Optimizing ROI: The Business Case for Cloud-Based Unified Communications. CapEx

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1 A UBM TECH Business Case Builder MAY 2013 CapEx OpEx Risk Optimizing ROI: The Business Case for Cloud-Based Unified Communications With many initiatives competing for finite resources, decision makers have to weigh capital investment, fixed operational overhead and exposure to risk carefully. This detailed guide helps leaders develop a clear understanding of how to gain the full benefits of unified communications while minimizing all three of these investment parameters.

2 In today s mobile, hyper-connected global marketplace, customer expectations and productivity pressures are escalating relentlessly. Employees, customers, partners and suppliers need the ability to talk, message and share data anywhere and at any time. As a result, unified communications (UC) has become an imperative. Consider the importance of business communications. In a healthcare environment, communications may be a matter of life and death. In a contact center environment, integration with customer relationship management may demand access to very specific professional services. A few moments of downtime could cost millions of dollars in lost business. Understanding these characteristics will help to provide a decision-making framework for evaluating models, meeting with potential cloud providers and building a business case for a UC investment. WHY UC? UC transforms communications in two essential ways: First, it provides better collective use of all available communications services. Existing communication systems at most organizations have evolved over time. Many communication elements may already exist as discrete services. When voice, , instant messaging, unified messaging and videoconferencing are all tied together, users can quickly take advantage of the organization s entire portfolio of communications capabilities including the tremendous synergies between them. Second, UC transforms communications with presence and mobility. In an increasingly mobile and time-compressed business environment, it has become essential to empower users to work together wherever they are. UC facilitates this anytime/anywhere collaboration by providing presence an indication of a person s current status (available, busy, on the phone, for example) that is visible to authorized users.using these capabilities, individuals and teams inside and outside the organization can communicate and collaborate far more effectively. Customers don t have to leave messages on both office and cell numbers. Managers can get immediate answers from subject-matter experts with a few keystrokes in a chat session, even if both parties are on long conference calls. Contact center staff can also quickly reach out to experts in the business to answer customer questions. No organization can afford to forgo the substantial business benefits UC offers in terms of: Individual and team productivity The acceleration and improved reliability of business processes An enhanced customer experience Greater overall agility The biggest decision facing organizations, therefore, isn t whether or not to deploy UC but how best to do so. IT DEPLOYMENT MODELS Organizations can choose from four categories of models for deploying UC technology solutions. These include: Dedicated/site-specific model In this model, software runs on propriety hardware or dedicated industry-standard servers in the organization s data center. This was the most common deployment model before the advent of virtualization. Hardware: The dedicated hardware needed in a site-specific model typically leads to underutilization at every site. Support: This model requires subject-matter experts to login remotely or visit remote sites to resolve problems. Software releases and technology refreshes often need to be applied simultaneously at every location. Capacity: Each site must be independently provisioned for maximum capacity to meet business requirements. If requirements increase, capacity must be scaled at the individual site accordingly. Availability: The impact of a technical failure is usually limited to the site where the failure occurred. The cost of provisioning redundancy, resiliency and physical security at every site can be prohibitively expensive. End users: This model is best suited to workers colocated at fixed central and remote sites. Cost structure: Typically CapEx-intensive, site-specific models also require additional OpEx in the form of internal support costs and/or an annual vendor support contract. Private cloud model In a private cloud model (also called an internal or enterprise cloud model), software is deployed in an on-premises data center or on hosted data center resources dedicated to a single organization. This model enables an organization to realize cost savings through centralization and virtualization, while retaining a higher degree of control. Hardware: Hardware is abstracted from the applications using virtualization. Because multiple applications share resources within this virtualized environment, hardware utilization is maximized. Support: Subject-matter experts can perform all support tasks within the data center, thereby minimizing travel and expediting // 2 //

