The Total Economic Impact Of Mitel Virtual Solutions

Transcription

1 A Frrester Ttal Ecnmic Impact Study Prepared Fr Mitel Prject Directrs: Michelle S. Bishp, Senir Cnsultant Shaheen Parks, Senir Cnsultant January 2012

2 TABLE OF CONTENTS Executive Summary... 2 Mitel Virtual Slutins Brings Imprved Scalability And Cst Efficiency... 2 Factrs Affecting Benefits And Csts... 3 Disclsures... 3 TEI Framewrk And Methdlgy... 5 Analysis... 6 Interview Highlights... 6 Csts... 6 Benefits... 8 Other Benefits Nt Quantified Flexibility Risk Financial Summary Mitel: Overview Appendix A: Ttal Ecnmic Impact Overview Appendix B: Glssary , Frrester Research, Inc. All rights reserved. Unauthrized reprductin is strictly prhibited. Infrmatin is based n best available resurces. Opinins reflect judgment at the time and are subject t change. Frrester, Techngraphics, Frrester Wave, RleView, TechRadar, and Ttal Ecnmic Impact are trademarks f Frrester Research, Inc. All ther trademarks are the prperty f their respective cmpanies. Fr additinal infrmatin, g t Abut Frrester Cnsulting Frrester Cnsulting prvides independent and bjective research-based cnsulting t help leaders succeed in their rganizatins. Ranging in scpe frm a shrt strategy sessin t custm prjects, Frrester s Cnsulting services cnnect yu directly with research analysts wh apply expert insight t yur specific business challenges. Fr mre infrmatin, visit Page 1

3 Executive Summary In Octber 2011, Mitel cmmissined Frrester Cnsulting t examine the ttal ecnmic impact and ptential return n investment (ROI) enterprises may realize by deplying Mitel Virtual Slutins. The purpse f this study is t prvide readers with a framewrk t evaluate the ptential financial impact f deplying Mitel within their rganizatins. Frrester interviewed representatives frm Organizatin A, an educatinal rganizatin that prvides testing and certificatin services t state gvernments, ther testing cmpanies, and varius public and private sectr rganizatins. This rganizatin, headquartered in Nrth America, has fur buildings and a fifth under cnstructin in its crprate campus. The cmpany als maintains 13 satellite ffices thrughut the United States. It is a privately held cmpany with 600 emplyees. Organizatin A had a 10-year-ld vice ver IP (VIP) phne system that it had utgrwn. It wanted t implement a unified cmmunicatins (UC) system that had the flexibility and cst-effectiveness required fr the rganizatin s grwth. It was als lking fr a virtual slutin that wuld maximize resurces and prvide almst-immediate disaster recvery in the event f failure. Upn careful evaluatin, it chse nt t invest additinal resurces in an upgrade f its ld system. Instead, it cnsidered a number f UC slutins and decided t implement Mitel, giving the educatinal rganizatin the scalability t supprt future grwth. Mitel Virtual Slutins Brings Imprved Scalability And Cst Efficiency Frrester s Ttal Ecnmic Impact (TEI) methdlgy captures and quantifies the vice f the custmer relative t technlgy investments. In this study, we interviewed an enterprise abut its experience in implementing Mitel Virtual Slutins fr Unified Cmmunicatins. Frrester s interviews and subsequent financial analysis fund that the rganizatin experienced the benefits, csts, and a risk-adjusted ROI summarized in Table 1. Table 1 Three-Year Risk-Adjusted ROI ROI Payback perid Ttal benefits (PV) Ttal csts (PV) Net present value (NPV) 84% 7.8 mnths $450,290 ($245,140) $205,150 Benefits. Organizatin A experienced the fllwing benefits: Prductivity savings with UC and better user experience. Cst avidance f an alternative vice slutin and crrespnding annual supprt. Page 2

4 Cst savings frm utilizing SIP trunking. Failver savings frm using sftware-based technlgy. Hardware and disaster recvery savings frm virtualizatin infrastructure. IT administrative savings thrugh faster recvery. Training cst avidance. Cst savings frm better scalability. Lwer risk f lss frm dwntime. Increased flexibility fr future grwth and new capabilities. Csts. Organizatin A incurred the fllwing csts: Mitel sftware licenses and industry-standard hardware. Mitel sftware maintenance. Prfessinal fees. Labr csts fr implementatin. Hardware csts fr virtualizatin infrastructure. Factrs Affecting Benefits And Csts Table 1 illustrates the risk-adjusted financial results that wuld be expected by the interviewed rganizatin. The riskadjusted values take int accunt ptential uncertainty r variance in estimating the csts and benefits, with the aim f prducing mre cnservative estimates. In that cntext, the fllwing factrs may affect the financial results that ther rganizatins may experience: Implementatin csts may vary fr rganizatins depending n the scpe f the implementatin and the level f cmplexity f wrk required. The level f virtualizatin f an rganizatin s envirnment may change degree f benefits achieved. Disclsures The reader shuld be aware f the fllwing: The study is cmmissined by Mitel and delivered by the Frrester Cnsulting grup. Page 3

