IP Telephony Total Cost of Ownership:
A case for the Implementation of
IP Centrex Hosted Service
October, 2001
Executive Summary
This white paper is focused on the subject of IP and convergence. There has
been much written about IP and convergence, but typically from a manufacturer’s
perspective – that is to say, a company that has a vested interest in the
emergence of a telephony replacement market. The many applications and
benefits of IP and convergence are being proven by adopters of the new
technology. The jury has returned, and the verdict is in – IP and convergence
have a positive impact on an enterprise’s bottom line.
Once the decision is made to implement IP and a converged communications
infrastructure, a more difficult decision remains. That decision is which technical
solution alternative to deploy. There are three primary alternatives to choose
from for implementing IP and convergence. The first two options garner a lot of
media space. This media attention is primarily due to the fact that IP and
convergence represents a major discontinuity in the existing TDM-based PBX
telephony systems market. Manufacturers of the new solutions recognize the
size and potential of the embedded PBX market, and have been exhaustive in
their efforts to increase the awareness of buyers.
The first implementation is a traditional PBX with trunk and station gateways that
support IP. This option may be attractive based upon the recent vintage of an
existing PBX, especially if the in-place PBX is less than 3 years old. The second
implementation option is a pure IP – PBX. This option is a replacement for the
traditional PBX in which virtually all communications are IP. In both the
traditional PBX and IP – PBX scenarios, there is a need for capital expenditure,
and the equipment is owned and maintained on the customer’s premises.
The third implementation option is to attain IP and convergence as a hosted
service. IP-Centrex is a service provided by the Local Exchange Carrier, and
operationally, it is much like its TDM-based predecessor, Centrex. As an
outsourced service, IP-Centrex provides the benefits of IP and convergence, but
it does not require the same level of capital expenditure as a premises-based
solution. Further, IP Centrex has a significant advantage in that it can be
implemented on the basis of one station at a time. This flexible capability will
enable an enterprise to move to IP and convergence at its own pace. IP Centrex
could be advantaged to support single departments or classes of employees,
such as “tele-workers” (work-at-home) or “road warriors” without the immediate
removal of the existing premises-based system.
Page 2
This white paper is a report of the promise of IP and convergence and the
operational improvements realized by early adopters. The paper compares the
three options available for implementation of a converged environment on the
basis of positive attributes, and on the basis of total cost of ownership.
The comparison is based upon a new system implementation because of the
time and space included to cover the multiples of possible permutations. A
consideration of alternatives, such as department-level PBX migration or an IP
Centrex-based one-phone-at-a-time transition/implementation, one should
consider cost impact differences relative to end-user training and differing levels
of service interruption with each solution in order to accurately predict first year
costs and the impact upon total cost of ownership.
A total cost of ownership model was developed in an attempt to compare all
three alternatives on a “level playing field” over a three-year period. In the
analysis, it is assumed that each alternative is a new installation. In order to
measure the cost impact of a system addition, the model reflects the addition of
new users in year three of the analysis. Also included in the analysis is the
support of “tele-workers” as an extension of the system. This work-at-home
population is configured in a manner to utilize all system features. Further, the
analysis includes views of a 100-user and a 400-user enterprise. In the 100-user
enterprise, 10 workers are designated as “tele-workers”. In the 400-user
enterprise, 80 workers are designated as “tele-workers”.
“Tele-workers” were included in the financial analysis by design. Given that the
World Trade Center tragedy of September 11 is expected to most likely add
velocity to the existing trend toward telecommuting, the inclusion of a
representative sample of “tele-workers” is considered an important aspect of the
analysis.
All of the details of the IP and convergence financial analysis follow the body of
this white paper, in the addendum. As depicted below, IP – Centrex is a
significantly more economical IP and convergence solution in the 100 user
enterprise.
Page 3
100 User IP and Convergence Total Cost of Ownership
An Analysis of Three Alternatives
$250,000
$237,283
Traditional PBX
IP - Enabled (New)
$219,229
Solution Cost
$200,000
IP - PBX
$150,000
$135,001
$105,724
$100,000
$126,399
$109,434
Hosted Service
IP - Centrex
$50,000
$85,220
$60,192
$82,480
$-0
Year 1
Year 2
Year 3
The Hosted Service IP – Centrex solution has an $80,000 first year advantage
over the IP – PBX solution and a $100,000 advantage over the traditional PBXIP Enabled solution. The incremental impact of the addition of 20 users in year
three is consistent across all three solution. However, to add 20 users to the IP –
Centrex solution is $2,000 less than the equivalent addition to an IP – PBX
solution. In year two, the IP – Centrex solution advantage is $25,000 and this
advantage increases to $27,000 with an addition of 20 users in year three.
