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The Business Case for ‘Voice over Internet Protocol’ Implementation for XYZ Insurance Limited
Table of Contents
Project Team.........................................................................................................................................3
Project Description................................................................................................................................3
Measurable Organisational Value..........................................................................................................4
Comparison of alternatives...................................................................................................................5
Cost of implementation.....................................................................................................................6
Benefits of VoIP implementation.......................................................................................................7
Recommendation..................................................................................................................................8
Project Team
The team for implementation of Voice over Internet Protocol (VoIP) solution for the company will consist of
Project Manager Two Network Engineers Legacy system expert Financial analyst
Project Description
The project envisages complete implementation of VoIP at the New Delhi branch of XYZ
Insurance Limited. The branch having 100 employees currently uses traditional PSTN
networks both for international as well as short distance calls. TDM based Private Branch
Exchange (PBX) is also being used for internal communication and voice mail. Increasing
number of new entrants in the insurance sector has forced companies to implement cost
cutting measures to remain competitive. VoIP (Voice over Internet Protocol) is an IP
telephony term for a set of facilities used to manage the delivery of voice information over
the Internet. VoIP involves sending voice information in digital form in discrete packets
rather than by using the traditional circuit-committed protocols of the public switched
telephone network (PSTN). The project involves a complete upgradation of the existing
traditional PBX to hybrid systems that combine the capability of PBX and enhanced features
of VoIP. The advantage that the hybrid network provides over standalone VoIP
implementation is that in case of congestion over the internet the traffic can be routed over
the traditional PSTN network which in turn would maintain the desired Quality of Service.
This has been appropriately depicted in the figure below:
2
Measurable Organisational Value
The basic advantage of VoIP is the cost savings. International call tariffs are dramatically
reduced, and in addition, the cost of equipment is very reasonable compared to a traditional
PBX environment. But cost savings is not the only benefit, and possibly not even the biggest.
The major benefits of VoIP for the company in the order of their importance are:
Financial Benefits
The currently installed system in the branch makes use of a PSTN – Packet-Switched
Telephone Network line. For using PSTN one actually has to pay for each minute spent on
communication via the phone. International calls are much more expensive. VoIP on the
other hand uses the Internet as backbone so the only cost incurred when using it is the
monthly Internet bill of the Internet Service Provider. Studies have shown that, compared to
using a PSTN line, using VoIP can potentially make you save up to 40 % on local calls, and
up to 90 % on international calls.
Operational Benefits
VoIP being a digital technology can offer much more extra features as compared to
traditional telephony using PSTN and PBXs. In traditional telephony, these additional
features though available, have an enormous cost attached with it. Most VoIP installations
come standard with high-end features, including voicemail, portability that allows you to plug
in an IP phone into your computer and make calls from any location, free in-network calling,
distinctive ringing, and the ability to select numbers from multiple area codes to serve
geographically dispersed callers. The benefit of "virtual numbers" is very beneficial to
businesses deploying VoIP. This service allows you to obtain phone numbers with different
area codes, and sometimes even in different countries depending on your provider, so that a
caller from London for example, could call your New York office as if it were a local call.
VoIP also boosts productivity of businesses by integrating telephony with every-day
applications. Doing so may require some additional custom integration and the services of a
3
specialist, but the benefits are undeniable. For instance, it is routine for VoIP to be integrated
with Outlook and other contact managers, allowing you to simply click on a name and place a
phone call. VoIP also offers operational facilities like videoconferencing, web conferencing
and web-based meetings. This allows all participants to collaborate, share documents, and
even mark up a screen in real time.
Customer Benefits
Since VoIP uses the same channel for data and voice transfers, various applications can be
integrated which provide better services to the customers. Losses due to jams over the
network can be reduced by using the hybrid system of VoIP and PSTN. This hybrid system
considerably improves the Quality of Service provided to the customer.
The value that the project brings to the organisation is in terms of following two aspects:
Provide a cheaper mode of internal and external communication- As stated the
implementation of VoIP can reduce the cost incurred on international calls by about
80%-90%. This saving in cost can bring the company distinctive competitive
advantage.