5 Frrester makes n assumptins as t the ptential ROI that ther rganizatins will receive. Frrester strngly advises that readers shuld use the framewrk prvided in the reprt t determine their wn estimates f the apprpriateness f an investment in Mitel. Mitel reviewed and prvided feedback t Frrester, but Frrester maintains editrial cntrl ver the study and its findings and des nt accept changes t the study that cntradict Frrester s findings r bscure the meaning f the study. Page 4

6 TEI Framewrk And Methdlgy Intrductin Frm the infrmatin prvided in the interviews, Frrester has cnstructed a TEI framewrk fr thse rganizatins cnsidering a Mitel implementatin. The bjective f the framewrk is t identify the cst, benefit, flexibility, and risk factrs that affect the investment decisin. Apprach And Methdlgy Frrester tk a multistep apprach t evaluate the impact that Mitel Virtual Slutins can have n an rganizatin. Specifically, we: Interviewed Mitel marketing and sales staff and Frrester analysts t gather data relative t Mitel and the cmmunicatins sftware and slutins market in general. Interviewed a cmpany currently using Mitel Virtual Slutins t btain data with respect t csts, benefits, risk, and flexibility. Cnstructed a financial mdel representative f the interviews using the TEI methdlgy. The financial mdel is ppulated with the cst and benefit data btained frm the interviews. Frrester emplyed fur fundamental elements f TEI in mdeling the financial implicatins f deplying Mitel Virtual Slutins: 1. Csts. 2. Benefits t the entire rganizatin. 3. Flexibility. 4. Risk. Frrester s TEI methdlgy prvides a cmplete picture f the ttal ecnmic impact f technlgy investment decisins. Please see Appendix A fr additinal infrmatin n the TEI methdlgy. Page 5

7 Analysis Interview Highlights These interviews uncvered a number f imprtant insights abut the rganizatin s experience with Mitel: Organizatin A had implemented VIP 10 years ag, but it had since utgrwn its phne system. Its chices were t upgrade its current system r lk at the marketplace. After researching a number f vendrs in the market, it chse Mitel. Cst cmpetitiveness and flexibility f prgramming were amng the drivers fr the rganizatin in chsing Mitel. Scalability was anther strng factr in its decisin t g t Mitel. With Mitel, we culd manage and grw it had everything we needed, yet it wasn t s basic that we culd utgrw it in five years, the prductin manager fr netwrk peratins said. Organizatin A had already implemented a virtual envirnment and seen the benefits f faster server restratin in instances f failure and/r maintenance frm this apprach. Frm its viewpint, the real value f a virtual apprach was t: 1) maximize resurces and 2) achieve almst-immediate replicatin in the event f failure. Cnsequently, it wanted t rll ut a similar apprach t its vice netwrk and lked fr a slutin with a strng virtual cmpnent. As it had virtualized using VMware, cmpatibility with VMware was als a majr factr in its evaluatin. Mitel was the nly system that embraced the cncept f virtual technlgy. It was fully functinal and was, in fact, wrking in a virtual envirnment. (Prductin manager, netwrk peratins) The rganizatin s phne system was supprting call center peratins that were critical t the testing and certificatin services ffered by the cmpany. Cnsequently, it bserved, Dealing with critical systems as ur telephnes are, yu need [recvery] immediately. Framewrk Assumptins The discunt rate used in the present value (PV) and NPV calculatins is 8%, and time hrizn used fr the financial mdeling is three years. Organizatins typically use discunt rates between 8% and 16% based n their current envirnment. Readers are urged t cnsult with their respective cmpany s finance department t determine the mst apprpriate discunt rate t use within their wn rganizatins. Csts The main csts assciated with the deplyment f Mitel Virtual Slutins are: 1) Mitel sftware licenses and industry standard hardware; 2) Mitel sftware license maintenance fees; 3) prfessinal fees; 4) internal labr csts fr implementatin; and 5) virtualizatin hardware csts. Mitel Sftware Licenses And Hardware The rganizatin implemented Virtual Mitel Cmmunicatins Directr, Virtual Mitel Applicatins Suite, Virtual Mitel Cntact Center Slutins, Virtual Mitel Brder Gateway, and Virtual Mitel Unified Cmmunicatr Advanced fr 400 Page 6