Admittedly, the traditional PBX solution is somewhat disadvantaged in that it is
configured as a new installation to provide the equivalent services of the other
two options, and in most cases, enterprise buyers will consider only new
technology.
A second financial analysis was conducted on 400 user size alternatives with 80
“tele-workers”. In this analysis, IP-Centrex had a significant advantage in year
one and a smaller advantage in years two and three against the alternative
solutions.
Page 4
$800,000
400 User IP and Convergence Total Cost of Ownership
An Analysis of Three Alternatives
IP - PBX
$754,016
$700,000
$729,232
Traditional PBX
IP - Enabled
Solution Cost
$600,000
$500,000
IP - Centrex
$400,000
$427,425
$275,234
$300,000
$252,880
$240,496
$200,000
$272,351
$220,252
$201,816
$100,000
$-0
Year 1
Year 2
Year 3
The year one IP-Centrex advantage over IP – PBX is $327,000. The IP-Centrex
advantage is $51,000 and $55,000 in years two and three, respectively.
In both analyses, the IP – Centrex solution proved to be the least expensive
option to implement IP convergence. The first year capital outlay and on-going
cost delta is extraordinarily significant. Based upon the results of this analysis, IP
– Centrex should be carefully considered and selected as the vehicle with which
to implement IP convergence.
The Promise of IP and Convergence
Traditionally, business communications systems have been, like the technology
they represent, dedicated to enabling pre-defined communications. For the most
part, the primary focus and orientation of these systems has been voice. Support
for data communications flows has largely been assigned to applications
processors or pre-defined end points. This approach was fine for its time, but it
forced enterprises to operate under the dictation of its systems’ “rules” and
conversely, it forced customers, suppliers and partners to also have these same
systems’ “rules” dictate how they interacted with the company.
The astounding growth of the Internet and the use of the PC as a personal
information and productivity tool have helped to re-define how businesses and
individuals live and work. IP (Internet Protocol), the language of the Internet, has
emerged as the common language of voice, data and video communications
through a common appliance. This evolution has in turn enabled us to visualize
the application of converged communications and applications.
Page 5
Enterprises are quickly realizing that, to be successful, they must treat
technology as a strategic asset in order to improve the supply chain, to enhance
the customer experience, increase revenues and decrease costs. In short,
enterprises are becoming customer-centric, and they are adopting new
technology to provide differentiation from their competition and to ensure their
very survival. Those that “get it” are taking immediate steps to implement the
technology required to become customer-centered.
“Getting it means that understanding that the consumer occupies the center.
Connectivity allows customers to drive companies."
Chuck Martin, Harvard Business Review
Benefits and Issues
Today, enterprises face unprecedented challenges. Competitive pressures are
higher than ever, partially fueled by the Internet Web Site’s ability to make
virtually any company appear valid. Enterprises are focused on supply chain
enhancement, collaboration, relationship management and enterprise resource
planning in order to maintain and grow share. In addition, there is extraordinary
pressure to grow revenues and decrease costs – on a quarter by quarter basis.
Convergence and IP are the tools of the successful enterprise in the Twenty First
Century. The benefits of convergence and IP span customer, supplier/partner
and employee, and it is fast becoming a critical factor of success.
Converged or unified communications supports the management of contacts,
information and collaboration. It allows a company to leverage the Internet and
all communications channels in support of its supply chain, its customers and its
employees. It also supports ubiquitous applications and unified services.
Because a converged system provides a seamless environment, the enterprise is
able to provide unified services to customers, “tele-workers” and “road warriors”
alike. These corporate segments are of extreme importance in that “teleworkers” comprise some 20% of the workforce while “road warriors” comprise
some 10% of an enterprise. It is also the basis of a virtual work environment that
allows anyone inside or outside of the company to participate in a call, adding
efficiency, responsiveness and broader ownership.
Converged message management of e-mail, fax and voice mail through a phone,
PC or PDA ensures prompt and appropriate response. Combined with a contact
management system, the callback can be personalized, and the transaction
included in the enterprise information system in real time.
Convergence also translates to increased employee productivity. Users of IP
telephony systems report an average of 2% increase in productivity for virtually
all users.
Page 6
Percent Annual Productivity Improvement
Productivity Improvement After Implementing
Unified Communications
3%
2%
1%
0
Product
Managers
Customer
Care
Sales
Representatives
Executives
Source: The Radicati Group, Inc.
From a systems perspective, the hard cost savings of converged IP telephony
are very strong. Savings are attained from the centralized administration of a
single network; reduced networking costs; reduced costs of moves, adds and
changes; network and premises reconfiguration and end-user support. On
average, a minimum of 57% of adopters of converged systems have reported
reduced costs of aspects of system management.
