White Paper HiPath 8000 Business Benefits V3...HiPath 8000 Business Benefits A White Paper by Siemens Communications Enterprise Networks Division . HiPath 8000 Benefits 2 Content 1

Issue: July 2005

HiPath 8000 Business Benefits

A White Paper by Siemens Communications Enterprise Networks Division

HiPath 8000 Benefits 2

Content 1. General Strategic ROI Approach with HiPath 8000 3

1.1 The Need 3

1.2 HiPath 8000 Solution 4

1.3 Common HiPath 8000 Benefits 5

1.4 Results of a Recent Independent TCO Study 6

2. HiPath 8000 Benefits in Detail 8

2.1 Benefits for Enterprises 8

2.2 Benefits for Managed Service Providers and Carriers 11

3. Economic Assessment Process 12

4. Sample Business Case 14

4.1 Scenario Description 14

4.2 Calculation Results 14

5. Summary 16

1. General Strategic ROI Approach with HiPath 8000

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SIP (Session Initiation Protocol), is a signaling protocol for Internet confer-encing, telephony, presence, events notification & instant messaging. SIP was developed within the IETF MMUSIC (Multiparty Multi-media Session Control) working group, with work proceeding since Sept.1999.

1.1 The Need Business demands on IT and telecommunication infrastructures are constantly rising. Increased mobility, global business operations, real-time communications and zero downtime tolerance require new applications and continuous, interruption-free service. As IP becomes the medium of choice for integrated communications and existing TDM (Time Division Multiplexing) switches are migrated to support IP or are replaced, there is a perfect opportunity to move to open architectures and standard interfaces not previously available in traditional PBX systems. This enables both the enterprise customers and the leading suppliers to gain major advantages from this evolving technology. Key benefits include more choice of critical platform components, open interfaces to applications, accelerated development of new features, and the ability to more easily integrate communications functions into business processes. Within a business, applications like presence and advanced mobility transform the way people collaborate and significantly enhance both productivity and personal satisfaction, while the associated servers can be distributed anywhere within the network. Business needs drive network evolution and technology replacement. As a result, infrastructures are often in more than one evolutionary stage at any given time. Today, for example, the majority of enterprises are transitioning from traditional to converged networks, with a few leading organizations starting the transition to fully converged communications. Clearly it is highly advantageous to these businesses to deploy solutions that accommodate both existing infrastructures and investments as well as provide a sound business foundation for the new emerging applications and services. In today’s dynamic and customer-focused economy, the ground rules for competition constantly change. New alliances are formed, new opportunities are seized and new markets are exploited on a global basis. Companies are more virtual, collaborative and distributed through their reliance on an extended network of partners, suppliers and employees across diverse locations. New IP telephony business applications deliver a greater range of economic and operational advantages. However, companies which consider moving to IP-enabled or hosted systems grapple with a number of critical business challenges:

• Reduce operational costs

• Support the communications environment across the enterprise, office, home office and mobile locations

• Provide tangible improvements to the business, quickly and with minimal pain

• Support advanced multi-media and multi-modal services

• Support advanced applications, such as presence and instant messaging

• Integrate mobile workers into one seamless enterprise network

• Simplify the employees’ lives and put them in control of their daily work

• Enable easy integration into the data infrastructure through flexible software architectures

• Maintain high reliability and survivability

• Support a broad array of SIP client devices


In traditional circuit switched networks, HW & SW are not independent. A "softswitch" means decoupling the under-lying computing HW, which is based on non-proprietary operating systems, from the pure switching application. A softswitch architecture by itself is limitlessly scalable, with its performance dependent only upon the underlying HW and the availability of components such as gateways and applications.

CPE (Customer Premise Equipment): Equipment and wiring located at subscriber's business location.