8 phnes. It rlled ut tw cntrllers fr its system that were deplyed n industry-standard servers. The ttal cst fr the implementatin s hardware and licenses was $180,000 ver three years. The rganizatin als had sufficient VMware licenses t supprt the deplyment, s Organizatin A did nt incur additinal virtualizatin sftware csts. Mitel Sftware Maintenance Fees Sftware maintenance fees are included in the sftware purchase price fr Year 1, s the rganizatin will pay $13,000 in annual sftware maintenance fees starting frm Year 2 f its implementatin. Prfessinal Fees Organizatin A wrked with a cmmunicatins slutins prvider that is a Mitel partner t implement the slutin. The service prvider initially brught in tw peple fr a week f prgramming, and it brught in sme additinal peple fr the tw-day deplyment. The rganizatin paid $36,000 in prfessinal fees fr implementatin. As maintenance fees fr the service prvider have remained the same when cmparing the previus and pst-mitel envirnment, these prfessinal maintenance fees are nt included in the calculatin. Implementatin Csts Internal Labr With mst f the prewrk dne by the service prvider, 10 persnnel frm Organizatin A spent a ttal f 12 hurs ver the curse f a weekend t deply the Mitel Virtual Slutin fr 400 phnes. At a fully laded cst f $62,400 per full-time equivalent (FTE), the ttal implementatin cst t the rganizatin was $3,600. Table 2 Implementatin Csts Internal Labr Ref. Metric Calculatin Per perid A1 Number f peple 10 A2 Hurly rate per FTE (fully laded) $62,400/2,080 hurs $30.00 A3 Hurs length f implementatin 12 At Implementatin csts A1*A2*A3 $3,600 Nte that calculatin ttals thrughut the study may nt recncile because f runding. Page 7

9 Hardware Virtualizatin Csts Organizatin A estimates that ut f the $35,000 in hardware that the rganizatin had invested in its virtual envirnment, apprximately 10% f that can be allcated t the Mitel Virtual Slutin. This translates t $3,500 in hardware virtualizatin csts ver three years. Ttal Csts The ttal cst f the Mitel deplyment t the rganizatin is $249,100 ver a three-year analysis. Table 3 Ttal Csts (Nn-Risk-Adjusted) Csts Initial Year 1 Year 2 Year 3 Ttal Mitel hardware and licenses $180,000 $180,000 Sftware license maintenance (yearly) $13,000 $13,000 $26,000 Prfessinal fees $36,000 $36,000 Implementatin csts $3,600 $3,600 Virtualizatin cst allcatin (hardware) $3,500 $3,500 Ttal ($223,100) ($13,000) ($13,000) ($249,100) Benefits In the interviews with Organizatin A, Frrester quantified these benefits: 1) end user prductivity savings with UC and better user experience; 2) cst avidance f an alternative vice slutin and crrespnding annual supprt; 3) failver savings frm using sftware-based technlgy; 4) savings n training; 5) imprved scalability leading t mre cstefficient disaster recvery; and 6) hardware savings frm virtualizatin. Other benefits include enhanced reliability, better flexibility fr grwth, and savings frm mving t a SIP-based technlgy. The capabilities that Mitel had were really ging t give us what we wanted t d in terms f grwth ptential. (Prductin manager, netwrk peratins, educatinal testing and certificatin rganizatin) End User Prductivity Savings With Unified Cmmunicatins And Imprved User Experience With Mitel Unified Cmmunicatr Advanced, rganizatins have the capability t access and manage their vic , , and fax messages frm PCs, mbile devices, r tablets, which in turn can help simplify their day-t-day tasks and Page 8

10 gives these rganizatins the ptential fr end user prductivity savings. Users have the capability t see that the persn they are trying t cntact is n the phne and have the chice t message their cntacts instead. Mitel als gives end users the ability t readily cnference peple int audicnferencing and web cllabratin. These capabilities were sme f Organizatin A s cnsideratins when chsing Mitel. It als acknwledged that it has yet t fully utilize these UC capabilities fr the majrity f its wrkfrce, althugh it has seen sme prductivity imprvements in its call center team. We were lking fr a prduct with a strng call center cmpnent, and Mitel fit the bill. (Prductin manager, netwrk peratins) Organizatin A has a 25-persn call center that sees high traffic during testing seasn. With the implementatin f the Mitel Virtual Cntact Center Slutin, the rganizatin bserved an imprvement in ease f use and management f its cntact center. These benefits were centered n a better user interface (UI) and imprved reprting features. The rganizatin estimates that the easier UI has saved the five call center supervisrs 30 minutes a day r 2.5 hurs per week in reprt generatin. At a fully laded cmpensatin f $24 per hur, this has saved the rganizatin $15,600 per year. In additin t these prductivity savings, Mitel s cntact center licenses were included in the verall Virtual Slutins licenses. The rganizatin wuld have had t pay an additinal $27,000 in call center management licenses fr an alternative slutin. Overall call center savings t the rganizatin thrugh Mitel is $73,800 ver a three-year analysis. Table 4 Call Center Savings Ref. Metric Calculatin Year 1 Year 2 Year 3 Ttal B1 Number f call center supervisrs 5 B2 Hurly rate per call center supervisr $24.00 B3 Number f hurs (saved) 2.5 hurs*52 weeks B4 Call center management licenses cst avidance $27, Bt Call center savings (B1*B2*B3)+B4 $42,600 $15,600 $15,600 $73,800 Page 9

