Is VoIP Worth It?

• 11/01/08

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The reasons can be as much qualitative as quantitative, but once you add them all up, school districts are finding the answer is yes.

JIM SCHUL SAYS EXPERIENCE has taught him one key to optimizing the return on investment (ROI) for a newly installed voice over IP system: Turn off your old phone line!

"I don't know if I should say this, but phone companies will keep billing you until you tell them to turn it off-- and sometimes even after that," says Schul, the CIO of the Harris County Department of Education in Houston, which recently finalized its switch from landlines to VoIP. "You have to put requests in writing, 30 to 60 days in advance."

It may seem trifling, but making sure that the local phone company doesn't bill you for your old landlines is one step toward ensuring that your move to a web-based telephone system will show a positive return on investment.

School districts have by and large had great results implementing VoIP, which has become the conduit for delivering expanded functionality, achieving greater internal control, and gaining freedom from onerous monthly phone bills. But demonstrating a financial return on what is a substantial investment can be an elusive effort.

The goal of calculating return on investment with VoIP-- or any new technology initiative, for that matter-- is to derive either a simple number that identifies the value of the investment, or a ratio that compares the value of the results you expect to receive from the deployment to the amount you would have to spend to buy the system and maintain it.

To get a reliable calculation, you have to take several numbers into account. According to Jeff Hicks, software architect for NetQoS and author of Taking Charge of Your VoIP Project (Cisco Press, 2004), to get a sense of pre-VoIP costs you need to know what your district is being charged for each traditional telephone line it uses, typical long-distance charges, as well as the expense of running dual networks-- one dedicated to voice communications and the other to data communications-- including staff and maintenance costs.

On the VoIP side, costs include the purchase of equipment, including IP phones, specialized network equipment such as call servers, and backup power sources in the event of a power outage. Then there are charges for the many applications that will run on VoIP to perform chores such as automated attendance and unified communications. And there may still be the cost of those lingering traditional phone lines that need to remain in place, dedicated to maintaining 911 and alarm access.

Plus, says Hicks, you have to ensure that your network infrastructure can support the additional bandwidth required to sustain voice traffic. Hicks' company sells products that examine the impact of running new services on the network. He also points to Cisco Systems' IOS IP service level agreement, part of the company's IOS operating system, which allows network administrators to run VoIP tests between routers and between routers and switches to gauge whether the network can sustain additional usage.

Once you've documented and compared the expenses for both your old phone service and the VoIP system, it's time to reckon the value of making the switch. There are potential savings in two obvious areas: eliminating or reducing monthly carrier expenses and consolidating networks, with the latter's requisite reduction in staffing, maintenance, and equipment requirements.

Even after you've pulled together all the numbers, tallying a comprehensive ROI for a VoIP system still isn't easy. First, there are many ways to calculate ROI, and one isn't any better than the next; it all depends on how your administrators prefer to see the numbers presented. In one formula, you take the benefits and subtract the costs and you have your simply answer. In another, you divide the benefits by cost. In a third approach, you subtract costs from benefits and divide that difference by those initial costs (see "Three Ways to Spell ROI").

The second complication is that, beyond hard and direct cost savings, you need to be able to quantify all the benefits VoIP delivers to your school. And that's not so simple to do.

Measuring the Benefits

"I'll be honest with you: ROI and how you quantify it-- you can slant it any way you want to," says Vani Naidoo, education solutions marketing manager for VoIP vendor Mitel.

That said, Naidoo believes there are ways to reliably calculate the cost savings VoIP offers while ferreting out and measuring the technology's qualitative benefits.

For example, she points out, if a district has an office support person dedicating a portion of each day to handling incoming and outgoing calls, a VoIP system can include an automated speech attendant to direct calls. There are also the advantages brought by the mere availability of more phones. Few schools or districts can afford to deploy landline phones or voicemail accounts to every classroom, while VoIP service allows for a 1-to-1 installation. So when a parent calls to reach a teacher, instead of staff handling the call, it can be routed directly to the teacher's class or voicemail box. Naidoo says the value of that freed-up time can be calculated by multiplying staff salaries by the percentage of time that can now be redirected to other work.

VoIP's qualitative benefits are apparent in Florida's Monroe County School District, where the implementation of a Mitel 3300 system "has opened up doors to really great communication," says Ken St. James, director of instructional technology. He calls the district, which covers a 110-mile stretch from Key Largo to Key West, "geographically challenged." That has made communication challenging too. With a phone now in every classroom, VoIP service has improved dialogue between parents and teachers, as well as among staff, and even between the superintendent and teachers. "A teacher will call the superintendent directly and get right to his office," St. James says.

Likewise, the new phone system has been used to notify teachers in emergencies, such as a bomb scare at one school that prompted a lockdown, and a stranger on campus at another. The phones include digital readouts. If school administrators want to put a message out, they ring the classrooms and enter a special code: Code 3. "Teachers know what a Code 3 is," St. James says, "so it doesn't alert the students."

Because the 14 sites in the district are so far apart, staff and teachers are beginning to hold training sessions through Mitel's Your Assistant, a collaboration application. Now participants can sit in front of their computers and talk with each other over the phone while viewing demos, receiving training, or getting remote support. "We're probably going to be doing more with Your Assistant this year, just because of travel expenditures and cost of gas to go up and down the Keys," says St. James.