1.2 HiPath 8000 Solution HiPath 8000 is a SIP-based Real-Time IP softswitch for very large enterprises (VLE) and can be deployed and managed either as a typical enterprise solution or as a hosted service, which is managed by either the customer, a managed service provider or Siemens. This provides a robust service creation and delivery framework, which allows customers to simply and cost-effectively integrate converged voice, multi-media and multi-modal services and applications across the organization via the IP infrastructure. The HiPath 8000 softswitch architecture is scalable from a few thousand users up to several tens of thousands of users. It runs on highly reliable, fault-tolerant industry-standard servers. Hardware errors are automatically managed by the HiPath 8000 system and do not cause service degradation. This survivability strategy takes advantage of the HiPath 8000 public carrier heritage to ensure that HiPath hosted solutions deliver reliability which exceeds that delivered on enterprise CPE solutions. Besides unbeatable availability, the unique HiPath 8000 architecture ensures ‘on-the-fly’ software upgrades and patching, as well as static and dynamic load sharing. Each node can be configured to serve as a “hot-standby” for the other node. Synchronization of call status between both nodes is guaranteed, thus active calls are always maintained. While HiPath 8000 supports multiple protocols due to its carrier heritage, the SIP protocol is the fundamental architectural approach due to its ability to support both telephony and other real time services that will be commonplace in the new NGN (Next Generation Network) world such as video, multi-media, multi-modal, collaboration services, presence, etc. The HiPath 8000 universe, similar to NGN carrier architectures, can be broken down into four key components: softswitch, devices, media gateways and media servers for applications. This approach is ideal for the provision of real-time communication services via a hosted service. The following diagram shows the elements of the comprehensive HiPath 8000 solution:

3rd Party

SIP

optiClient 130

PSTN

HiPath 8000

SIP

SIP

Gateways

ISDN3rd Party

SIP

3rd partySoft Client

SIP

optiPoint400/600/410/420

IPUnityApplication Server

SIP/MGCP

HiPath 3000/4000 (SMG)

SIP-Q ISDN

IPUnityHarmony 6000

HMS 3000Media Server

SIP/MGCP

HiPath 8000 V2.0

iSSC/NMC/SMC

RG 8700

HiPath ComAssistantHiPath Xpressions VM

HiPath OpenScape

SIP

Mediatrix GW

Media Servers

Endpoints

SIP

SIP ISDNSIP

Convedia CMS 1000 Media Server

Applications

LAN/WAN

SIP

analog fax

IAD ISDN/analog

Comdasys Convergence 1600 & 2600



Survivable Media Gateways (SMG) bridge the gap to PSTN-supporting different trunking protocols. In the very unlikely case of a non-accessible switch, SMGs maintain existing calls and provide local, basic operations.

1.3 Common HiPath 8000 Benefits Most large companies have established a strategy to reduce infrastructure administration and other operational costs. End-user productivity improvements and customer satisfaction increases are also key strategic elements. The Siemens HiPath 8000 platform, optiPoint and optiClient SIP user workpoints and management applications advance this strategy of reduction in management costs, improvement of end-user productivity and investment protection.

HiPath 8000 offers numerous benefits that improve operational efficiency, reduce costs and eliminate unnecessary business expenses. HiPath 8000 consolidation of nodes and servers results in a highly efficient communication solution that reduces network and operational costs, including headcount and space requirement reductions.

The HiPath 8000 real-time IP systems modular architecture allows IP, TDM and analog networks to co-exist by leveraging existing infrastructure via smart migration concepts. Thus, the architecture protects legacy investments while introducing IP benefits to the enterprise.

HiPath 8000 can operate as a truly centralized, single node solution, based on a clustered server concept that provides nearly unlimited scalability from a few hundred users to over 100,000 users.

Being a unique, carrier-grade solution, the highly reliable HiPath 8000 architecture has no single point of failure and provides carrier reliability and proven 99.999% availability.

Common, standardized components make it easier and more cost-efficient to add or move trunks, stations, sites, redundancy, applications, clients and manage-ment functions across systems and networks regardless of which configuration is used (stand-alone, networked, distributed or hosted configuration). HiPath 8000 is a true SIP softswitch based on carrier grade Linux and the Fujitsu-Siemens Resilient Telco Platform (RTP) as a decoupling software layer between the softswitch application itself and the underlying hardware. The customer benefits from low integration overhead through the consistent use of standard hardware and software components, utilizing the latest state-of-the-art processor and computing platform technologies from off-the-shelf components, which is not otherwise possible with proprietary solutions.

HiPath 8000 supports a variety of Branch Office Solutions - from small to very large locations – by using direct workpoint client connections through a Survivable Media Gateway (SMG). This seamlessly supports the communications environment across the enterprise, office, home office and mobile locations. To protect the business processes per site, a survivability solution can be added to each remote side, which maintains existing calls and ensures basic operations even in WAN failures or unreachability of the HiPath 8000 system.