3 problem resolution. Software updates and technology updates are easily managed using virtualization management tools. Capacity: Centralized resources including hardware, licenses and connectivity can be dynamically allocated as needed to fulfill business needs. Availability: Redundancy, resiliency and physical security do not have to be provisioned at each site, so they can be implemented much more cost-effectively. Virtualization also facilitates business continuity. End users: Private cloud models are better suited to supporting mobile users, because centralized resources can be accessed from any location. Cost structure: Private clouds typically require CapEx with a support contract, although hardware and software CapEx can be avoided with private infrastructure-as-a-service or platform-as-a-service offerings. Public cloud model Also known as shared clouds, public clouds are provided on an as a service basis often with limited control over the underlying infrastructure. Public cloud reduces the overall complexity of internal IT, enables faster deployment and simplifies capacity management. Service levels and cost are clearly defined and understood. Cost savings are realized through the economies of scale that result from sharing resources with other organizations. Hardware: The data center and associated hardware are owned and managed by the service provider. Support: The service provider performs support tasks under a service level agreement (SLA) over a fixed term. Economies of scale give the service provider superior access to subjectmatter experts. Capacity: The service provider quickly delivers any increase or reduction of capacity under the terms of the SLA. Availability: Investment in business continuity often exceeds private cloud solutions. End users: Public clouds can support users everywhere with a secure Internet connection. Cost structure: Public clouds involve highly predictable peruser OpEx, typically billed on a monthly or quarterly basis. Hybrid cloud model Organizations can combine public and private cloud models to realize return on investment from existing capital expenditure, fulfill specific compliance requirements and retain control over mission-critical applications while still gaining the functional and economic benefits of the cloud. The hybrid cloud model also enables organizations to migrate to the cloud gradually to avoid the potential risk and disruption of an all-in move to full public cloud deployment. Organizations that take this approach often distinguish between utility and specialist IT services. Utility services are those that do not require direct control, such as , and are therefore more likely to be migrated to public cloud models. Specialist services are those that require more direct control because they contribute to competitive differentiation and are, therefore, more likely to be managed internally. Given the many demands competing for limited IT resources, organizations have to be highly judicious when it comes to capital investment, operating expenses and exposure to risk. Fortunately, with the advent of the cloud, organizations can now choose the UC deployment model that best aligns with their specific tolerances for CapEx, OpEx and risk so they can substantially enhance business performance while conserving limited financial and human resources. (continued on page 4) ABOUT MITEL Mitel (Nasdaq:MITL) (TSX:MNW) is a global provider of unified communications and collaboration (UCC) software, solutions and services that enable organizations to conduct business anywhere, over any medium, with the device of their choice. Through a single cloud-ready software stream, Mitel s Freedom architecture provides customers in more than 100 countries the flexibility and simplicity needed to support today s dynamic work environment. For more information, visit UBM LLC. All rights reserved. // 3 //

4 CapEx Requirements for UC Deployment Models The capital expense associated with UC implementation falls into three categories: hardware infrastructure, software licensing and IT labor. The amount of CapEx a UC solution requires in each category varies with each deployment model. Hardware UC infrastructure Organizations need sufficient server, storage and networking hardware capacity to support UC applications with appropriate service levels. The real-time nature of voice and video communications makes it especially important to have sufficient server compute and I/O capacity available for periods of peak utilization. These CapEx hardware investments are: High under the dedicated/site-specific model, because organizations must bear the full burden of hardware procurement for every location Moderate under the private cloud model, because virtualization and centralization mitigate upfront infrastructure costs to some degree Low under the hybrid cloud model, because select upfront hardware costs can be offloaded to service provider(s) Low under the public cloud model, because most if not all upfront hardware costs are borne by the service provider and included in monthly subscription costs Software licensing UC environments require the licensing of highly sophisticated software modules that deliver reliable, feature-rich, real-time communications capabilities and integrate existing resources such as directory services. Organizations often roll out these modules in stages to ensure a smooth adoption by end users and to stagger costs over time. These CapEx software investments are: High under the dedicated/site-specific model, because organizations must license UC software to run on all machines at all locations and avoid underlicensing to ensure compliance Moderate under the private cloud model, because virtualization and centralization can mitigate per-machine licensing fees to some degree High to moderate under the hybrid cloud model, because software costs can be selectively offloaded Eliminated under the public cloud model, because upfront software costs are borne by the service provider and included in monthly subscription costs IT labor Installing, configuring and integrating UC-supporting hardware and software can require a significant amount of labor. Organizations that don t have the necessary skills in-house will have to invest in staff training or retain specialized contractors to do this work. These CapEx labor investments are: High under the dedicated/site-specific model, because work has to be performed on a one-off basis at multiple sites Moderate under the private cloud model, because centralization mitigates labor costs Low under the hybrid cloud model, because organizations can selectively offload support tasks to service providers Low under the public cloud model, because UC applications are already running in the hosted environment and set-up charges are typically included in monthly subscription costs There is a degree of uncertainty for any of the CapEx investments, because hardware, software and labor are all subject to cost overruns. (continued on page 5) CapEx Implications of UC Models Dedicated Private Cloud Hybrid Cloud Public Cloud Hardware Software Labor // 4 //

