Avoid Network Readiness Risks with The Phybridge UniPhyer

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1 Avoid Network Readiness Risks with The Phybridge UniPhyer Save over 50% of the cost and 80% in deployment time Receive 100% of the features and functionality of a converged network NO COMPROMISES Allocate more resources to applications and training; not to the stresses of getting the network right! Having the right voice and data network foundation is critical to optimizing a customer s Unified Communication experience. Until the Phybridge UniPhyer was introduced the accepted deployment method was to converge voice networks onto data networks which created many challenges and barriers for both customers and providers. Customers had to take a leap of faith before being able to trial the new VoIP solution and providers were faced with an ever changing network environment with no two customer data networks being alike. Nemertes research studied 1,400 IP Telephony Deployments with over 60% of companies underestimating network readiness costs. Here is a summary of their report and how the Phybridge UniPhyer addresses the key issues: 60% of organizations underestimate the time, cost, or both required to plan, design, and implement LAN readiness. Phybridge Solution: Exact pricing, no surprises. The Phybridge UniPhyer is a more customer centric application that leverages proven technology to convert your reliable telephony infrastructure into a complete Parallel IP network with Power over Ethernet ideal for Unified Communications and IP Telephony. Deployment is lower cost, risk free, non-disruptive with you in full control of migration. At approximately half of the cost of voice on data network deployment, this game changing technology allows you to allocate more of your budget to applications and training while offering a risk free, quick and easy way to converge your voice and data networks. Overall, companies spend an average of $421 on the LAN upgrade (POE, cabling, and upgrades) and $554 on the IP telephony (switches, handsets, and gateways) for a total cost of $975 per end unit. Phybridge Solution: Over 50% in LAN readiness cost savings. 65% of companies conduct a baseline network assessment to determine required changes to the LAN. The baseline assessment generally costs between $2,500 and $3,500 per location. Phybridge Solution: No or minimal network assessment cost. LAN capital costs can double, and implementation/operational costs increase by 25% to 50%. Phybridge Solution: Lower Day 2 management costs. Once the LAN upgrade is completed, the No. 1 rule of networking kicks in: The only constant in networking is change. Before long, the company will add new UC applications which requires the IT staff to go through the upgrade cycle all over again. Phybridge Solution: Voice on separate path making it easier to manage a converged network. We call it Optimizing your network for Unified Communications while optimizing customer satisfaction with a reliable network to handle voice, video, and data effortlessly. The UniPhyer eliminates much of the cost and risks associated with LAN readiness highlighted in the Nemertes study. Optimized Converged Network The Phybridge UniPhyer is a game changing technology that eliminates the challenges and barriers for customers and providers alike greatly reducing deployment costs and time. Visit to download the Nemertes white paper and to learn about the many benefits of the Phybridge UniPhyer. The Enabling Company

2 LAN Upgrades Inflate True IP Telephony Costs Companies often underestimate time, cost of network upgrades By Robin Gareiss Executive Vice President & Sr.Founding Partner, Nemertes Research Executive Summary IP telephony and unified-communications projects require careful planning and budgeting and often companies don t do enough of either. Prior to these implementations, the network or infrastructure team must evaluate network readiness and calculate the costs involved with upgrades on both the LAN and WAN. This paper focuses on the LAN upgrades, which typically include the addition of Power Over Ethernet (POE) switches, Cat 5/6 cabling, sometimes the addition of wireless infrastructure to support wireless IP phones and perhaps Uninterrupted Power Supplies (UPS). Often, companies spend more on the LAN upgrade than they budgeted, either because they didn t evaluate the LAN at all or because they didn t run the appropriate baseline network assessments to determine the actual upgrades required for the IP telephony or UC equipment the organization is implementing. The end result erodes the return-on-investment of convergence projects. The Issue Even prior to the recession, IT staffs had to prove the business case for IP telephony and UC deployments. In the past, 24- to 36-month returns on investment were acceptable. In this economy, the business case must be even more compelling. Nearly 80% of companies say a pre-approved business case is required for any new IT projects. (Please see Figure 1: Pre-Approved Business Case Required?, Page 2.) And among those organizations, decision-makers commonly push for 12-month payback periods. That s why it s crucial to understand the true costs of an IP telephony deployment, the most frequent precursor to a full UC architecture. There is much more to the deployment than capital and implementation costs of the IP telephony equipment itself. Unless the organization recently upgraded its LAN, the capital and implementation costs to do so can be significant typically nearly half of the total project cost. And even when a LAN upgrade recently took place, organizations 1