Due to open and standard interfaces, third-party applications can be easily linked to enrich a customer’s experience with additional services and applications that complement Siemens’ powerful application suite.

The cost effectiveness of a centrally managed real-time IP system, or softswitch, and applications is further emphasized by productivity enhancements due to rapid global deployment throughout large or very large enterprises. The HiPath 8000 solution supports advanced multi-media and multi-modal services as well as advanced applications such as presence and instant messaging, while tightly integrating mobile workers into one seamless enterprise network. Deployment utilizing IT compliance, while adhering to virtually all data and IT standards, provides open flexibility.

The following list summarizes the common HiPath 8000 benefits: New, compelling TCO model for large enterprise communications Highly scalability to 100,000 users per node & virtually unlimited users per network Carrier reliability and proven 99.999% availability Resilient real-time communications for data center integration Step-by-step evolution with solid investment protection Easy and seamless integration with IT business and advanced 2gIP applications Vehicle for business efficiency and employee productivity

1.4 Results of a Recent Independent TCO study A recent study performed by an independent research company compared the Total Cost of Ownership (TCO) of the following solutions:

The following scenario was the baseline for the comparison:

• Global 1000, Very Large Enterprise • 25,000 User Enterprise Dispersed Across the U.S. • Headquarter with 10,000 Employees • Regional Locations with 1,500 Users • 195 Small to Mid-Sized Branch Offices with 20 to 250 Users • 4% Employee Growth over 5-Year Period • Applications:

o Contact Centers - 5% of User Population o Messaging - 90% Voice Only; 10% Unified Messaging o Conferencing - 2,500 Simultaneous Sessions

Analysis Compares Total Cost of Ownership over a 5-Year Period:

• Capital Investment and Operating Expenses • IT Deployment Model Process Efficiencies • Administration Process and Productivity Efficiencies

The results clearly show that HiPath 8000 offers the best overall TCO:

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HiPath 8000 Softswitch TCO Scenario Comparison“IP PBX” Is Most Expensive

• Self-Maintainer• SIP Based, Centralized SolutionHiPath 8000

• Replace 10% Of Traditional PBX Systems Per Year• Traditional PBX Environment That Swaps Out 10%

Of Systems Per Year To An IP-PBX End Of Life PBX

• CPE Managed By Service Provider• SIP Based, Centralized SolutionHiPath 8000 Managed

• New 100% IP, CPE Managed By Service Provider• IP PBX Centralized At Enterprise Location And

Managed By A Service ProviderManaged IP PBX

• New, 100% IP In Network & Desktop, Self-Maintainer • Pure Packet Switched EnvironmentIP PBX

• “Do Nothing Scenario”• Self-Maintaining Current Investment• Keeps Larger Sites At Latest Software Release

Traditional PBX

DescriptionModel

• Self-Maintainer• SIP Based, Centralized SolutionHiPath 8000

• Replace 10% Of Traditional PBX Systems Per Year• Traditional PBX Environment That Swaps Out 10%

Of Systems Per Year To An IP-PBX End Of Life PBX

• CPE Managed By Service Provider• SIP Based, Centralized SolutionHiPath 8000 Managed

• New 100% IP, CPE Managed By Service Provider• IP PBX Centralized At Enterprise Location And

Managed By A Service ProviderManaged IP PBX

• New, 100% IP In Network & Desktop, Self-Maintainer • Pure Packet Switched EnvironmentIP PBX

• “Do Nothing Scenario”• Self-Maintaining Current Investment• Keeps Larger Sites At Latest Software Release

Traditional PBX

DescriptionModel

and “Managed HiPath 8000” Is Least Expensive

$120M

$130M

$90M

$100M

$110M

TradPBX

123

HiPath8000

108

End-of-Life PBX

120

129

IP PBX

The values are 5-year cumulative for a 25k user scenario with 1 HQ & 197 small to large offices

Source: External Research Company

ManagedIP PBX

123

ManagedHiPath8000

102


In addition to TCO, HiPath 8000 offers the best overall Operational Expenses (OPEX) as seen in the following detailed diagram:

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HiPath 8000 Hosted Softswitch – TCO SummaryManaged HiPath 8000 Offers Best Overall TCO and Lowest OPEX

$0 $25M $50M $75M $125M$100M Totals

CAPEX OPEX Telecom Facilities

HiPath 8000 23 27 58 0.1 $108M

IP PBX

37 33 58 0.25 $129M

TraditionalPBX 6 40 77 0.5 $123M

$120M15 30 75End-of-Life PBX 0.5



$102M23 21 58 0.1Managed HiPath 8000

ManagedIP PBX $123M37 27 58

The costs per user per month (incl. telecommunication costs) also are the lowest with a HiPath 8000 solution.