11 Cst Avidance Savings Hardware, Sftware, And Annual Supprt By implementing Mitel t replace its previus vice system, the rganizatin estimates that it has avided the cst f spending $196,000 in hardware and licenses fr an alternate slutin as well as an additinal $18,000 annually in maintenance. The ttal hardware, sftware, and maintenance cst-avidance savings t the rganizatin is $232,000 ver a three-year perid. Table 5 Cst Avidance Hardware, Sftware, And Maintenance Fees Ref. Metric Calculatin Year 1 Year 2 Year 3 Ttal C1 Hardware and sftware licenses fr alternative slutin $196,000 C2 Ct Maintenance fees fr alternative slutin Cst reductin maintenance and supprt fees $18,000 $18,000 C1+C2 $196,000 $18,000 $18,000 $232,000 Savings Frm A Centralized Deplyment Mdel By implementing Mitel Virtual Slutins, the rganizatin was able t deply the slutin in a centralized data center while still maintaining full business cntinuity and was able t avid the cst f purchasing and implementing switches at its 13 satellite lcatins. By using Mitel s server-based and virtual slutin instead f a hardware-based technlgy, the rganizatin has saved $50,000. Table 6 Savings Frm A Centralized Deplyment Mdel Ref. Metric Calculatin Year 1 Year 2 Year 3 Ttal D1 Cst f switches fr satellite ffices $50,000 Dt Cst avidance savings frm a centralized deplyment mdel D1 $50,000 $0 $0 $50,000 Page 10

12 Savings Frm Using SIP Technlgy The rganizatin s previus vice netwrk used PRI trunks. With Organizatin A s mve t Mitel, the rganizatin was able t use SIP trunks instead. This saved the rganizatin line charges f $1,000 a mnth fr annual savings f $12,000. Mitel s full integratin with SIP technlgy was a majr factr in chsing the Mitel prduct, the interviewed rganizatin nted, adding that using SIP wuld have been challenging r, in sme cases, a strngly discuraged ptin with the ther vendrs it cnsidered. We were lking at using that technlgy, but everyne we talked t tld us SIP wasn t ready fr prime time. The rganizatin was encuraged by Mitel s integrated SIP-based slutin deplyable in a virtualized data center and by talking t existing Mitel clients that had successfully deplyed and implemented SIP technlgy. Table 7 Savings Frm Using SIP Technlgy Ref. Metric Calculatin Year 1 Year 2 Year 3 Ttal E1 Mnthly savings $1,000 E2 Number f mnths 12 Et SIP technlgy savings E1*E2 $12,000 $12,000 $12,000 $36,000 Hardware And Disaster Recvery Savings Because Of Virtualizatin Withut Mitel Virtual Slutins, the rganizatin estimated that it wuld have had t purchase tw additinal servers at a cst f $5,000 per server t supprt the new vice system. T prvide failver services fr thse tw servers, the rganizatin wuld have had t either purchase an additinal server r buy failver services with a vendr t prvide a ht-swappable server replacement within a 3-hur respnse time. These failver services wuld have cst the rganizatin an additinal $10,000 per year. Ttal hardware savings t the rganizatin as a result f virtualizatin is $40,000 ver three years. Page 11

13 Table 8 Server Hardware And Disaster Recvery Savings Ref. Metric Calculatin Year 1 Year 2 Year 3 Ttal F1 F2 Ft Hardware and sftware licenses fr alternative slutin Maintenance fees fr alternative slutin Server and disaster recvery savings $10,000 $10,000 $10,000 $10,000 F1+F2 $20,000 $10,000 $10,000 $40,000 IT Administratin Savings Recvery In its previus envirnment, Organizatin A bserved that restring the phne system when smething ges wrng was manual and slw. The Mitel system takes advantage f VMware High Availability, s that system recvery that tk 12 hurs fr ne FTE n its ld system nw nly tk 15 minutes at mst. This represents a 98% reductin in IT administrative time spent n phne system recvery thrugh Mitel. Assuming tw incidents annually, the rganizatin saves 23.5 man-hurs per year in recvery effrt. At a fully laded cmpensatin f $50 per hur fr an IT engineer, the rganizatin will see IT administrative savings fr recvery f $3,525 ver a three-year analysis. Table 9 IT Administrative Savings Recvery Ref. Metric Calculatin Year 1 Year 2 Year 3 Ttal G1 Number f wrkers 1 G2 Hurly rate per wrker $50 G3 Number f hurs (saved) 12 hrs min G4 Number f incidents per year 2 Gt Server and disaster recvery savings G1*G2*G3*G4 $1,175 $1,175 $1,175 $3,525 Page 12