3 find they may have more to do in order for the IP telephony deployment to work optimally. Pre-Approved Business Case Required? Figure 1: Pre-Approved Business Case Required? Breaking Down the Costs For the past several years, Nemertes has conducted extensive research on thousands of companies IP telephony costs and cost structures. These companies range from small, 10- to 100-employee businesses, to large, multinational powerhouses. They also span 18 industries, providing us with a detailed understanding of what companies spend on these deployments and how they structure their business cases. IP telephony costs generally fall into one of the following three broad categories: Capital: This includes all one-time, initial equipment costs for both the LAN upgrade and the IP telephony equipment. 2

4 Planning and Implementation: This covers all costs associated with the installation and start-up of the IP telephony project, such as planning, engineering, installation, training, and initial troubleshooting for the LAN equipment itself and the IP telephony equipment. Ongoing Operational: This includes labor costs to operate, maintain, and troubleshoot the system (either internal or external personnel), in addition to maintenance, warranties, and other professional services. Many network or telecom professionals will refer to network upgrades as fairly straightforward, regularly scheduled changes in the infrastructure. This was true when the infrastructure was date-only. But these upgrades now include voice and perhaps video traffic, and require Power-Over-Ethernet (POE) switches, optimization tools, and bolstered Uninterrupted Power Supplies, for example. Consequently, they become more complex and include more components. (Please see Figure 2: LAN Upgrade Cost, Page 3.) Planning & Implementation Capital Operational Figure 2: LAN Upgrade Cost LAN Upgrade Cost Overview Initial Project management Building business case Baseline network assessment Network design & engineering Time to deploy (labor) Training IT POE Switches Software/firmware upgrades Management tools Cabling UPS Optimization devices Maintenance contracts Extended warranties Labor to monitor, manage, secure network Add-Ons Additional management tools & training New UC Apps & Related Upgrades Redundancy for Disaster Recovery Planning & Implementation LAN upgrade planning and implementation involves professional services and operational costs, which range from $275 to $363 per end user connected to the LAN. The range varies based on the size of the deployment, the extent of professional services, and the internal expertise. 3

5 In the planning and implementation stage, organizations typically assign a project manager, either by using an internal staff member or hiring an outside expert. From there, about 65% of companies conduct a baseline network assessment to determine required changes to the LAN. The baseline assessment generally costs between $2,500 and $3,500 per location, depending on the size of the rollout. Then, they must design and engineer the network upgrade, implement it, and train the team how to use, manage and troubleshoot the equipment. Most networking teams underestimate the time required for planning and implementation because they don t account for the extra steps an IP telephony upgrade involves. In data-only upgrades, the team contacts the chosen switch/router vendor and simply upgrades firmware and software to the next version. It s not that simple with a converged network, as organizations must minimally: Build a detailed business case that demonstrates the hard- and softdollar value of the implementation; Determine real-time application requirements by location; Define wireless requirements, if applicable; Select an IP telephony vendor, to make sure any LAN upgrades support that vendor s unique requirements; Run tests, simulating new traffic types to each location to determine whether the network infrastructure can support individual applications and combinations of applications; Design and engineer the upgrade to support application changes anticipated for the next two to three years (the typical network refresh period); Evaluate management, monitoring, and security; Train the network staff on any new equipment; Install, configure and test any new equipment. Because of the complexity involved with upgrading the LAN for converged voice/data traffic, we find 55% to 60% of organizations underestimate the time, cost, or both required to plan, design, and implement the LAN upgrade. The larger the organization, the more complex the LAN upgrade. Small companies with fewer than 10 locations handle the implementation phase in three months to two years. Large, multinational companies spend between one year and three years on this phase alone. Another issue is the order in which the LAN upgrade happens. Three scenarios generally exist, and each has its weakness: 1.) The company recently upgraded the LAN and now wants to add IP telephony; 4