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TCO Study – Monthly Per User CostThe “Managed/Hosted” Deployment Model Outperforms All by as Much as 22%

$55

$60

$65

$70

$75

$50

70

TradPBX

73

IP PBX

69

End-of-Life PBX

TDMIP



Costs per user

per month

(incl. telecomcosts)

61

HiPath8000

58

ManagedHiPath8000

Managed/Hosted

70

ManagedIP PBX


2. HiPath 8000 Benefits in Detail


2.1 Benefits for Enterprises The following are summaries of the most important HiPath 8000 benefits for enterprises.1

Administration Cost Reduction from Centralized Administration Support

HiPath 8000 provides improved administration resource utilization by simplifying tasks and enabling administrators to support more users than with legacy systems. The dual server configuration reduces system monitoring and configuring effort. A commissioned study conducted by Forrester Consulting on behalf of Siemens Communications found that organizations can save an average of 60% in administration costs by deploying HiPath 8000.

Data Center Facility and Server Support Cost Reduction due to Server Consolidation

HiPath 8000 requires less space as it does not require as many PBX nodes or application servers, which has a major financial impact on the infrastructure and equipment maintenance costs. Companies can reduce real estate, electrical and environmental costs, as well as corresponding insurance and safety expenses. In addition, they can significantly reduce inventory and improve asset management.

Attendant Cost Reduction from Improved Productivity and Centralized Operations

HiPath 8000 centralizes operations via IP Telephony (IPT), thus allows calls arriving at a central location to be transmitted over the data network to the remote locations. This centralizes call answering functions, reduces the requirement for operator attendant resources at each location and improves utilization. Thus, companies can reduce attendant resources and eliminate overstaffing across their distributed network.

Voice Technical Support Cost Reduction due to Increased Productivity

HiPath 8000 solutions and IP telephony (IPT) integrate voice and data general technical support tasks. Because data technical staff absorbs many traditional voice support tasks, voice technicians are able to support up to twice the number of ports when compared to legacy PBX systems. In addition, centralized management, based on transparent and central support centers, is performed remotely. A commissioned study conducted by Forrester Consulting on behalf of Siemens Communications found that a voice technical support efficiency increase from 50% to 62.5% can be realized with HiPath 8000, with only a slight increase in corresponding data technical support to manage the voice over data network.

Cabling Cost Avoidance at New or Renovated Locations/Buildings due to Elimination of Dual Cabling

Converged networks require only a single cable to each desktop, which supports voice when the IT network incorporates voice-ready active components. For new or renovated facilities, significant cost savings result from eliminating separate cable plans for voice. Overall cable cost reductions due to HiPath 8000 are based on the number of workstations at each new or renovated facility.

1 For all descriptions on this page: Source: Forrester Consulting 2005

Moves, Adds & Changes (MAC) Cost Reduction due to IP Telephony2

Most companies require extensive moves, additions, and changes (MAC) for telephone systems. Staff to support MAC services is typically in addition to technical services staff for system management, including help desk and facility support staff. With SIP on HiPath 8000, MAC effort is substantially reduced because of the automatic registration process.

Facility and Equipment Cost Reduction from Desk Sharing and Office Hoteling

The automatic registration process also allows an easy implementation of desk sharing and office hoteling scenarios to reduce facility operating and capital expenses (phones, desks, file cabinets, etc.) for employees who are in the office only part-time.

Self Maintainer & System Engineers Cost Reduction due to Self-Maintainer Improvements

HiPath 8000 takes less time to service and has fewer servers, thus self-maintainers gain an immediate cost benefit. There are no software distributions, database backups or node activations to manage. Improved diagnostics through node reduction improves performance and reduces the time needed to support the system. According to a commissioned study conducted by Forrester Consulting on behalf of Siemens Communications, HiPath 8000 can increase self-maintainer engineers’ efficiency by 25% to 60%.