Page 7
Work Flow Impacts of Converged System Deployment:
User experience of Reduced Time Required to Perform Functions with an IP Telephony System
% of Converged Systems Implementers
100%
94%
75%
64%
60%
57%
50%
25%
0
Moves,
Adds &
Changes
System
Administration
Premises
Equipment
Reconfiguration
End-User
Support
Source: InfoTech - The IP Telephony Customer Experience, June 2001
The actual experience of those enterprises that have implemented IP and
convergence bears out the promise. In IP convergence implementations, as
shown in the following graph, budget decreases of a minimum of 10% savings
has been realized in areas of systems management and administration. Users
have reported a 37% reduction in adds, moves and changes, a 23% reduction in
toll, a 10% reduction in maintenance and the ease of administration has enabled
a 30% reduction in staff.
Page 8
Annual Savings Following IP Telephony System Deployment
% of Converged Systems Implementers
40%
37%
30%
30%
23%
20%
10%
10%
0
Reduced
Moves,
Adds &
Changes
Toll
Bypass
Simplified
Maintenance
Reduced
Staff
Source: Renaissance Worldwide/Gartner Group Data
MultiService IP Telephony Business Case, Cisco Systems
In short, the early returns are in and convergence has been deemed a requisite
of success. Many enterprises have adopted and many more are planning to
adopt IP telephony solutions over the near term.
Based upon current plans to implement converged communications systems,
fully 91% of all large enterprises and 61% of small and mid-sized businesses will
be “IP Converged” by 2004. This adoption trail is marked by significant growth in
2002 and 2003. Given the business improvement that IP convergence offers and
its impact on the bottom line and competitive position, all enterprises need to
begin to develop an implementation plan.
Page 9
Converged Communication System Adoption Rates:
Large Enterprises Vs. Small/Mid-Sized Businesses
100%
91%
90%
81%
% of of Enterprises
80%
74%
Large
Enterprises
70%
60%
55%
58%
61%
49%
50%
Small / Mid-Sized
Businesses
40%
30%
20%
23%
17%
10%
0
10%
2000
2001
2002
2003
2004
Source: InfoTech - Enterprise Convergence Decision-Maker Study, January, 2001
There is no doubt that enterprises of all sizes will move to a converged
communications environment, and in some cases the market leaders may lose
their advantage as a converged environment allows the competition to move and
react to market conditions faster.
Enterprise Choices
Clearly, convergence and IP can have a profitable impact on an enterprise’s
bottom line, and many enterprises are planning to implement a converged
communications environment. However, this directional decision is just half of
the total decision. The technical decision, how to implement a converged
communications environment, is a harder decision, and requires investigation
into the alternatives and a comparison of the total cost of ownership.
Traditional PBX
The PBX solution consists of a traditional PBX with trunk-side and line-side
gateways provided for IP traffic. This solution combines the proven PBX TDM
Page 10
technology with an ability to selectively add IP traffic. For many enterprises, this
“adaptable” PBX solution is only preferable in the short term as a means of
extending the useful life of an installed PBX or completing the amortization of a
PBX asset.
IP-PBX
The IP-PBX solution is available in a couple of “flavors”. There is the PBX
replacement, “all IP” version in which the architecture and terminals are pure IP.
In this implementation, call traffic is distributed over a LAN infrastructure and
telephony features and intelligence are provided by a network-attached server. A
second version of the IP-PBX combines a TDM switching matrix with a LAN, IP
and server environment. This implementation enables an enterprise to converge
all of its communications traffic onto a single infrastructure. “All-in-One” systems,
available to small and medium-sized businesses, provide a single box solution
that includes IP and circuit switched communications, router and LAN hub.
Hosted Service – IP Centrex
IP Centrex is a converged solution that provides converged communications an
IP on a system or user-by-user basis. This solution enables the enterprise to
lease converged IP telephony service rather than purchasing the equipment
required to support this environment. In addition to a lower capital requirement,
IP Centrex also includes protection from technological obsolescence through the
transfer of communications system technology planning and implementation to
the service provider.
Each of the three solutions has discreet advantages. As shown in the following
chart, the Hosted Service - IP Centrex solution is the most flexible. This is
largely due to no requirement to the ability to migrate on one’s own time
schedule, improved/less expensive support for “tele-workers” and “road warriors”
and the reduced requirement for capital outlay.