When the topic of ROI is brought up, St. James dithers a bit: "Our superintendent has asked us the same question: 'Can you tell me a dollar amount?'" He can document the savings of $50,000 to $60,000 a year produced by eliminating the costly maintenance contract the district had in place to cover its 12-year-old phone system. But trying to defend some of the more substantial benefits of the new service that can't be captured statistically eludes him: "Enhanced communication has been a real thing, but how do you put a value on that?"

Reducing TCO

Harris County's Schul says he knew that a convergence of the voice and data networks would result in savings. "If I don't have to maintain two switches-- if I don't have to maintain knowledge of two switches-- that saves us money," he says.

Better customer service was also a consideration, Schul adds. "We weren't getting the customer service that we thought was adequate. We had multiple delays-- days long-- in getting phones repaired or fixed. And we were looking for a better solution for our customers." The county's internal IT department was little help. It simply documented whatever came in through its help desk and forwarded those requests to the local phone company.

Schul says that because a large number of the district's locations were connected with fiber optics, his team knew Harris County had the bandwidth available to deploy VoIP. To begin the process, the IT department did an analysis of the existing phone system to discover all recurring costs, as well as support and maintenance expenses. Plus, the department researched turnaround time on the additions, changes, and deletions it was having done by a third-party vendor. The outlay, says Schul, "seemed to be prohibitive."

From that, the county procurement staff issued a request for proposals, to which four vendors responded. After getting demos from each company, the county started negotiations. "There were two main factors that helped us make a decision," Schul recalls. "The first was, of course, the cost. We looked for a quality solution at the best price. Then we looked at ease of use."

Two of the vendor candidates were closely priced, but one had a VoIP system that appeared to be simpler to use. "That was going to reduce our total cost of ownership, because now we had a system we could support easily, train our end users on easily, and train our support people on easily."

The system-- ShoreTel equipment installed by Total Technologies-- covers 29 locations and 990 phones. The first group of 500 phones was deployed in the district in December 2006. A second phase followed in September 2007, when 280 units were installed. The final 210 went in this past September.

As the deployment progressed and the county was able to turn off the old system, Schul says, "we realized an even faster return on investment." According to Schul, the district initially projected a 24-month rate of return on its VoIP deployment, but is now on track to achieve that in 20 months.

The county chose to lease its system over a period of three years rather than buy it outright. "Like everyone, we have to fight budgets," Schul says. "We didn't have the capital on hand to pay for the entire system, so we looked at different lease options." He says leasing adds a little bit of interest to the cost, but that it is the most cost-effective way to get the functionality the county needed.

According to district calculations, after three years the traditional phone service would have cost about $1.16 million. An outright purchase of a VoIP system would have cost $591,000; the lease costs $598,000. Those are just the hard numbers, but they tell enough of the story, Schul says. "Converging networks, saving dollars on network switches-- because now you're utilizing your existing infrastructure-- have advantages in the long haul."

More for the Money

Implementing VoIP doesn't always mean a district will pay less each month for its telecommunication services. What it does mean is that the schools will receive more for their money, which is the essence of measuring a positive return. Before factoring in the funds it receives from the federal E-Rate program, which provides discounts to eligible districts for telecommunications services, Marana Unified School District, northwest of Tucson, AZ, is spending about $295,000 annually for its ShoreTel VoIP system, which it deployed last year on its new wireless network, as opposed to $330,000 a year for the previous Qwest Centrex system (see "At a Glance"). Although a $35,000 savings doesn't sound like much, it's considerable when you take into account that the number of phones available in the district has nearly doubled from 700 to about 1,300.

The district doesn't own or maintain the equipment. That's handled by Trillion. "We really didn't have anybody who was an expert in VoIP," Marana's technology resources manager, Tom Payne, explains. "We still have the ability to manage and monitor a good portion of it."

The result: Service has vastly improved. The local phone company could take up to four weeks to respond to requests for changes to the phone service. Now, says Payne, he can make changes quickly right at the management console on his computer-- the same console viewed by the technicians at Trillion. "Because we manage that, there is no cost per month," he says. New phones can be installed within a day a work order is received. "Teachers are just amazed by that. They love that they don't have to wait or keep calling to find out what's going on."

Staff who travel among the 18 schools in the district-- such as counselors-- can reassign their phones on the fly when they arrive at a different campus. "They punch a code into the phone, and it transfers that account to that phone," Payne says. "That's a temporary assignment. When they unassign it, it goes back to the home account. It gives them the ability to receive calls without giving out multiple phone numbers, and to get voicemail no matter where they're at."

Unified Communications

VoIP is still a relatively young tool, and many schools and districts are just beginning to realize its biggest advantages. So for the time being, ROI may remain hard to pin down. But that doesn't mean the technology isn't making an impact.

Monroe County in Florida will shortly be deploying Microsoft Office Communicator 2007, which its Mitel phones integrate with through Active Directory. Once that software is installed, users will have a "presence" that can be viewed from Outlook, SharePoint, and Office Communicator. That will enable them to right-click on other users in the directory, select the type of communication to initiate with them, and talk via audio, video, or instant messaging by computer or phone.

"Some of the features we've gotten out of the system are light-years away from what we used to have," says Miguel Gonzales, network analyst for the district. "The most exciting thing about a VoIP system is that it opens the door for unified communications. It gets your foot in the door."

::WEBEXTRAS ::
If you would like more information on VoIP, visit our website at www.thejournal.com. In the Browse by Topic menu, click on Telecom.

Dian Schaffhauser covers education technology for T.H.E. Journal and its sister publication, Campus Technology.

This article originally appeared in the 11/01/2008 issue of THE Journal.