International and National Long-Distance Toll Charge Cost Reduction due to On-net Call Routing

Telephone expenses include both line charges and usage fees. With IPT via HiPath 8000 and Multi Protocol Label Switching (MPLS), service companies do not pay for on-net usage fees, thus eliminating international toll charges for calls that can be transmitted on-net.

Video Conference Cost Reduction due to On-net Call Routing

Circuit-based video conferencing requires dedicated ISDN or T1/E1 lines to each facility and incurs per minute usage charges. IP enables higher bandwidth video conferencing for TV quality viewing. The largest savings for video calls are for intra-company calls that are routed over the internal data network. If a company already has adequate Quality of Service (QoS) and IP network security, video conferencing over IP only requires additional bandwidth and monitoring.

Audio Conference Cost Reduction due to On-net Call Routing

New requirements for spontaneous communications or collaboration – often integrated into calendar systems – increase current conferencing levels in businesses. However, many companies rely on external service providers for audio conferencing services. With IPT on HiPath 8000, audio conference calls are routed over the internal data network. This reduces PSTN trunk requirements and usage fees.



Network Operation Cost Reduction from Site-to-Site Leased Line Elimination

HiPath 8000 reduces access costs at the network edge by supporting the consolidation of voice and data circuits, as well as the elimination of voice circuits. A common infrastructure and cable plan for both voice and data results in lower hardware connection costs.

Inventory Cost Reduction from Improved Spare Parts Inventory Control for Self-Maintainers

Migrating to HiPath 8000 from a distributed network system enables self-maintainers to substantially reduce spare parts inventories. When existing HiPath 4000 nodes are used as SMGs, HiPath management tools provide real-time system status, which delivers accurate information on needed components and reduces redundant and excess spare parts.

Licensing Cost Reduction from Unrestricted Movement of User Licenses Among Sites

HiPath 8000 avoids the problem of movement of user licenses among nodes. Customers are no longer bound to the fixed number of licenses they purchase for each switch. A network total license pool allows the customer to allocate licenses according to dynamic user needs, thus reduce overall excess licensing and administration costs.

There are additional benefits a HiPath 8000 solution provides, such as:

• Desktop Replacement Cost Avoidance

• Major System Upgrades Cost Avoidance

• Improved User Productivity due to Real-Time Applications

• Improved User Productivity due to Improved Agility

• Maintenance and Service Contract Fees Cost Reduction from Improved Platform Serviceability

• Network Operation Cost Reduction from Optimized Allocation of Network Usage

• Travel Cost Reduction due to Increased Use of Video and Audio Conferences

A recent commissioned study conducted by Forrester Consulting on behalf of Siemens Communications evaluated the following Forecast Improvements with HiPath 8000:

Source: Forrester Consulting 2005

Reduction in Voice Technical Support CostsReduction in Voice Technical Support Costs50% to 62%50% to 62%

50% to 70%50% to 70%

40% to 55%40% to 55%

25% to 60%25% to 60%

15% to 25%15% to 25%

66% to 75%66% to 75%

45% to 50%45% to 50%

10% to 30%10% to 30%

7% to 10%7% to 10%

Reduction in Administrative Support CostsReduction in Administrative Support Costs

Facility & Server Support Savings due to Server ConsolidationFacility & Server Support Savings due to Server Consolidation

Self-Maintenance Service Engineer Efficiency IncreaseSelf-Maintenance Service Engineer Efficiency Increase

Increase in Call Handling Capacity of Console OperatorsIncrease in Call Handling Capacity of Console Operators

Reduction of MAC Charges/CostsReduction of MAC Charges/Costs

Avoidance of Dual Cabling Costs due to One Wire to the DeskAvoidance of Dual Cabling Costs due to One Wire to the Desk

Reduction in International Toll Charges due to On-Net CallsReduction in International Toll Charges due to On-Net Calls

Improved Communications with Real-Time Applications (Increase in Staff Accessibility and Productivity)Improved Communications with Real-Time Applications (Increase in Staff Accessibility and Productivity)