Page 11
Comparison of Converged IP Communications Solution Advantages












PBX Advantages
Extend useful life of existing telephony infrastructure
Reap some advantages of convergence
Lower demand for end user training
IP-PBX Advantages
Reap full advantages of convergence and IP
Implement totally converged CRM, ERP, messaging and collaboration
applications
Some user training cost advantage
Improve support for “tele-workers” and “road warriors”
Hosted Service – IP Centrex Advantages
One phone-at-a-time migration or full advantage of convergence and IP
Implement totally converged CRM, ERP, messaging and collaboration
applications
Low user training costs
Less expensive support for “tele-workers” and “road warriors”
Minimal capital outlay
The Financial Case for IP Centrex – A 3 Year Financial Analysis
Financial analysis was completed on the three alternatives (a traditional PBX, IPEnabled, a “pure” IP – PBX and a Hosted Solution – IP Centrex) for converged IP
communications in both a 100 user configuration with 10 “tele-workers” and a
400 user configuration with 80 “tele-workers. All of the analyses included a 20
user addition in year three. It was assumed that all three options were installed
as new systems and that the installation and year three additions occurred on
January 1. Additional options, such as PBX migration or a smooth, one-phoneat-a-time implementation were not included in the analysis due to the high
number of possible implementation permutations and in the interest of clarity and
ease of understanding. However, if considering a change to IP, one should
assume additional cost impacts for different user training requirements and
service interruption.
Page 12
Financial Analysis Approach
A determination was made of the components required to implement each
solution, with an emphasis on, as closely as possible, comparing “apples to
apples”. These components included physical equipment, the communications
facilities, implementation costs, maintenance costs and other support costs, such
as system and phone maintenance, staffing, and space, HVAC, Power and
Insurance. The following figure depicts all of the elements included in the
analysis. Some of the elements are applicable to only one solution, but are listed
here to promote understanding of the depth of the analysis.
Elements Included in the IP Converged Solutions Analysis
First Costs (Implementation)
 System
 Phones
 Gateways
 Installation
 LAN Costs (In addition to existing network)
 Administrator Training
 User Training
 Soft Client Phones
 DSL Modems
 Remote Modules
 Local Facilities Installation (Trunks, PRI, ISDN and ADSL)
On-Going Costs
 IP-Centrex Line Charges
 Facilities Charges (Local Trunks, PRI, ISDN and ADSL/Cable)
 Hardware Maintenance
 Space, HVAC, Power, Backup and Insurance
 Staffing
Soft Costs
 Business Disruption
Average prices or costs were developed for each element. First costs were
developed using average street prices. On-going costs were developed with
assumptions based upon actual end user experience. All assumption and unit
costs used in the analyses can be found in the Addendum section of this white
paper.
Page 13
The Results
The analyses reveal that the Hosted Service IP – Centrex is the most
advantageous option to implement IP convergence. The following table depicts
the costs and the cumulative IP – Centrex advantage over the three-year
analysis period. This analysis suggests that both a 100-user and a 400-user
enterprise should strongly consider IP – Centrex as the vehicle for IP
convergence implementation. This analysis is especially important in light of the
on-going profits crunch and softness of the economy.
100 User IP System Total Cost of Ownership Analysis
Traditional PBX
IP – PBX
IP – Centrex
IP – Centrex : IP –
PBX Delta
IP – Centrex
Cumulative
Advantage
Year 1 Costs
$237,283
$219,229
$135,001
$84,228
Year 2 Costs
$105,724
$85,220
$60,192
$25,028
Year 3 Costs
$126,399
$109,434
$82,480
$26,954
$84,228
$109,256
$136,210
The 400 user IP system total cost of ownership analysis produced similar results.
400 User IP System Total Cost of Ownership Analysis
Traditional PBX
IP – PBX
IP – Centrex
IP – Centrex : IP –
PBX Delta
IP – Centrex
Cumulative
Advantage
Year 1 Costs
$729,232
$754,016
$427,425
$326,591
Year 2 Costs
$240,496
$252,880
$201,816
$51,064
Year 3 Costs
$272,351
$275,234
$220,252
$6,582
$326,591
$372,655
$432,637
The primary difference between the 100-User and 400-User models is that in the
100-User Model, 10% of the workforce are Tele-workers” while in the 400-User
Model, 20% of the workforce are “Tele-workers”. The cost offset created by this
portion of the users accounts for the smaller cumulative advantage in the 400user Model as compared to the 100-User Model.
The bottom-line is that a Hosted Service IP-Centrex implementation of IP
convergence is the least expensive option. Given the increased pressure for
enterprises to increase profit on a quarterly basis, IP – Centrex is the logical
choice.