14 Lwering The Risk Of Lss Frm Dwntime The generally accepted methd f valuing risk f lsses frm external and internal incidents is t lk at an amunt f ptential lss, assume a frequency f lss, and estimate a prbability fr incurring the lss. Organizatin A nted that shuld its phne systems g dwn at certain critical times, such as when several clients are in the middle f testing, the rganizatin culd be liable fr at least half a millin dllars in fines. T be cnservative, this number des nt include the amunt assciated with remediatin assciated with lss f reputatin and brand equity. By chsing the Mitel slutin where recvery is nw faster in a virtualized envirnment, Organizatin A is able t minimize this lss. As the prductin manager fr netwrk peratins bserved: That s why yu buy insurance. We dn t want that [phne system] crash. We wanted t chse a system that wuld minimize that ptential and enable us t take the steps t recvery quickly. Mitel was the nly ne. Cnservatively assuming there is a 5% prbability f dwntime t ccur at critical times with a ptential $500,000 in penalties, the resulting avided cst is $25,000 annually. Users f this study are encuraged t use this methd with their wn assumptins fr ptential penalty amunts, frequency, and prbability. Table 10 Lwer Risk Of Lss Frm Dwntime Ref. Metric Calculatin Year 1 Year 2 Year 3 Ttal H1 Ptential expsure mst likely $500,000 H2 Prbability f lss 5% Ht Reduced risk f lss frm dwntime H1*H2 $25,000 $25,000 $25,000 $75,000 Training Cst Avidance Organizatin A bserved that Mitel s phne system slutin was easy t manage and grw with the current skill set f its peratins wrkfrce. We liked that we culd prgram [Mitel] withut sending smebdy ut t get a fur year degree in switch management, the prductin manager added. The rganizatin estimated that by chsing Mitel instead f varius alternative slutins, it has saved $10,000 in system management training fr ne FTE. Page 13

15 Table 11 Cst Avidance Training Ref. Metric Calculatin Year 1 Year 2 Year 3 Ttal I1 Cst f system management training fr alternative slutin $10,000 It Cst avidance training fees I1 $10,000 $0 $0 $10,000 Cst Savings Frm Scalability Organizatin A als nted that it chse t wrk with Mitel as it gave it better scalability in terms f the rganizatin s grwth. Its current server cnfiguratin with Mitel has the capacity t supprt 1,000 users at n additinal hardware cst. It culd als grw t 2,500 users with the additin f ne mre cntrller. Withut Mitel, the rganizatin nted that it wuld have t substantially invest in mre hardware t supprt the same number f users. The rganizatin estimates that it has saved $10,000 in hardware fr future grwth by chsing the Mitel slutin. The Frrester TEI financial mdel cnservatively assumes that there is a 50% chance that the rganizatin will grw t 1,000 users within three years. The ttal cst savings frm imprved scalability t the rganizatin is $5,000 ver a three-year analysis. Table 12 Scalability Cst Savings Ref. Metric Calculatin Year 1 Year 2 Year 3 Ttal J1 Hardware cst avidance at 1,000 users $10,000 J2 Prbability f grwth 50% Jt Scalability cst savings J1*J2 $0 $0 $5,000 $5,000 Ttal Benefits Table 13 summarizes the quantified benefits frm the rganizatin s investment in Mitel s Virtual Slutins prtfli. Page 14

16 Table 13 Ttal Benefits (Nn-Risk-Adjusted) Benefits Initial Year 1 Year 2 Year 3 Ttal Call center savings $42,600 $15,600 $15,600 $73,800 Cst avidance f alternative slutin hardware $196,000 $18,000 $18,000 $232,000 Cst avidance f a centralized deplyment mdel $50,000 $50,000 Savings frm SIP technlgy $12,000 $12,000 $12,000 $36,000 Hardware and disaster recvery savings frm virtualizatin $20,000 $10,000 $10,000 $40,000 IT administrative savings recvery $1,175 $1,175 $1,175 $3,525 Cst avidance training $10,000 $10,000 Hardware savings frm imprved scalability $5,000 $5,000 Lwering the risk f lss frm dwntime $25,000 $25,000 $25,000 $75,000 Ttal $356,775 $81,775 $86,775 $525,325 Other Benefits Nt Quantified Other qualitative benefits cited by the cmpanies interviewed but nt quantified in this study include: Increased Flexibility Organizatin A nted that Mitel s capabilities gave it a lt f flexibility fr new prjects in the future. This wuld include the ability t implement mbile slutins t extend the crprate UC slutin t its peratin team s mbile devices. Anther pssible prject was enabling remte-wrker setups t give its call center persnnel the ability t wrk frm hme. It als liked the fact that it had the pprtunity in the future t use APIs t custmize the Mitel slutin and develp plug-ins as well as take advantage f Mitel s cmpatibility with a virtualized desktp. Flexibility Flexibility, as defined by TEI, represents an investment in additinal capacity r capability that culd be turned int business benefit fr sme future additinal investment. This prvides an rganizatin with the right r the ability t engage in future initiatives but nt the bligatin t d s. Frm ur interviews, we ve fund that there are multiple scenaris in which a custmer can deply Mitel and later realize additinal uses and business pprtunities. Page 15

