UCaaS + SIP Trunking for Positive ROI Part 2: A Cost Analysis of Hybrid Cloud Deployments
This article was originally published by Telecom Reseller.
This blog is a continuation of the financial analysis of hybrid UCaaS combined with SIP trunks. Read the first article, “UCaaS + SIP Trunking for Positive ROI Part 1: Hybrid Cloud Deployments.”
Whenever the IT department wants to change its strategies and operation, it will affect the entire organization. The word impact comes to mind. A major change will be disruptive. There may even be downtime involved.
C-level executives want to see advantages to IT changes. The changes may not all be quantifiable. The financial value including the Return on Investment (ROI) and the Total Cost of Ownership (TCO) are numeric values that can be assigned to the IT changes. A positive ROI and lower TCO will stimulate executives to evaluate whether the changes should be implemented.
What Do I Get from ROI?
Return on Investment (ROI) is expressed as a percentage. It is used for financial decisions such as “did the investment benefit the business?” It compares a business’s profitability and the efficiency of different investments. The return on investment formula is:
ROI = (Net Profit / Cost of Investment) x 100
In the cases of UCaaS and SIP trunks, do these investments more than offset the cost of making the investment? The result should be a positive number. The greater the ROI, the better the investment. A negative number means the investment was a financial loss.
As shown in the chart below, with a hybrid cloud deployment there will be cost decreases as well as cost increases. Evaluate your costs based on these eight factors. The sum of the costs should produce a positive ROI.
The Impact of Hybrid Cloud Deployments: Eight Factors for ROI
|Maintenance Hardware & Software||X|
|UCaaS Licenses||Legacy cost is lost||Cloud licenses|
|Internal Network||No change|
|Network Access Bandwidth||Eliminate T1 and PRI Connections|
With Hybrid Cloud Deployments:
- IT Staff – greater efficiency from the cloud may mean that staff can be decreased or reassigned to other projects. For example, using their skills to monitor the cloud service, the SIP trunk performance, and satisfying Service Level Agreements (SLA).
- Data Centers – It may be hard to reallocate data center space you’ve already purchased. Leveraging a hybrid infrastructure will probably reduce your energy costs. New savings and data center space could be assigned to other uses.
- Maintenance – Less hardware and software to maintain means additional cost savings. Review your present maintenance contracts to ensure you have no penalties or long term responsibilities.
- UCaaS Licenses – Unless you move to a cloud provided by your on-premises UCaaS vendor, you will probably not save money on the licenses and setup. Check to see if there are separate license and setup fees for your proposed UCaaS service. If there are no fees, you will avoid additional costs as you add new users.
- Internal Network – This should remain constant with no cost increase or decrease.
- Network Access Bandwidth – This is a technology trade-off. You will definitely reduce costs by retiring your T1 and PRI connections. These connections will be replaced by far cheaper Internet access.
- Endpoints – User endpoints will remain the same, with no cost increase or decrease.
- Cloud Contract – This is the new cost of service that will be offset by cost decreases in other areas.
How Do I Improve the ROI on a Hybrid Cloud Deployment?
While continuing to move more functionality to the cloud will lower your TCO, a smooth transition with SIP trunks will ensure a positive ROI. Just moving to the cloud and adding SIP trunks will work, but the benefits will increase if you and your partner(s) manage the project efficiently. Hybrid solutions have a lot of moving parts, meaning that integration, deployment, and any troubleshooting can be complex if multiple vendors and their equipment/technologies are not all in sync.
Success can be largely dependent upon partner expertise, alignment and knowledge exchange among key players, the interoperation of all components as well as the visibility across the entire multi-vendor solution, allowing you to easily optimize performance. Remember that, sometimes a cheap service may be expensive to implement. It’s best to compare services on function, support, as well as price.
How Does Hybrid Influence TCO?
Total cost of ownership is a financial estimate that helps enterprise management determine the direct and indirect costs of a product, service, or system. TCO covers the initial purchase/subscription price and the implementation cost (in this case a cloud service and SIP trunk) that considers the full cost over the useful life of the implementation.
A high ROI may not produce the best TCO. On the other hand, a low TCO may require a lot of investment thereby lower the ROI. When IT looks for the financial benefits of cloud UCaaS and SIP trunks, there needs to be balance.
There may be a higher initial cost to move to the cloud and SIP trunks, but the costs decrease once the implementation is complete. This delivers a lower TCO over the life of the implementation when compared to the existing implementation (before the cloud/SIP trunk migration). A positive ROI usually means a lower TCO which is better for the enterprise IT budget. This reduces the cash flow for the enterprise as well and it is easier to plan the IT budget.
In the end, a positive ROI is usually the case for UCaaS/CCaaS hybrid cloud solutions replacing a variety of disparate legacy telephony systems spread across the globe. As the demands for workplace mobility increases, as modern video conferencing becomes the norm, and as Team Collaboration tools continue to explode in popularity, enterprises are recognizing the productivity and competitive advantages modern communication technologies bring. When you combine those perks with the cost benefits of the cloud, building a case for investment is easier than you might think.
Read the first blog in this series, “UCaaS + SIP Trunking for Positive ROI Part 1: Hybrid Cloud Deployments.”