As an owner of a small business myself, we purchased our telecommunication system three years ago. As we relocate our offices now, I regret not having implemented Voice over Internet Protocol (VoIP) at the time, as it would make the move much easier. Our current system is already obsolete in supporting our growing business and needed applications. I am sure we are not alone in our assessment.
The core issue for many small and medium-sized businesses (SMBs) is that the up-front costs of VoIP are often higher than competitive small key-based or private branch exchange (PBX) systems. Where capital is in short supply, it's all too common to make purchase decisions based on up-front costs. Our total cost of ownership (TCO) studies, which analyze the total costs of an asset over its useful life, clearly show that up-front costs represent less than 20% of the overall total costs over the system's lifetime. These costs accrue as additional support, adds, changes and moving costs add up over time. What's particularly costly is having to expand the system as we grow.
Long-term savingsA traditional phone system usually needs to be replaced in half the lifetime of a VoIP system. This alone negates much of the up-front savings and can justify the higher investment. VoIP can also deliver additional features and benefits to enable precious productivity gains, such as "find me-follow me," enhanced voice mail services and teleconferencing. These are all important capabilities for small- and medium-sized businesses that are trying to maximize the productivity of a thin staff.
On the flip side, SMBs are unable to achieve all the savings that larger companies can when it comes to interoffice call savings, routing calls among locations over the network versus via the telephone exchange, and avoiding toll charges. The SMB can only reap these additional rewards if it is less centralized.
Unfortunately, as was our case three years ago at Alinean, SMBs continue to focus on the up-front solution costs-versus-lifecycle TCO and additional business benefit impacts of VoIP. It is important to assess TCO and benefits head-to-head when making a telecommunication purchase decision. This will help you break out of short-term decision-making that is more costly in the long run.
Tom Pisello is the CEO of Orlando, Fla.-based Alinean Inc., an ROI consultancy. He can be reached at email@example.com.
This was first published in October 2005