2.2 Benefits for Managed Services Providers and Carriers HiPath 8000 offers many advantages for Manages Services Providers (MSP) and carriers. Based on its design, HiPath 8000 requires fewer management and maintenance resources, thus reduces support costs. It provides a sound platform for managed services with IP based charging, centralized call number plan, and the ability to service many firms with a single HiPath 8000 system. Due to its ability to support multiple companies, provide scalability and reduced maintenance costs, HiPath 8000 offers MSPs a highly marketable solution that supports competitive customer pricing. Major HiPath 8000 advantages include the following benefits: 3

Cost-Effective MSP Solution

HiPath 8000 is designed to deliver high value MSP solutions. When multiple companies share the same server, MSPs can support several customers more cost effectively. A centralized call numbering plan allows MSPs to better manage their operations. In addition, IP-based flexible billing facilitates efficient customer billing and decreases operational costs associated with billing plans. MSP savings can be passed on to the customer through more competitively priced services.

End-To-End Secure Solutions

HiPath 8000 enables MSPs to offer their customers secure end-to-end network solutions. By providing WAN and LAN solutions, customers can simplify purchase decisions and use MSPs as a single source vendor. This strengthens the MSP’s partnership with its customers and promotes long term loyalty. Both MSPs and its customers benefit from the saving of consolidated servers, which lowers service delivery costs and improves the MSP’s overall cost structure.

Cost-Effective Scalability

Many companies uncertain about their future rate of growth often face the challenges of over planning or under planning their infrastructure requirements. MSP solutions offer companies flexibility in addressing growth for future business communication requirements. Companies need not pay for more capacity than they use and can quickly scale to meet changing business environments. This offers a sound business proposition for business and represents repeat business opportunities for MSPs. By not requiring constant planning for additions to existing systems, companies avoid the expense of having employees work on upgrade requirements, issue RFPs and evaluate vendor products.

Increase Business Opportunity

Risks associated with IPT concern large enterprises. Security, scalability and reliability concerns delay business decisions. With secure end-to-end network solutions, MSPs offer high availability and experienced network management services. As companies rely on their MSP for total support, from the network to the desktop, MSPs are able to establish strong business partnerships and increase revenue opportunities.




3. Economic Assessment Process

HiPath Business Case Builder

Payback is the number of years (or months) until the cumulative net benefit equals zero. Net Present Value (NPV) is the cumulative present value of future cash flows (positive or negative) less, discounted by the Discount Rate, minus the original investment. Internal Rate of Return (IRR) is the investment return expressed as an annual compound interest rate.

A well formulated investment decision requires a calculation of profitability. Such assessments are usually accomplished with a traditional investment calculation that incorporates both soft and hard benefits. A “hard benefit” is typically a direct reduction in operating costs such as network cost reductions. A “soft benefit” can be a cost reduction or revenue increase that is indirectly derived from employee productivity improvements. Depending upon the nature of an investment and its potential business benefits, a well formulated analysis includes the appropriate short-term or long-term financial measures, also referred to as financial metrics. Short-term financial measures include Total Cost of Ownership (TCO), Return on Investment (ROI) and Payback Period. These measures can be used for evaluating investments over a limited time period – typically one year. The disadvantage is that short-term measures are restricted in assessing longer periods, as they fail to incorporate the influences of the time value of money and discounting. Long-term financial measures, such as Net Present Value (NPV) and Internal Rate of Return (IRR), consider all business factors which are essential to the overall assessment of a pending investment decision. Because both short- and long-term financial measure calculations can be extremely complex and time-consuming, Siemens uses HiPath Business Case Builder (HBCB) to provide a detailed investment analysis without requiring unnecessary complexity or consumption of time. HBCB is based upon the product Genius Base™ from Glomark Corporation. HiPath Business Case Builder simplifies the evaluation process and provides clear financial measures to support an investment decision. As is the requirement for any comprehensive analysis, HBCB’s results are dependent upon the accuracy of the entry data, which includes relevant information as to the client’s communications and business characteristics (e.g. communications services, utilization behavior, communication costs, employee/staff structure, etc.). This data can only be gathered and discussed through close cooperation between Siemens and the client. Using Siemens’ model of forecast improvements, the expected solution investment and the client’s business data, HBCB provides a significant and meaningful financial analysis to support the decision-making process. In most cases, independent organizations have validated the forecast improvements a Siemens solution provides a client’s business. As an example with HiPath 8000, most forecast improvements are derived from the results of a commissioned study conducted by Forrester Consulting on behalf of Siemens Communications. However, any economic assessment is an estimate of potential future benefits and change if the client’s business data varies. To manage the uncertainty of such an analysis, HBCB defines and calculates three case scenarios: Best Case, Most Likely Case and Worst Case. Using three cases enables HBCB to incorporate and reflect many analysis factors, such as entry data precision or range, performance variations, and aggressive versus conservative perspectives.

