Typically, building a business case for a new phone system isn’t tough.
Chances are the system simply isn’t working at some branch office, support is difficult to reach, or worse, the system is now completely unsupported by a vendor that’s declared bankruptcy.
Sometimes, building a business case is as easy as showing executive leadership the cold war tech that’s lurking in the phone system closet:
Calculating the return on investment (ROI) for a full-fledged unified communications (UC) system, however, can be much tougher. There are a number of factors that affect ROI on UC solutions, such as:
- The choice between cloud-based or on-premise deployment
- Your network environment
- Support costs
- Per-seat application licensing
- Compatibility with related business applications and systems
In this article, we’ll present a simple calculator tool for estimating ROI on UC solutions. We’ll also discuss the more advanced considerations that you need to think through when selecting a platform.
Here’s what we’ll cover:
Modeling ROI for UC Systems
UC systems differ from a simple phone system in that they also handle other forms of communications: text messaging, instant messaging, email, voicemail, contact center workflows etc.
Moreover, UC systems unify multiple devices (e.g., mobile and desk phone pairing) to provide a relatively seamless user experience.
Added communications functionality, however, comes at added cost.
If you’re simply looking for the cheapest business phone service around, a system like Ooma Office will be your best bet. Ooma and competitors such as Grasshopper sell to the smallest businesses around, where keeping the phone bill down is the number one reason to replace a phone system.
The issue with providers like Ooma and Grasshopper is that they don’t scale when your business begins to grow. Small business phone system providers don’t offer the robust service level agreements (SLAs) that enterprise UC providers offer.
They also lack necessary communications features and usage requirements that growing businesses demand.
If you’re a dry cleaner that’s been operating out of the same location for 30 years, something like Ooma is probably right for your needs.
If you’re a growing wholesaler opening up a new branch office, however, you need to begin thinking beyond simple line-item expenses in the phone bill.
This diagram offers an expansive definition of what ROI for UC includes:
SIP Trunking Helps Reduce Costs
Historically, savings on phone service has been the primary reason to move to a phone system based on VoIP technology (which transmits phone calls as data packets over the internet) rather than traditional phone service.
Traditional phone service is substantially pricier than VoIP technology, particularly ISDN PRI (see our guide to business voice service types if you aren’t familiar with this service offering).
The major problem with VoIP technology is that you need a special network service known as SIP trunking in order to connect calls between the internet and the traditional phone network (see our explanation of the service if you’re still learning the territory).
With that said, however, SIP trunking service is still far cheaper than traditional phone service.
In “Slash U.S. Telecom Expenses With SIP Trunks,” (content available to Gartner clients), analysts Rafael Benitez and Ted Corbett estimate that businesses still using traditional voice services like ISDN PRI can achieve savings of up to 40 percent on their phone bills by migrating to SIP trunking.
If you’re already using SIP trunking, you probably won’t achieve savings of 40 percent by investing in a new UC system. However, UC can still offer major savings when it comes to conferencing services, another significant component of the phone bill.
Rafael Benitez notes in “Midmarket Context: ‘The Roadmap to Reduce Your Audioconferencing Expenses’” (content available to Gartner clients) that conferencing savings of over 10 percent can be achieved simply by investing in a UC system that handles conferencing and ensuring that employees use the platform for internal meetings.
The reason to adhere to these rules, Benitez explains, is that “on-net” calls aren’t routed through the traditional phone network, and hence don’t incur per-minute calling charges from the SIP provider.
Cutting the significant costs of audio conferencing is an important source of ROI for a new UC platform for organizations that have already migrated to SIP trunking.
Moreover, even if you don’t plan on replacing legacy phone systems at all of your branch offices, a UC platform can integrate with third-party phone systems at branch sites to unify all of these systems into a single telephony platform.
Many SIP trunking providers can then route calls between your branch offices over the internet rather than the phone network, which means that interoffice calls are essentially free.
Workflow Improvements Simplify Business Processes
With unified communications, employees can choose from a variety of ways to get in touch with colleagues, such as:
- Voice calling
- Video calling
- Web meetings
- Instant messaging
Moreover, a functionality known as “presence” allows employees to indicate whether they’re available to talk and which communication channel they prefer.
If you’ve ever used Skype, Hangouts, Facebook Messenger, Google Hangouts or another calling/messaging client with a list of contacts, the little indicators that show whether contacts are online are an example of presence.
