Finding the Value of UC

Making the case for upgrading an aging phone system. 

Although IP-based telephony has been providing organizations with documented benefits for going on two decades now, a surprisingly large number of companies still depend on legacy time-division multiplexing (TDM) services. Nemertes Research says more than 70 percent of companies still use TDM, although most at least have IP in the mix.

While it’s only natural to want to squeeze every dollar of value out of technology investments, this may not be the wisest strategy when it comes to aging phone infrastructure. With a push from the Federal Communications Commission, major carriers are actively transitioning from TDM circuits to IP networks. Companies clinging to older infrastructure will face rising maintenance costs and heightened risk of failure.

Beyond the hard costs of service and support, aging phones also have significant opportunity costs — particularly if they are impeding digital transformation initiatives. Outdated features, limited mobility capabilities and fragmented applications create quality and operational issues that restrict productivity, inhibit innovation and frustrate customers.

Enabling Transformation

IP-based unified communications (UC) platforms lay the groundwork for digital transformation by synchronizing an array of communications and collaboration tools, and by enabling broader integration with key business applications. This helps create an agile, engaged and connected workforce through the delivery of a consistent, reliable communications experience across multiple devices and locations.

Global Market Insights predicts the UC market will grow to $96 billion by 2023 as organizations increasingly realize the value of updating their communications infrastructure. While increased functionality is the major driver, cost is another consideration. UC adoption has trailed expectations for most of the past decade, in large part due to perceived high capital costs for the acquisition of hardware, software and endpoint devices. That perception is shifting, however. Nemertes says capital costs should no longer have much bearing on the UC decision.

The research firm conducts an annual analysis of real-world UC expenses, with an emphasis on total cost of ownership (TCO) based on three categories — capital investments, implementation costs and operational expenses. According to the firm’s most recent report, year-over-year UC capital costs have dropped by 25 percent due to increased competition in the market and growing adoption of cloud-based solutions.

The Cloud Option

The cloud-based UC-as-a-Service (UCaaS) delivery model is on the rise, largely because it shifts acquisition costs and internal staffing burdens to a provider. Nemertes found that in 2016, more than half of organizations with UC have adopted cloud services, compared to just 26 percent in 2015.

Interestingly, Nemertes finds that UCaaS can have slightly higher ongoing operational costs than on-premises deployments. Follow-up interviews revealed this is often because organizations tend to limit ongoing training and engineering expenses once a system is in place. Conversely, those with cloud-based services tend to continue training and expanding usage to ensure they are getting the most bang for their buck.

In light of these market dynamics and to better reflect the importance of ongoing operational costs, Nemertes is now calling TCO “total cost of operations” rather than “total cost of ownership.” The firm says implementation costs increased 60 percent year-over-year while operational costs increased 21 percent. In many cases, however, these cost increases are the result of the new emphasis on UC’s broader collaboration features.

Elements such as robust mobile clients, enterprise-grade videoconferencing, document-based collaboration and social media integration have greater network overhead than basic UC apps such as email and instant messaging. The integration of voice, video and messaging functionality directly into business applications also adds complexity. While these features add costs, they also provide improvements in processes and productivity that are difficult to quantify.

Businesses today require multiple communications technologies to operate effectively. IP-based unified communications systems can integrate, coordinate and manage those technologies for maximum benefit. With so much at stake, those considering a UC system should avoid the temptation to make a decision based solely on upfront costs. By looking at the big picture and analyzing long-term operational costs, organizations will be able to calculate TCO and make the smartest possible decision.