17 Althugh data fr calculating the value f these flexibility ptins was insufficient when this study was cnducted, ur interviews identified areas that culd prduce flexibility ptins based n next-stage real ptins that have been described by the rganizatin interviewed: Organizatin A can realize cst savings in the future when it chses t fully utilize Mitel s mbile capabilities. The rganizatin s prductin and netwrk peratins team uses smartphnes, and with the Mitel implementatin, it has the capability t set up these mbile devices as an extensin f its emplyees desk phnes. This mbility strategy wuld bring additinal prductivity savings and faster respnsiveness t the rganizatin. Mitel als has the capability t prvide Organizatin A s emplyees with the ability t wrk frm anywhere with a mbile slutin. The rganizatin nted that part f its disaster recvery plan fr its phne system was t chse a system that wuld give it a wrk-at-hme ptin particularly fr its call center. Shuld the rganizatin chse t implement this prject in the future, it culd ptentially achieve mre prductivity savings and cst avidance savings arund SLA penalties. Shuld the rganizatin chse t use Mitel s capability fr cnferencing and migrate these services frm its current third-party carrier, Organizatin A als has the ptential t realize lwer peratinal csts fr cnferencing. The value f flexibility is unique t each rganizatin, and the willingness t measure its value varies frm cmpany t cmpany (see Appendix B fr additinal infrmatin regarding the flexibility calculatin). Risk Frrester defines tw types f risk assciated with this analysis: implementatin risk and impact risk. Implementatin risk is the risk that a prpsed investment in Mitel may deviate frm the riginal r expected requirements, resulting in higher csts than anticipated. Impact risk refers t the risk that the business r technlgy needs f Organizatin A may nt be met by the investment in Mitel, resulting in lwer verall ttal benefits. The greater the uncertainty, the wider the ptential range f utcmes fr cst and benefit estimates. Quantitatively capturing implementatin and risk by directly adjusting the financial estimates results in mre meaningful and accurate estimates and a mre accurate prjectin f the ROI. In general, risks affect csts by raising the riginal estimates, and they affect benefits by reducing the riginal estimates. The risk-adjusted numbers shuld be taken as realistic expectatins, as they represent the expected values cnsidering risk. The fllwing implementatin risk that affects csts is identified as part f this analysis: Internal labr needed fr implementatin and supprt may exceed initial estimates. The fllwing impact risks that affect benefits are identified as part f this analysis: Variability in end user prductivity savings depending n the implementatin f the call center management applicatins and the previus envirnment. Variability in cst avidance and cst reductin savings based n the level f virtualizatin f an rganizatin. Page 16

18 Table 14 shws the values used t adjust fr risk and uncertainty in the cst and benefit estimates. The TEI mdel uses a triangular distributin methd t calculate risk-adjusted values. T cnstruct the distributin, it is necessary t first estimate the lw, mst likely, and high values that culd ccur within the current envirnment. The risk-adjusted value is the mean f the distributin f thse pints. Readers are urged t apply their wn risk ranges based n their wn degree f cnfidence in the cst and benefit estimates. Table 14 Cst And Benefit Risk Adjustments Csts Lw Mst likely High Mean Mitel hardware and licenses 100% 100% 100% 100% Mitel sftware license maintenance (yearly) 100% 100% 100% 100% Prfessinal fees 98% 100% 105% 101% Implementatin csts 100% 100% 115% 105% Virtualizatin cst allcatin (hardware) 98% 100% 105% 101% Benefits Lw Mst likely High Mean End user prductivity savings 90% 100% 105% 98% Cst avidance f alternative slutin hardware Cst savings frm a centralized deplyment 90% 100% 105% 98% 90% 100% 105% 98% SIP technlgy savings 90% 100% 105% 98% Hardware and disaster recvery savings frm virtualizatin 90% 100% 105% 98% IT administrative savings recvery 90% 100% 105% 98% Cst avidance training 90% 100% 105% 98% Scalability cst savings 90% 100% 105% 98% Lwer risk f dwntime lss 50% 100% 100% 83% Page 17

19 Financial Summary The financial results calculated in the Csts and Benefits sectins can be used t determine the ROI, NPV, and payback perid fr the rganizatin s investment in Mitel. These are shwn in Table 15 belw. Table 15 Cash Flw Nn-Risk-Adjusted Cash flw riginal estimates Initial Year 1 Year 2 Year 3 Ttal PV Csts ($223,100) $0 ($13,000) ($13,000) ($249,100) ($244,565) Benefits $0 $356,775 $81,775 $86,775 $525,325 $469,341 Net benefits $356,775 $68,775 $73,775 $276,225 $224,776 ROI 92% Payback perid 7.5 mnths Table 16 belw shws the risk-adjusted ROI, NPV, and payback perid. These values are determined by applying the risk-adjustment values frm Table 14 in the Risk sectin t the cst and benefits numbers in Tables 3 and 13. Table 16 Cash Flw Risk-Adjusted Cash flw risk-adjusted estimates Initial Year 1 Year 2 Year 3 Ttal PV Csts ($223,675) $0 ($13,000) ($13,000) ($249,675) ($245,140) Benefits $0 $345,890 $76,390 $81,290 $503,569 $450,290 Net benefits $345,890 $63,390 $68,290 $253,894 $205,150 ROI 84% Payback perid 7.8 mnths Page 18