Page 14
Addendum
Assumptions and Calculations
The following pages present the full analysis, assumptions and detail of the Total
Cost of Ownership comparison.
Page 15
100 User PBX System With IP Gateways
100 User System IP Telephony System TOTAL COST OF OWNERSHIP - A 3 Year Analysis
PBX with IP Gateways Cost Analysis
Hard Costs
First Costs
System (Port & Station)
Installation (System & Voice Mail)
Trunk & Line Gateways
Voice Mail
Voice Mail Installation
Training - System Administrator
Training - Users
LEC Facilities Installation
Teleworker Costs (10)
Remote Module Purchase
Remote Module Installation
ISDN Installation
Training
Unit Cost
(Annual)
Soft Costs
Business Disruption
SubTotal
Total
YEAR 2
$
$
$
$
$
$
$
$
490
120
150
10,000
1,500
500
40
1,100
$
$
$
$
$
$
$
49,000
12,000
13,500
10,000
1,500
500
3,600
$
$
$
$
1,500
100
30
50
$
$
$
$
15,000
1,000
300
500
$
106,900
$
SubTotal
On-going Costs
PSTN Trunk Charges
PRI Facilities Costs
Maintenance (System & Station)
Space, HVAC, Power, Backup
& Insurance
Staffing - Administration
Staffing - Hardware Technical Staff
Teleworker Costs (10)
Remote Module Maintenance
ISDN Facilities Cost
SubTotal
YEAR 1
YEAR 3
$
$
$
9,800
2,400
3,000
$
$
800
50
-
$
16,050
$
$
$
240
7,200
39.24
$
$
$
2,400
7,200
3,924
$
$
$
2,400
7,200
3,924
$
$
$
2,640
7,200
4,709
$
$
$
180
30,000
40,000
$
$
$
16,200
30,000
40,000
$
$
$
16,200
30,000
40,000
$
$
$
19,800
30,000
40,000
$
$
120
480
$
$
$
1,200
4,800
105,724
$
$
$
1,200
4,800
105,724
$
$
$
1,200
4,800
110,349
$
247
$
$
24,659
24,659
$
$
237,283
$
105,724
$
$
126,399
Assumptions
100 users; 90 at central location and 10 teleworkers
All users have voice mail
Remote modules used to extend PBX features to teleworkers
Centralized users have IP phones, teleworkers use a PC soft client
Line & Trunk Gateways used to support IP traffic
LAN costs average $15 per user
Installation cost includes PBX, internal facilities and user stations
Administrator training is estimated at $400 - Source: InfoTech
End user training is estimated as $40 per user - Source: InfoTech
Teleworkers are assumed to use a remote module and connect via ISDN
IP Centrex Line Charges are estimated at $25 per line per month - Source: Lucent Technologies
System maintenance is estimated at $3.27 per set, per month - Source: InfoTech
Space, HVAC, Power, Backup & Insurance is estimated at $15 per station per month
Staffing-Administration is estimated at 66% of a $45K per annum employee's time
Staffing-Hardware Technical Staff is estimated at 66% of a $60K per annum employee's time
Teleworker Facilities (ISDN) is estimated at $40 per month per user
Business Disruption is estimated at 10 loaded salary hours of an average $35K per annum employee
Year 3 includes a 20 station addition to the system - at centralized locations
Page 16
100 User IP - PBX System
100 User System IP Telephony System TOTAL COST OF OWNERSHIP - A 3 Year Analysis
IP PBX Cost Analysis
Hard Costs
First Costs
System (Server & Software)
IP Phones
LAN Costs
Installation & System Config.
