data network
upgrade
• Payback of 18 Months
• Net Present Value of $2.7M
• Achieved an annual savings of $361/per user
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ROI Case Study
• Securities firm needed to
replace older PBX at central
site that was nearing end of
useful life
• Needed to identify a way to
reduce the costs of a
constantly moving workforce
• Needed to simplify
management of the network
and improve the productivity
of the network support team
• Deployed 1500 Cisco IP Phones
• Deployed conference connection
to offload smaller conference
calls
• Gave the user the ability to move
their phone in an effort to save
MAC charges
• Leveraged extension mobility to
improve utilization of real estate
space
• Payback of 19 Months
• Net Present Value of $1.5M
• Achieved an annual savings of $308/per user
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ROI Case Study
• Medium size east coast
city was evaluating their
future voice strategy
• Had a mix of PBX, key
systems and Centrex
• Centrex contracts were
coming due for renewal
• Decided to deploy IP Telephony
in place of Centrex service to 500
users across several city
facilities as first step towards
converging their network
• Decided to lease instead of
purchase new IP Telephony
equipment
• Annual lease costs for IPT were
less then annual Centrex costs
• Immediate Payback
• Net Present Value of $117K
• Annual savings per user of $335
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ROI Case Study
• Extension campus of large
state university needed to
replace existing end of life
PBX
• Needed to be able to
continue to leverage a
percentage of existing
handsets
• Was faced with an
imminent upgrade cost to
voicemail system and PBX
• Reused 1500 analog phones,
while deploying 700 IP
phones of various models
• Deployed (4) Call Managers
and Unity voicemail
• Upgraded data infrastructure
• Payback of 11 Months
• Net Present Value of $253K
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