6 2.) The company plans to upgrade the LAN first, and then install IP telephony equipment at some point in the future; 3.) The company plans to install both the LAN upgrade and the IP telephony equipment together. The first scenario typically leads to cost overruns. Network managers think that because they just upgraded the LAN (say, within the past year), it should be able to support the newly emerging IP telephony project. This is not always true. If the team didn t upgrade the LAN to support voice and real-time traffic, chances are they may need POE switches, new LAN monitoring tools, different WLAN configuration, and changes in the VLANs. The second scenario generally results in double operational expenses. Companies pay third parties and/or engage their own teams to install the LAN infrastructure. Then they do it all over again with the IP telephony infrastructure. What s more, because they implement the LAN upgrade first, any cost overruns can cannibalize the budget devoted to IP telephony or associated UC applications. The third scenario can leverage labor costs, and makes the most sense for companies that plan to install IP telephony and upgrade their LANs. But, it can be risky to upgrade both the telecom and data network at one time. If the network/telecom staff is upgrading the LAN and implementing IP telephony location by location, there is a risk of service interruptions for voice and data simultaneously. Doing so also can streamline planning and engineering, providing the LAN and telephony teams are converged. Another concern in crafting an IP telephony and UC strategy is which personnel should handle which pieces of the implementation. When it comes to the LAN upgrade, a combination of expertise is crucial for success. Prior to converged upgrades, it was common for the LAN manager or other infrastructure person to oversee the LAN upgrade on a regular interval using a standard process. Now, with converged infrastructure, organizations should include a combination of the LAN, WAN, and telecom personnel to make sure they cover all angles. For example, the telecom manager may know some business units require wireless VOIP phones, in which case, the LAN manager must consult with wireless and security staff while designing a WLAN architecture. As companies have become VOIP-enabled or have expanded existing implementations, the network and telecom teams have converged. That has helped ensure the LAN upgrade isn t just a standard maintenance routine. But it s also caused some internal turf wars. When that happens (and it still does, often), the LAN upgrade may not be sufficient for VOIP, causing additional upgrades (and additional costs) down the road. 5

7 Capital Nonetheless, capital costs in any of the scenarios consume a large part of the project budget. Capital costs for the LAN upgrade nearly equal the costs of the IP telephony equipment (including the IP switches, handsets, softphones, and gateways). In a research study of nearly 1,400 companies, Nemertes found 43% of capital costs for IP telephony implementations come from the LAN upgrades. So, in a $2-million implementation, $860,000, on average, is the result of the LAN. The percentage varies based on the size of the company. Larger companies spend a smaller percentage (32%) on the LAN upgrade, though they spend a larger dollar amount overall on their projects. Smaller companies spend more on the LAN upgrade (45%), and midsize companies spend 41% of their capital on LAN upgrades. (Please see Figure 3: Capital Costs, by Company Size, Page 6.) The primary reason for this is that large companies are more apt to buy more expensive IP handsets. They also have more offices with large numbers of employees who can share the cost of the LAN upgrade more so than smaller companies with fewer employees in their offices basically, there is economy of scale. Overall, companies spend an average of $975 per end unit on their capital implementations--$554 on the IP telephony (switches, handsets, and gateways), and $421 on the LAN upgrade (POE, cabling, and upgrades). The figures vary by size of company, with larger companies spending the least per end unit (but, of course, more in total dollars). IP Telephony Implementations Capital Costs Per Person Number of End Units Cost per end unit* Less than ,000 More than 5,000 All sizes IPT Hardware $667 $411 $342 $554 LAN Upgrade $553 $280 $159 $421 LAN Upgrade: Total Average Capital $1,220 $691 $501 $975 LAN Upgrade: % of Overall Capital 45% 41% 32% 43% *End unit is IP handset, audio bridge, softphone or other end-user device. Figure 3: Capital Costs, by Company Size Ongoing Operations Capital decisions also affect LAN operational costs. For example, if the network team decides to add optimization devices to improve performance, additional maintenance costs would apply. Or, if they added POE switches or UPS, they must now pay 14% to 18% maintenance on this equipment annually. And, keep in mind if a company requires full redundancy, LAN capital costs can double, and implementation/operational costs increase by 25% to 50. Basic LAN operational costs exist with or without IP telephony, though companies do require additional expertise to run voice traffic over the IP network. That translates into more training costs, but typically not more headcount to 6

8 actually run the network. Companies spend between $1,000 and $10,833 per IT staff member for training on how to run voice effectively over an IP network. The actual training cost maps to the size of the rollout. Those with fewer than 500 endpoints typically send one to two people to training and spend $10,833 on average, per person. The per-person figure drops substantially with larger rollouts: For rollouts of 500-2,000 endpoints, the per-person training cost is $1,500 for five to 10 people, on average; for rollouts greater than 2,000 endpoints, the cost drops to $1,000 per person for up to 10 to 50 people. (Please Figure 4: VOIP Training Costs, Page 7.) VOIP Training Costs Per Staff Member $12,000 $10,000 $10,833 $8,000 $6,000 Average: $4,833 $4,000 $2,000 $2,500 $- $1,000 Fewer than 500 Endpoints 500-2,000 Endpoints Greater than 2,000 Endpoints Figure 4: VOIP Training Costs Day 2 Costs Once the LAN upgrade is completed, the No. 1 rule of networking kicks in: The only constant in networking is change. Before long, the company will add new UC applications, and that requires the IT staff to go through the cycle all over again. They must build new business cases, devote resources to planning and implementation, invest in more capital, and have the staff to operate it. Management and monitoring tools are perhaps the most common day 2 expense. Initially, companies use the monitoring and management tools that come for free with the IP PBXs. Typically, within the first two years of operation, the staff realizes it doesn t have the depth of data required to make sure voice traffic is 7