IP Phone Programing
Voice Mail
Voic e Mail Installation
Training - System Administrator
Training - Users
LEC Facilities Installation
Teleworker Costs (10)
Soft Client
DSL or Cable Modem
ADSL Facility Installation
Training
SubTotal
On-go ing Costs
PSTN Trunk Charges
PRI Facilities Costs
Maintenance (Port & Station)
Space, HVAC, Power, Backup
& Insurance
Staffing - Administration
Staffing - Data Technician
Teleworker Costs (10)
ADSL Facilities Cost
SubTotal
Soft Costs
Bus iness Distruption
SubTotal
Total
Unit Cost
(Annual)
YEAR 1
YEAR 2
$
$
$
$
$
$
$
$
$
$
600
300
15
1,500
10
10,000
1,000
500
40
950
$
$
$
$
$
$
$
$
$
54,000
27,000
1,350
1,500
1,000
10,000
1,000
500
3,600
$
$
$
$
500
300
100
40
$
$
$
$
$
5,000
3,000
1,000
400
109,350
$
YEAR 3
$
$
$
12,000
6,000
300
$
200
$
$
800
50
-
$
19,350
$
$
$
100
7,200
58
$
$
$
1,000
7,200
5,820
$
$
$
1,000
7,200
5,820
$
$
$
1,100
7,200
6,984
$
$
$
180
15,000
40,000
$
$
$
16,200
15,000
40,000
$
$
$
16,200
15,000
40,000
$
$
$
19,800
15,000
40,000
$
480
$
$
4,800
85,220
$
$
4,800
85,220
$
$
4,800
90,084
$
247
$
24,659
24,659
$
-
$
-
$
219,229
$
85,220
$
109,434
Assumptions
100 users; 90 at central location and 10 teleworkers
All users have voice mail
Remote users access connection is ADSL or Cable Modem
Centralized users have IP phones, teleworkers use a PC soft client
LAN costs average $15 per user
One-time costs for system installation and configuration
Voice mail purchase and installation are separate from the IP-PBX
Administrator training is estimated at $400 - Source: InfoTech
End user training is estimated as $40 per user - Source: InfoTech
Teleworkers are assumed to use a soft client and connect via ADSL or cable modem
5 Trunk Charges for Fax & modem traffic are estimated at $20 per line per month
System maintenance is estimated at $4.85 per set, per month - Source: InfoTech
Space, HVAC, Power, Backup & Insurance is estimated at $15 per station per month
Staffing-Administration is estimated at 33% of a $45K per annum employee's time
Staffing-Data Tec hnician is estimated at 66% of a $60K per annum employee's time
Telework er Facilities (ADSL) is estimated at $40 per month per user
Business Disruption is estimated at 10 loaded salary hours of an average $35K per annum employee
Year 3 includes a 20 station addition to the sys tem - at centralized loc ations
Page 17
100 User Hosted Service IP - Centrex System
100 User System IP Telephony System TOTAL COST OF OWNERSHIP - A 3 Year Analysis
IP Centrex Cost Analysis
Hard Costs
First Costs
IP Phones
IP Gateways to support FAX/Modem
LAN Costs
Installation (Facilities & Stations)
Training - Administrator
Training - Users
IP Phone Programming
Teleworker Costs (10)
Soft Client
Training
Unit Cost
(Annual)
300
750
15
120
250
40
10
$
$
$
$
$
$
$
27,000
750
1,350
10,800
250
3,600
1,000
$
$
500
40
$
$
5,000
400
$
50,150
$
Total
$
6,000
$
$
300
2,400
$
$
800
200
-
$
9,700
300
17
$
$
27,000
1,512
$
$
27,000
1,512
$
$
33,000
1,848
$
$
$
12
15,000
108
$
$
$
1,080
15,000
10,800
$
$
$
1,080
15,000
10,800
$
$
$
1,320
15,000
11,880
$
480
$
4,800
$
4,800
$
4,800
$
60,192
$
60,192
$
67,848
$
$
24,659
24,659
$
-
$
$
4,932
4,932
$
135,001
$
60,192
$
82,480
$
SubTotal
YEAR 3
$
$
SubTotal
Soft Costs
Business Disruption
YEAR 2
$
$
$
$
$
$
$
SubTotal
On-going Costs
IP Centrex Line Charges
IP Phone Maintenance
Space, HVAC, Power, Backup
& Insurance
Staffing-Administration
Voice Mail Line Charge
Teleworker Costs (10)
Teleworker Facilities (e.g., ADSL)
YEAR 1
247
Assumptions
100 users; 90 at central location and 10 teleworkers
All users have voice mail
Centralized users have IP phones, teleworkers use a PC soft client
IP Gateways support fax and modem traffic at a compression of 4:1
LAN costs average $15 per user
Installation cost includes IP Centrex facilities and user stations