20 The data cllected in this study indicates that deplying Mitel has the ptential t prvide a slid ROI thrugh quantifiable cst avidance savings, hardware and IT administratin savings thrugh virtualizatin, and prductivity benefits. The risk-adjusted ROI f 84%, alng with a payback perid (breakeven pint) f 7.8 mnths, raises cnfidence that the investment is likely t prduce a psitive utcme, especially after the risks and uncertainty that may affect the prject have been cnsidered, quantified, and incrprated int the business case. In interviews with a Mitel custmer, Frrester fund that rganizatins can realize benefits in the frm f: End user prductivity savings with UC and better user experience. Cst avidance f an alternative vice slutin and crrespnding annual supprt. Cmmunicatins cst savings frm utilizing SIP trunking technlgy. Failver savings frm using sftware-based technlgy. Hardware and disaster recver savings frm virtualizatin. IT administrative savings thrugh faster recvery. Training cst avidance. Cst savings frm better scalability. Lwer risk f lss frm dwntime. Increased flexibility. Based n these findings, cmpanies lking t implement Mitel can anticipate cst avidance savings, hardware and IT administratin cst savings thrugh virtualizatin, imprved call center prductivity, and imprved scalability. Using the TEI framewrk, many cmpanies may find a ptentially cmpelling business case t make such an investment. Page 19

21 Mitel: Overview Accrding t Mitel, Mitel prvides businesses f all sizes with cmmunicatins slutins that deliver enriched cllabratin and prductivity, unprecedented perating cst savings, simplified IT management, and enhanced security and business cntinuity. Mitel Virtual Slutins are part f the Mitel Freedm Architecture, designed t ensure that rganizatins can deply UC including virtualized UC n existing infrastructures, and that they dn t have t rely n any ne vendr fr an end-t-end, single-surce UC slutin. The Mitel Freedm Architecture prvides: A single, clud-ready sftware stream. It s a sftware-based UC slutin that plugs int existing IT framewrks withut needing manufacturer-dependent hardware r relying n ne vendr fr an end-t-end, single-surce UC slutin. Freedm frm walled-garden architecture. It fits with yur existing netwrk, prcesses, and ther business applicatins. An in-ffice experience anywhere. Mbility slutins ensure that emplyees can be prductive regardless f their lcatin r device. By deplying the Freedm Architecture-based Virtual Mitel Cmmunicatins Directr (vmcd), the industry s first fully virtualized vice prcessing sftware applicatin, rganizatins add all f the benefits f data center virtualizatin t their vice cmmunicatins, including reduced capital expenditures and peratinal and maintenance csts. Built n a tightly integrated partnership with virtualizatin leader VMware, Mitel Virtual Slutins deliver best-in-class virtualized UC applicatins that can reside alngside ther enterprise business applicatins in mainstream data center envirnments and n virtual desktps, delivering peratinal and capital cst savings. Tight integratin f Mitel Unified Cmmunicatins with VMware vcenter Management tls means yu can manage all applicatins in the same way, giving yu faster system deplyment, a cmmn management strategy, and a single business cntinuity plan acrss all f yur business applicatins, including UC. Mitel has als integrated its UC slutins with VMware View t give vice t the virtual desktp. Desktp virtualizatin is hugely significant fr IT departments and end users alike. It takes applicatins, much f the data, and persnalized cnfiguratin settings that have traditinally been stred n PCs and mves them t virtualized servers, enabling centralized desktp management and imprved security and cnfrmance and enabling users t be prductive frm anywhere, anytime. Mitel Virtual UC Slutins cnsist f: Virtual Mitel Cmmunicatins Directr (vmcd). The fundatin f Mitel Virtual UC Slutins is vmcd, a virtual telephny services platfrm. It prvides IP-PBX features fr small t large enterprises with pwerful call handling, a prfusin f UC features including mbility and cnferencing, and simple management enabling faster, mre effective cmmunicatin. Page 20

22 Virtual Mitel Applicatins Suite (vmas). vmas is an easy-t-use and easy-t-manage UC applicatins suite. It delivers capabilities such as unified messaging; speech-enabled autattendant; mbility; telewrking; sphisticated audicnferencing, videcnferencing, and webcnferencing; and business reprting. Virtual Mitel Unified Cmmunicatr Advanced (vuca). vuca is a client fr desktps and mbile devices that prvides a single access pint fr all yur business cmmunicatin and cllabratin needs. It prvides real-time access t everyne in the rganizatin, n r ff the premises, and enhances the effectiveness f in the mment cmmunicatins. vuca delivers rich presence and availability; desk phne and sftphne integratin; crprate directry access; visual vic ; secure instant messaging; and pint-t-pint vide. Deplyed as part f the virtual desktp, it gives users single sign-n t their UC and data applicatins. The UCA sftphne enables media streaming in a VMware View envirnment. Virtual Mitel Brder Gateway (vmbg). vmbg enables yu t securely extend the crprate vice and data netwrk thrugh yur firewall t virtually any lcatin via a bradband cnnectin. Establish secure wrkspaces with cmprehensive threat prtectin, strict access cntrl, and privacy, and enable telewrkers t wrk and cllabrate prductively frm any lcatin. Virtual Cntact Center Slutins. Mitel s Virtual Cntact Center Slutins ensure the delivery f excellent custmer service that nurtures relatinships. Agent and supervisr tls drive prductivity in yur cntact center, and real-time and histrical reprting ensure peratinal efficiency. Agents can use the cntact center sftphne as part f their VMware View virtual desktp. Page 21