9 performing properly over an IP network. When voice ran over the TDM network, it was a closed network run by very experienced staff who understood the limited sources of problems. With IP, new questions emerge such as: Is this a problem on the router? Is another application contending for bandwidth, and if so which one? Is there a problem with the gateway? Is a PC application interfering with the softphone? Number of End Units ,000 LAN Planning & Implementation $ 72,600 $ 797,500 $ 2,750,000 Project management Building business case Baseline network assessment Network design & engineering Implementation LAN Testing/troubleshooting LAN Capital $ 110,600 $ 700,000 $ 1,590,000 LAN Capital maintenance (annual) $ 17,696 $ 112,000 $ 254,400 IPT Planning & Implementation $ 140,000 $ 850,000 $ 2,250,000 Project management Building business case Baseline network assessment Network design & engineering Implementation IPT Testing/troubleshooting IPT Capital $ 133,400 $ 1,027,500 $ 3,420,000 IPT Capital maintenance (annual) $ 21,344 $ 164,400 $ 547,200 Training IT $ 10,833 $ 7,500 $ 15,000 Network management tools $ 20,000 $ 25,000 $ 200,000 Network management maintenance $ 3,200 $ 4,000 $ 32,000 Total $ 529,673 $ 3,687,900 $ 11,058,600 IP Telephony component $ 311,761 $ 2,060,150 $ 6,340,700 LAN component $ 217,913 $ 1,627,750 $ 4,717,900 Percent IP telephony 59% 56% 57% Percent LAN 41% 44% 43% Total cost per unit $ 2,648 $ 1,475 $ 1,106 Figure 5: Cost Scenarios IP Telephony & LAN Implementation Costs Sample Cases As a result, companies turn to third-party tools for additional data and analysis of problem-resolution. Small and midsize companies pay about $20,000 for management and monitoring tools; large companies spend about $150,000, and extremely large global companies spend $1 million or more on these tools. In 8

10 addition, they spend 14% to 16% per year on maintenance, $2,500 to $5,000 on each monitoring application server, and about $2,500 per IT person for training. Scenario-Based Modeling When factoring all start-up costs (planning, implementation, and capital), it s easy to see how significant a cost LAN upgrades are in an IP telephony deployment. We calculated three samples of companies with rollouts of 200, 2500, and 10,000 end units, representing small, midsize, and large companies. (Please see Figure 5: Cost Scenarios, Page 8.) The startup costs for a typical, 200-unit implementation costs $529,673, for both a LAN upgrade and an IP telephony implementation, along with some third-party management and monitoring tools. Of that total, 41% of the cost is for the LAN upgrade. The LAN costs make up even more of a 2,500-end-unit rollout. Out of a total cost of $3.68 million, 44% is for the LAN upgrade. As the company size gets larger, costs can vary based on the extent to which the organization is distributed. The more locations, the more LAN equipment to upgrade and those costs don t benefit from economies of scale as much as they would if there were fewer locations. A 10,000-end-unit rollout costs about $11 million, with 43% of that cost for LAN upgrades. The cost per unit declines as the rollout size increases when combining all costs. Per-person costs for complete LAN upgrade and IP telephony deployment range from $2,648 for 500-unit rollouts to $1,106 for 10,000-person rollouts again primarily driven by economies of scale. Conclusion LAN upgrade costs are a significant and often overlooked cost of IP telephony and unified-communications deployments. When accounting for capital and operational costs, LAN upgrades actually can exceed the cost of the IP telephony deployment itself. As a result, it s imperative for IT leaders to understand the cost components associated with LAN upgrades. Don t ignore capital, planning and implementation, and operational costs, and factor them into the overall return-on investment. About Nemertes Research: Nemertes Research is a research-advisory firm that specializes in analyzing and quantifying the business value of emerging technologies. You can learn more about Nemertes Research at our Website, or contact us directly at research@nemertes.com. 9