Administrator training is estimated at $400 - Source: InfoTech
End user training is estimated as $40 per user - Source: InfoTech
Installation (Facilities & Stations)
IP Phone Programming is estimated at $10 per user - Source: InfoTech
Teleworkers are assumed to use a PC soft client and connect via ADSL or cable modem
IP Centrex Line Charges are estimated at $25 per line per month - Source: Lucent Technologies
IP Phone Maintenance is estimated at $1.40 per set, per month
Space, HVAC, Power, Backup & Insurance is estimated at $1 per station per month
Staffing-Administration is estimated at 33% of a $45K per annum employee's time
Voice Mail Line Charge is estimated at $9 per month per mailbox
Teleworker Facilities (e.g., ADSL) is estimated at $40 per month for either ADSL or cable modem
Business Disruption is estimated at 10 loaded salary hours of an average $35K per annum employee
Year 3 includes a 20 station addition to the system - at centralized locations
Page 18
400 User PBX System With IP Gateways
400 User IP System TOTAL COST OF OWNERSHIP Comparison - A 3 Year Analysis
PBX with IP Gateways Cost Analysis
Hard Costs
First Costs
System (Port & Station)
Installation (System & Voice Mail)
Voice Mail
Voice Mail Installation
Training - System Administrator
Training - Users
LEC Facilities Installation
Teleworker Costs (80)
Remote Module Purchase
Remote Module Installation
ISDN Installation
Training
SubTotal
On-going Costs
PSTN Trunk Charges
PRI Facilities Costs
Maintenance (System & Station)
Space, HVAC, Power, Backup
& Insurance
Staffing - Administration
Staffing - Hardware Technical Staff
Teleworker Costs (80)
Remote Module Maintenance
ISDN Facilities Cost
SubTotal
Soft Costs
Business Disruption
SubTotal
Total
Unit Cost
(Annual)
YEAR 1
YEAR 2
$
$
$
$
$
$
$
490
120
20,000
25,000
500
40
2,200
$
$
$
$
$
$
$
156,800
38,400
20,000
25,000
500
12,800
2,200
$
$
$
$
1,500
100
30
50
$
$
$
$
$
120,000
8,000
2,400
4,000
390,100
$
YEAR 3
$
$
9,800
2,400
$
$
800
50
-
$
13,050
$
$
$
240
7,200
39.24
$
$
$
4,800
14,400
15,696
$
$
$
4,800
14,400
15,696
$
$
$
4,820
14,400
16,481
$
$
$
180
40,000
60,000
$
$
$
57,600
40,000
60,000
$
$
$
57,600
40,000
60,000
$
$
$
75,600
40,000
60,000
$
$
120
480
$
$
$
9,600
38,400
240,496
$
$
$
9,600
38,400
240,496
$
$
$
9,600
38,400
259,301
$
247
$
$
98,636
98,636
$
$
729,232
$
240,496
$
$
272,351
Assumptions
400 users; 320 at central location and 80 teleworkers
PBX includes IP gateways to replicate IP functionality
All users have voice mail
Remote modules used to extend PBX features to teleworkers
Centralized users have IP phones, teleworkers use a remote module and ISDN
Line & Trunk Gateways used to support IP traffic
LAN costs average $15 per user
Installation cost includes PBX, internal facilities and user stations
Administrator training is estimated at $400 - Source: InfoTech
End user training is estimated as $40 per user - Source: InfoTech
Teleworkers are assumed to use a remote module and connect via ISDN
Trunk charges include 20 local trunks and 2 PRI service
System maintenance is estimated at $3.27 per set, per month - Source: InfoTech
Space, HVAC, Power, Backup & Insurance is estimated at $15 per station per month
Staffing-Administration is estimated at 66% of a $60K per annum employee's time
Staffing-Hardware Technical Staff is estimated at 100% of a $45K per annum employee's time
Teleworker Facilities (ISDN) is estimated at $40 per month per user
Business Disruption is estimated at 10 loaded salary hours of an average $35K per annum employee
Year 3 includes a 20 station addition to the system - at centralized locations
Page 19
400 User IP - PBX System
400 User IP System TOTAL COST OF OWNERSHIP Comparison - A 3 Year Analysis
IP PBX Cost Analysis
Hard Costs
First Costs
System (Server & Software)
IP Phones
LAN Costs
Installation & System Config.