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HiPath Business Case Builder (HBCB) –Global Tool for Generating High Quality Business Cases

1.2.

3.

4.

Comprehensive Business Case Tool*Benefit identification based on internal experience & expertise, and partnership with respected industry experts, such as Forrester Consulting for the HiPath 8000.Benefits refined and translated into Business Case Builder Templates“Forecast Improvements” assessed by independent 3rd parties, such as Forrester Consulting, IDC, et al.

* based on SW Genius Base™ by Glomark Corp

The significant financial measures which a Siemens HBCB analysis provides are:

Return on Investment – ROI Payback Time Cumulative Cash Flow Profit Before Tax and Profit After Tax Net Present Value – NPV Internal Rate of Return – IRR

All assumptions, data and formulas used in a detailed HiPath Business Case Builder analysis are included and documented in a business case report and presentation. This allows the client to reconstruct and evaluate the results at any time.


4. Sample Business Case 4.1 Scenario Description

This sample analysis represents a potential business case for a typical, large company. In this scenario, the US-based company needs to replace aging PBXs at both their large headquarters site and at numerous distributed locations of various sizes. The company’s primary objectives are to reduce the costs to support and maintain their communications infrastructure, and to reduce general operating expenses and resources. The business case analysis reflects the below sample profile data and the Siemens solution that satisfies the company’s business requirements.

Customer Profile

• 10.000 employees, 4% annual growth over 5-year period • 1 Headquarter site with 4.000 users • 8 large distributed locations, each with 250 users • 34 medium distributed locations, each with 70 users • 81 small distributed locations, each with 20 users • Self-Maintainer

Siemens Solution

• HiPath 8000 (1 node), including hardware, software, licenses, installation, application server and media gateways

• 100% IP in network & desktop , 100 % SIP based • 1.500 SIP Clients (optiClient 130S) • 8.500 SIP Phones

25 % Basic (optiPoint 410 Entry) 50 % Standard (optiPoint 410 Standard) 10 % Advance (optiPoint 410 Advance)

• Data Network Upgrade • Data Circuits

4.2 Analysis Results

Overview Financial Measures

Based upon a five year analysis period, the overall analysis and business case results for all three scenarios (Best Case, Most Likely Case and Worst Case) are shown.

Note: The business case analysis period was five years and used an 8.5% Discount Rate.

Copyright © of Glomark Corporation


Considering the financial benefits and investment costs for the sample scenario, the investment in HiPath 8000 results in a payback of 29 months and a Net Present Value of $4.3 million, which indicates HiPath 8000 to be a highly economical solution for the company’s communications infrastructure. Note that no applications or application benefits have yet been considered within this business case, which, once included, would even further improve the financial results.

Benefit Financial Contribution

Based upon the described scenario, twelve HiPath 8000 solution benefits were selected for inclusion in this company’s sample business case. The table below provides the average annual benefit value, which is the positive cash flow impact either as a cost savings or as a cost avoidance.

Benefit Detail

The following slide is an excerpt from a business case PowerPoint presentation showing further detail for one of the benefits. This slide can be automatically generated for each benefit by the HiPath Business Case Builder application. Even greater detail is available through a Word business case report.

1



HiPath 8000 reduces access costs at the network edge by supporting the consolidation of voice and data circuits and the elimination of voice circuits. A common infrastructure and cable plan for both voice and data results in lower hardware connection costs, lower costs to deploy new VoIP user work points, and a more flexible and scalable system.