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UC systems integrate presence status across all the devices that employees use, so colleagues can always see who’s available to approve a request or help with a problem. Unified presence can thus be a game changer, as we discuss in our case study of a cloud UC deployment.
By giving employees multiple communication options and allowing them to track colleagues’ communication availability in real time, UC platforms speed up complex workflows.
Mobility Helps Employees on the Go
UC systems generate value by supporting employee mobile device usage in two ways:
- Unifying employees’ mobile devices with the rest of the communications system.
- Routing calls from mobile devices over Wi-Fi networks to cut costs.
Regarding the first point, UC platforms essentially treat any mobile device (e.g., smartphone, tablet, laptop) as an extension off the phone system.
Employees can manage communication preferences such that calls are forwarded to their mobile devices when they’re not in the office, and can even continue conversations and video meetings across multiple devices with certain platforms.
Such features offer major productivity benefits for both remote workers and “road warriors.” But more tangible ROI can be achieved with the “least-cost routing” options that UC platforms enable for calls from mobile devices.
Cost savings with least-cost routing stem from the variety of wireless networks out there, which range from 3G and 4G cellular data networks to public and private Wi-Fi. Frequently, phone calls will simply go over whichever network the employee has configured on her or his device.
With a UC platform, however, the platform itself identifies the cheapest network to route the call over. In many cases, substantial savings can be achieved by sending calls over private or public Wi-Fi to bypass the per-minute calling charges and high usage fees associated with 3G and 4G cellular networks.
Least-cost routing is especially important for road warriors, since roaming fees can be avoided if employees send calls over Wi-Fi, as we describe in this case study.
Application Integrations Extend Your Capabilities
The final way in which UC platforms generate ROI is through extensive integration with your whole ecosystem of business applications: your office productivity suite (Microsoft Office, Google Apps for Work etc.), your CRM system, your ERP system, your accounting system, your contact center platform etc.
Such integrations create substantial productivity hacks. For instance, you can include video meeting links in calendar invites to simplify the process of planning meetings.
More dramatically, UC platforms enable click-to-dial from CRM systems and other systems, so that employees can simply click on a contact’s phone number to make a call. This can dramatically impact the productivity of sales teams.
A Unified Communications ROI Calculator for Grading Vendors
If you’re determining ROI for an on-premise UC system, you’ll be paying a large sum upfront for the ability to license the system perpetually. In other words, you buy the user license once and the user can continue using the system for as long as it works.
This means that an on-premise system is a capex (capital expenditure)—it represents a one-time, large investment of capital as opposed to an ongoing operational expense (such as your internet service bill).
The system won’t pay for itself overnight. Thus our calculator outputs the number of years it will take for the system to pay for itself.
Cloud UC systems are typically licensed on a monthly subscription basis. This transforms your phone system from a capex to an opex (operational expenditure). Thus we can subtract your operational expenditures for your new system from your current operational expenditures to arrive at the amount of savings you can achieve per year.
With a cloud system, the SIP trunking service is typically handled by the same vendor that delivers your phone system applications. Thus we can calculate the amount of savings you can achieve by migrating to SIP trunking.
With an on-premise system, however, you pay upfront for the system and then find a third-party SIP trunking provider to buy monthly service from.
Some quick notes on using the calculator:
- When we ask about lost opportunity costs, we mean, for instance, the amount of revenue your sales team is missing out on when the phones are down. If you don’t know this figure, our formula will still work without it, but we recommend you try to estimate it to get a better sense of ROI for the new system.
- Remember when estimating the number of licensed users at your organization that not all employees will require a license on the system. Warehouse workers may only need a single phone for the whole warehouse, whereas desk employees will typically require one license per employee.
Note: Click on the white boxes in the “Input” column to enter values.
Note: Our formula for ROI on systems with subscription licensing assumes that you’re currently using traditional voice service—if you’re not, the ROI it outputs will most likely be higher than the savings you’ll actually achieve.
We don’t factor in phone service savings in our ROI formula for on-premise systems, given that the SIP trunking provider is separate from the phone system vendor. If you’re using traditional telephony services and calculating ROI on an on-premise system, the system will most likely pay for itself more rapidly than our formula indicates.
If you have any questions about the factors that go into calculating ROI on UC, or if you have questions about how to use our ROI calculator, you can email me at email@example.com.