Better operational efficiency- The overall VoIP solution results is productivity savings
resulting from increased operational efficiencies. In this category, benefits enabled by
the VoIP system include:
• Reduced time and effort to support existing services
• Increased employee productivity and reduced downtime
• Reduced support costs via customer self-service
• Reduced errors and order fallout
After the implementation of the project the total voice and data handling cost of the branch
should come down by 15% in 365 days after completion of project. Also after the successful
project implementation the branch should be able to process the insurance application in a
maximum of 24 hours.
Comparison of alternatives
4
The existing system of communication using PSTN network and TDM PBXs has to be
replaced due to the higher cost of operation of the system. The branch has two options either
to outsource the implementation of VoIP in the premises to some outside vendor or to
implement the project in house. The Total Cost of Ownership (TCO) can be calculated using
the formula:-
TCO = (Acquisition Costs) + (Monthly Recurring Costs) + (Annual Maintenance Costs)
Cost of implementation
Outsourcing the implementation of the project
Acquisition costs ADTRAN NorTel Alcatel Cisco
Phones $5,900 $6,493 $5,840 $8,110
Equipment $6,394 $10,234 $18,850 $10,681
Installation, Configuration, Training $2,969 $4,880 $3,756 $12,000
Subtotal $15,263 $21,607 $28,446 $30,791
Maintenance Costs
Three year maintenance and on-site support
$3,600 $5,208 $5,874 $11,322
Subtotal $3,600 $5,208 $5,874 $11,322
TCO $18,863 $26,815 $34,320 $42,113
In house implementation of the project
Acquisition costs ADTRAN
Phones $5,900
Equipment $6,394
Installation, Configuration, Training $3,000
Subtotal $15,294
Maintenance Costs
Three year maintenance and support $6,000
Subtotal $6,000
TCO $21,294
5
The assumptions under which the calculations are done for in house implementation are as
under:
It has been assumed that equipment is bought from the cheapest vendor i.e.
ADTRAN.
Installation, Configuration and training cost: It has been assumed that 30 man-days
will be consumed for the activity at the rate of $ 100 per man-day.
Three year maintenance and support: It has been assumed that the activity will require
60 man-days in three years at the rate of $ 100 per man-day.
Project Costs ($) Start up Year 1 Year 2 Year 3
Hardware Costs Phones 5900 0 0 0Equipments 6394 0 0 0
Installation, configuration and training 2969 0 0 0Operations and Maintainence 0 1200 1200 1200
Total Costs 15263 1200 1200 1200
Benefits ($)
Savings for moves, adds, changes and removals 0 5000 5250 5513Operational savings 0 4800 5040 5292Total Benefits 9800 10290 10805
Financial Analysis ($)
Net Value -15263 8600 9090 9605Discounted present values (9% disct rate) -15263 7890 7650 7416Net Present Value 7693 Payback Period 2 Years Internal Rate of Return 35%
6
Project Costs ($) Start up Year 1 Year 2 Year 3
Hardware Costs Phones 5900 0 0 0Equipments 6394 0 0 0
Installation, configuration and training 3000 0 0 0Operations and Maintainence 0 1500 1500 1500
Total Costs 15294 1500 1500 1500
Benefits ($)
Savings for moves, adds, changes and removals 0 5000 5250 5513Operational savings 0 4800 5040 5292Total Benefits 9800 10290 10805
Financial Analysis ($)
Net Value -15294 8300 8790 9305Discounted present values (9% disct rate) -15294 7615 7398 7185Net Present Value 6935 Payback Period 2 Years Internal Rate of Return 32%
Benefits of VoIP implementation
7
The benefits of VoIP will be independent of the method of implementation. The benefits
generated by VoIP implementation can be broadly categorized into Quantitative and
Qualitative.
Quantitative Benefits
Expenses for moves, adds, changes and removals (MACRs)
Toll charges for intra company long distance
Qualitative Benefits
Advanced, robust and mobile voice and data features
Integrated information services
Advanced multimedia and collaboration tools
8
We can infer that the monetary benefits generated per year $ 19,600 in addition to other
qualitative benefits.
Recommendation
A thorough analysis of cost and benefits of the implementation of VoIP suggests that the project should be outsourced to ADTRAN.
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