ForecastedImprovement

80% to 90%

Typical AnnualBenefit Value

$395.675

HiPath 8000 for HiPath 8000 Sample ClientIndividual Benefit Details


$307.169Desktop Replacement Cost Avoidance due to New System

$262.500Long-Distance & Internat. Toll Charge Cost Reduction due to On-net Call Routing

$462.000Travel Cost Reduction due to Increased Use of Video and Audio Conferences

$92.225Inventory Cost Reduction from Improved Spare Parts Inventory Control Self-Maint.

$395.675Network Operation Cost Reduction from Site-to-Site Leased Line Elimination

$471.707Voice Technical Staff Cost Reduction from Streamlined Support

$322.193Self Maintainer & System Engineers Cost Reduction

$3.722.008Total Benefit

$454.861Administration Cost Reduction from Centralized Administration Support

$673.868Attendant Cost Reduction from Improved Productivity

$112.860Cost Avoidance of Telecommunication Cable Costs at New Locations/Buildings

$119.700Data Center Facility & Server Support Cost Reduction due to Server Consolidation

$47.250Licensing Cost Reduction from Unrestricted Movement of Licenses Among Sites

Avg annual benefit valueBenefit

$307.169Desktop Replacement Cost Avoidance due to New System

$262.500Long-Distance & Internat. Toll Charge Cost Reduction due to On-net Call Routing

$462.000Travel Cost Reduction due to Increased Use of Video and Audio Conferences

$92.225Inventory Cost Reduction from Improved Spare Parts Inventory Control Self-Maint.

$395.675Network Operation Cost Reduction from Site-to-Site Leased Line Elimination

$471.707Voice Technical Staff Cost Reduction from Streamlined Support

$322.193Self Maintainer & System Engineers Cost Reduction

$3.722.008Total Benefit

$454.861Administration Cost Reduction from Centralized Administration Support

$673.868Attendant Cost Reduction from Improved Productivity

$112.860Cost Avoidance of Telecommunication Cable Costs at New Locations/Buildings

$119.700Data Center Facility & Server Support Cost Reduction due to Server Consolidation

$47.250Licensing Cost Reduction from Unrestricted Movement of Licenses Among Sites

Avg annual benefit valueBenefit


Total Costs of Ownership (TCO) and Benefit/Cost Graphs

HiPath Business Case Builder reports and presentations also include additional detail regarding the Total Costs of Ownership (TCO) and Benefit/Cost graphs, as shown below.

Benefits (ML)

Costs (ML)

0

4.000.000

8.000.000

12.000.000

16.000.000

20.000.000

Yea

r 1

Yea

r 2

Yea

r 3

Yea

r 4

Yea

r 5

Valu

es in

$

Cost vs. Benefit of the HiPath 8000 SolutionCost vs. Benefit of the HiPath 8000 Solution


5. Summary

HiPath 8000 offers numerous benefits that improve operational efficiency, reduce costs, and eliminate unnecessary business expenses. HiPath 8000 consolidation of nodes and servers results in a highly efficient communication solution that reduces network and operational costs, including headcount and space requirement reductions. To evaluate the economic impacts of a HiPath 8000 scenario, two different studies were conducted. The first study by an independent research company shows that HiPath 8000 has the lowest Total Costs of Ownership and costs per user per month when compared to other solutions. A second commissioned study conducted by Forrester Consulting on behalf of Siemens Communications proves the outstanding potential and power of a HiPath 8000 solution and its business benefits. Significant reduction in administrative and technical support costs, as well as data center facility and server support cost reduction due to server consolidation are just some examples of HiPath 8000 business benefits. However, as every customer scenario is different, a well formulated investment decision requires custom analysis of profitability and economic improvement. Thus, Siemens Communications offers support with HiPath Business Case Builder, an application that provides detailed financial analysis. Using this methodology, the evaluation process is simplified by providing clear financial measures to support an investment decision.

© Siemens AG 2005 • Siemens Communications • Hofmannstr. 51 • D-81359 München

The information provided in this whitepaper contains merely general descriptions or characteristics of performance which in case of actual use do not always apply as described or which may change as a result of further development of the products. An obligation to provide the respective characteristics shall only exist if expressly agreed in the terms of the contract. Availability and technical specifications are subject to change without notice. Printed in Germany.


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White Paper HiPath 8000 Business Benefits V3...HiPath 8000 Business Benefits A White Paper by Siemens Communications Enterprise Networks Division . HiPath 8000 Benefits 2 Content 1