IP Phone Programing
Voice Mail
Voice Mail Installation
Training - System Administrator
LEC Facilities Installation
Training - Users
Teleworker Costs (80)
Soft Client
DSL Modem
ADSL Facilities Installation
Training
SubTotal
On-going Costs
PSTN Trunk Charges
PRI Facilities Costs
Maintenance (Port & Station)
Space, HVAC, Power, Backup
& Insurance
Staffing - Administration
Staffing - Data Technician
Teleworker Costs (80)
ADSL Facilities Cost
SubTotal
Soft Costs
Business Distruption
SubTotal
Total
Unit Cost
(Annual)
YEAR 1
YEAR 2
$
$
$
$
$
$
$
$
$
$
500
300
15
25,000
10
20,000
2,000
500
2,200
40
$
$
$
$
$
$
$
$
$
$
160,000
96,000
4,800
25,000
4,000
20,000
2,000
500
2,200
12,800
$
$
$
$
500
300
100
40
$
$
$
$
$
40,000
24,000
8,000
3,200
402,500
$
YEAR 3
$
$
$
10,000
6,000
300
$
200
$
$
50
800
-
$
17,350
$
$
$
240
7,200
58
$
$
$
4,800
14,400
23,280
$
$
$
4,800
14,400
23,280
$
$
$
5,040
14,400
24,444
$
$
$
180
40,000
60,000
$
$
$
72,000
40,000
60,000
$
$
$
72,000
40,000
60,000
$
$
$
75,600
40,000
60,000
$
480
$
$
38,400
252,880
$
$
38,400
252,880
$
$
38,400
257,884
$
247
$
98,636.36
98,636
$
$
754,016
$
252,880
$
$
275,234
Assumptions
400 users; 320 at central location and 80 teleworkers
All users have voice mail
Remote users access connection is ADSL or Cable Modem
Centralized users have IP phones, teleworkers use a PC soft client
LAN costs average $15 per user
One-time costs for system installation and configuration
Voice mail purchase and installation are separate from the IP-PBX
Administrator training is estimated at $400 - Source: InfoTech
End user training is estimated as $40 per user - Source: InfoTech
Teleworkers are assumed to use a soft client and connect via ADSL or cable modem
12 Trunk Charges for Fax & modem traffic are estimated at $20 per line per month
System maintenance is estimated at $4.85 per set, per month - Source: InfoTech
Space, HVAC, Power, Backup & Insurance is estimated at $15 per station per month
Staffing-Administration is estimated at 33% of a $45K per annum employee's time
Staffing-Data Technician is estimated at 100% of a $60K per annum employee's time
Facilities are assumed to be 2 ISDN PRI, estimated at $140 per month each
Teleworker Facilities (ADSL) is estimated at $40 per month per user
Business Disruption is estimated at 10 loaded salary hours of an average $35K per annum employee
Year 3 includes a 20 station addition to the system - at centralized locations
Page 20
400 User Hosted Service IP - Centrex System
400 User IP System TOTAL COST OF OWNERSHIP Comparison - A 3 Year Analysis
IP Centrex Cost Analysis
Hard Costs
First Costs
IP Phones
IP Gateways to support FAX/Modem
LAN Costs
Installation (Facilities & Stations)
Training - Administrator
Training - Users
IP Phone Programming
Teleworker Costs (10)
Soft Client
Training
SubTotal
On-going Costs
IP Centrex Line Charges
IP Phone Maintenance
Space, HVAC, Power, Backup
& Insurance
Staffing-Administration
Voice Mail Line Charge
Teleworker Costs (10)
Teleworker Facilities (e.g., ADSL)
SubTotal
Soft Costs
Business Disruption
SubTotal
Total
Unit Cost
(Annual)
YEAR 1
YEAR 2
$
$
$
$
$
$
$
300
750
15
120
250
40
10
$
$
$
$
$
$
$
96,000
1,500
4,800
38,400
250
12,800
4,000
$
$
500
40
$
$
$
40,000
3,200
200,950
$
YEAR 3
$
6,000
$
$
300
2,400
$
$
800
200
-
$
9,700
$
$
300
17
$
$
96,000
5,376
$
$
96,000
5,376
$
$
102,000
5,712
$
$
$
12
15,000
108
$
$
$
3,840
15,000
43,200
$
$
$
3,840
15,000
43,200
$
$
$
4,080
15,000
45,360
$
480
$
$
38,400
201,816
$
$
38,400
201,816
$
$
38,400
210,552
$
247
$
$
24,659
24,659
$
$
427,425
$
201,816
$
$
220,252
Assumptions
400 users; 320 at central location and 80 teleworkers
All users have voice mail
Centralized users have IP phones, teleworkers use a PC soft client
Assumes 10 fax/modem ports at $75 per port and traffic at a compression of 4:1
LAN costs average $15 per user at central location
Installation cost includes IP Centrex facilities and user stations
Administrator training is estimated at $400 - Source: InfoTech
End user training is estimated as $40 per user - Source: InfoTech
IP Phone Programming is estimated at $10 per user - Source: InfoTech
Teleworkers are assumed to use a PC soft client and connect via ADSL or cable modem
IP Centrex Line Charges are estimated at $25 per line per month - Source: Lucent Technologies
IP Phone Maintenance is estimated at $1.40 per set, per month - Source InfoTech
Space, HVAC, Power, Backup & Insurance is estimated at $1 per station per month
Staffing-Administration is estimated at 33% of a $45K per annum employee's time
Voice Mail Line Charge is estimated at $9 per month per mailbox
Teleworker Facilities (e.g., ADSL) is estimated at $40 per month for either ADSL or cable modem
Business Disruption is estimated at 10 loaded salary hours of an average $35K per annum employee
Year 3 includes a 20 station addition to the system - at centralized locations
Page 21
About Infotech
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Page 22