5 OpEx Requirements for UC Deployment Models When considering the operational expense associated with prospective UC implementation models, decision makers need to account for total OpEx, cost uncertainty and cost opacity. Each of these factors varies depending on the chosen deployment model. Total OpEx OpEx for UC implementations includes costs such as infrastructure management, user administration, software updates, and server power and cooling. Total UC OpEx is: High under the dedicated/site-specific model, because of the need to support multiple locations on-site and the need to overprovision capacity at each site to ensure requisite service levels Moderate under the private cloud model, because while centralization and virtualization mitigate infrastructure ownership costs the organization still bears all software-related ownership costs and administrative overhead Moderate under the hybrid cloud model, because support tasks can be selectively offloaded to service providers Low under the public cloud model, because economies of scale enable the service provider to provide all UC-related infrastructure, software and management at lower cost Cost uncertainty OpEx, like CapEx, can be subject to uncertainty. In fact, because they continually recur over time, OpEx overruns can be even higher. These overruns can be driven by several factors, including the unanticipated complexities of managing UC infrastructure. The potential for unexpected UC OpEx is: High under the dedicated/site-specific model, because of the exacerbating effect of infrastructure at multiple sites Moderate under the private cloud model, because centralization can mitigate unanticipated labor costs Moderate under the hybrid cloud model, because the infrastructure-related OpEx can be selectively offloaded to the service provider Low under the public cloud model, because the full responsibility for delivering UC is shifted to the service provider for a fixed cost Cost opacity It s one thing to overspend on some aspect of UC. It s another thing to overspend and not know it. Cost opacity increases the likelihood that UC will consume IT resources inappropriately. It also limits the ability of organizations to easily and accurately chargeback or showback UC costs to business units. UC OpEx opacity is: Moderate under the dedicated/site-specific model, because visibility into the allocation of IT staff labor for infrastructure and software management can be limited High under the private cloud model, because in addition to IT staff labor for infrastructure and software management visibility into the consumption of infrastructure resources themselves can also be limited Moderate under the hybrid cloud model, because some labor is done on a fixed-cost basis by the service provider Eliminated under the public cloud model, because all OpEx is visible as a fixed monthly cost (continued on page 6) OpEx Implications of UC Models Dedicated Private Cloud Hybrid Cloud Public Cloud Total OpEx Uncertainty Opacity // 5 //

6 Risk Implications for UC Deployment Models Decision makers must take into account several risk factors when deciding how to best implement UC: poor project outcomes, business continuity and inflexibility/obsolescence. Each deployment model carries a different risk level for each factor. Poor project outcomes As with any IT initiative, UC projects can experience delays, functional shortfalls and outright failures for a variety of reasons, including poor planning and technical snafus. The risk of poor project outcomes is: Moderate under the dedicated/site-specific model, because of the complications associated with deploying and managing technology at multiple sites Low under the private cloud and hybrid cloud models, because infrastructure centralization mitigates project complexity Eliminated under the public model, because the full responsibility for delivering UC is shifted to the service provider for a fixed monthly cost Business continuity Any interruption of communications services can have highly adverse consequences for the business. Decision makers must therefore consider how to best protect the business from such interruptions whether they are caused by technical problems or natural disasters. The risk of business interruption is: High under the dedicated/site-specific model, because each site represents a potential single point-of-failure Moderate under the private cloud and hybrid cloud models, because virtualized infrastructure can be more readily replicated at multiple locations for failover purposes Low under the public cloud model, because the service provider can cost-effectively provision full redundancy of the UC environment in multiple data centers Inflexibility and obsolescence Organizations must be able to quickly adapt to changing business requirements such as piloting new UC capabilities or onboarding an acquired business. The ability to easily modify the UC environment over time is as important as the success of the initial rollout. The risk of inflexibility and obsolescence is: High under the dedicated/site-specific model, because of the time and effort required to upgrade UC resources at remote sites Moderate under the private cloud model, because organizations have to install and/or reconfigure software changes in the centralized/virtualized environment Low under the hybrid cloud model, because software changes may in some cases be the responsibility of the service provider Eliminated under the public cloud model, because the service provider can roll out new capabilities and accommodate organizational change almost immediately Some IT managers perceive risk in their loss of direct control over UC implementations in the cloud. By making UC implementations more responsive to the business at less cost, however, these implementations actually reduce risk rather than adding to it. THE BOTTOM LINE Decision makers evaluating models for UC implementation should bear in mind that cloud-based models reduce or even eliminate the need to make CapEx investments in UC technology and keep UCrelated OpEx controlled and visible. They also substantially mitigate the risks associated with UC implementation and ownership. Different organizations have different imperatives when it comes to CapEx, OpEx and risk as well as different UC-related business requirements so one size definitely does not fit all. And, because these imperatives and requirements can change over time, it is essential to choose a UC solution that can easily be migrated between alternative deployment models. UC offers substantial business benefits for productivity, business processes, customer experience and agility. The range of implementation models available allows decision makers to choose an approach that is right for their organizations needs today and with careful selection of offerings from specific vendors that can adapt for future conditions. Risk Implications of UC Models Dedicated Private Cloud Hybrid Cloud Public Cloud Poor Outcomes Business Continuity Obsolescence // 6 //

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