23 Appendix A: Ttal Ecnmic Impact Overview Ttal Ecnmic Impact is a methdlgy develped by Frrester Research that enhances a cmpany s technlgy decisin-making prcesses and assists vendrs in cmmunicating the value prpsitin f their prducts and services t clients. The TEI methdlgy helps cmpanies demnstrate, justify, and realize the tangible value f IT initiatives t bth senir management and ther key business stakehlders. The TEI methdlgy cnsists f fur cmpnents t evaluate investment value: benefits, csts, risks, and flexibility. Benefits Benefits represent the value delivered t the user rganizatin IT and/r business units by the prpsed prduct r prject. Often prduct r prject justificatin exercises fcus just n IT cst and cst reductin, leaving little rm t analyze the effect f the technlgy n the entire rganizatin. The TEI methdlgy and the resulting financial mdel place equal weight n the measure f benefits and the measure f csts, allwing fr a full examinatin f the effect f the technlgy n the entire rganizatin. Calculatin f benefit estimates invlves a clear dialgue with the user rganizatin t understand the specific value that is created. In additin, Frrester als requires that there be a clear line f accuntability established between the measurement and justificatin f benefit estimates after the prject has been cmpleted. This ensures that benefit estimates tie back directly t the bttm line. Csts Csts represent the investment necessary t capture the value, r benefits, f the prpsed prject. IT r the business units may incur csts in the frms f fully burdened labr, subcntractrs, r materials. Csts cnsider all the investments and expenses necessary t deliver the prpsed value. In additin, the cst categry within TEI captures any incremental csts ver the existing envirnment fr nging csts assciated with the slutin. All csts must be tied t the benefits that are created. Risk Risk measures the uncertainty f benefit and cst estimates cntained within the investment. Uncertainty is measured in tw ways: 1) the likelihd that the cst and benefit estimates will meet the riginal prjectins, and 2) the likelihd that the estimates will be measured and tracked ver time. TEI applies a prbability density functin knwn as triangular distributin t the values entered. At a minimum, three values are calculated t estimate the underlying range arund each cst and benefit. Flexibility Within the TEI methdlgy, direct benefits represent ne part f the investment value. While direct benefits can typically be the primary way t justify a prject, Frrester believes that rganizatins shuld be able t measure the strategic value f an investment. Flexibility represents the value that can be btained fr sme future additinal investment building n tp f the initial investment already made. Fr instance, an investment in an enterprise wide upgrade f an ffice prductivity suite can ptentially increase standardizatin (t increase efficiency) and reduce licensing csts. Hwever, an embedded cllabratin feature may translate t greater wrker prductivity if activated. The cllabratin can nly be used with additinal investment in training at sme future pint in time. Hwever, having the ability t capture that benefit has a present value that can be estimated. The flexibility cmpnent f TEI captures that value. Page 22

24 Appendix B: Glssary Discunt rate: The interest rate used in cash flw analysis t take int accunt the time value f mney. Althugh the Federal Reserve Bank sets a discunt rate, cmpanies ften set a discunt rate based n their business and investment envirnment. Frrester assumes a yearly discunt rate f 8% fr this analysis. Organizatins typically use discunt rates between 8% and 16% based n their current envirnment. Readers are urged t cnsult their respective rganizatin t determine the mst apprpriate discunt rate t use in their wn envirnment. Net present value (NPV): The present r current value f (discunted) future net cash flws given an interest rate (the discunt rate). A psitive prject NPV nrmally indicates that the investment shuld be made, unless ther prjects have higher NPVs. Present value (PV): The present r current value f (discunted) cst and benefit estimates given at an interest rate (the discunt rate). The PV f csts and benefits feed int the ttal net present value f cash flws. Payback perid: The breakeven pint fr an investment. The pint in time at which net benefits (benefits minus csts) equal initial investment r cst. Return n investment (ROI): A measure f a prject s expected return in percentage terms. ROI is calculated by dividing net benefits (benefits minus csts) by csts. A Nte On Cash Flw Tables The fllwing is a nte n the cash flw tables used in this study (see the example table belw). The initial investment clumn cntains csts incurred at time 0 r at the beginning f Year 1. Thse csts are nt discunted. All ther cash flws in Years 1 thrugh 3 are discunted using the discunt rate (shwn in Framewrk Assumptins sectin) at the end f the year. Present value (PV) calculatins are calculated fr each ttal cst and benefit estimate. Net present value (NPV) calculatins are nt calculated until the summary tables and are the sum f the initial investment and the discunted cash flws in each year. Table [Example] Example Table Ref. Categry Calculatin Initial cst Year 1 Year 2 Year 3 Ttal Page 23