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Return On Investment (ROI) for IP Communications WWIPC Partner Summit 1/28/2002 6426_10_2002_c1_Kisch © 2002, Cisco Systems, Inc. All rights reserved. 1 Business Trends Driving the Focus on ROI/TCO • Three years of declining corporate profits and shrinking capital expenditure budgets • Focus on back to basics approach to capex, requiring a solid business case before technology purchase is approved • Greater involvement from business decision makers who are more focused on business impact of technology • Focusing capex on only mission critical projects (“need to have” vs “nice to have”) • Failures of previous IT investments to produce expected returns •IT now accounts for 46% of all capital expenditures 6426_10_2002_c1_Kisch © 2002, Cisco Systems, Inc. All rights reserved. 2 The Growing Importance of ROI •The percentage of customers who require ROI justification has doubled in the past 2 years 83% 90 80 70 60 42% 50 40 30 20 10 0 2000 6426_10_2002_c1_Kisch © 2002, Cisco Systems, Inc. All rights reserved. 2002 Source: Darwin Magazine 3 ROI Helps Accelerate the Sales Cycle •The ability to help customers determine ROI (55%) is the most often cited means to speed up the adoption of IP Communications 55.3% 60% 50% 42.0% 40% 30% 20% 32.6% 25.1% 32.1% 29.1% 25.1% 10.8% 6426_10_2002_c1_Kisch © 2002, Cisco Systems, Inc. All rights reserved. OTHER ANALYST RECOMMENDATION/MARK ET RESEARCH ROI DOCUMENTS OR DATA RFP/IMPLEMENTATION PLAN CASES STUDIES/SUCCESS STORIES/TESTIMONIALS TRAINING CLASSES WITH CROSS FUNCTIONAL IT COLLEAGUES 0% TRAINING CLASSES WITH PEERS OF SIMILAR EXPERTISE 10% END USER TRAINING PERCENT OF RESPONDERS What would help speed up the Decision Making Process? Source: Cisco TDM Survey, October 2001 4 Cisco Network Investment Calculator (CNIC) Program 6426_10_2002_c1_Kisch © 2002, Cisco Systems, Inc. All rights reserved. 5 What is CNIC? • A web-based ROI/TCO calculator designed to simplify the business case development process • A tool that allows the calculation of ROI for multiple Cisco solutions, including IPT, Contact Center, Unified Messaging and upgrades to the data network • A comprehensive program that provides web-based and instructor led training and user support to increase Cisco sales and partners comfort level with financial analysis • A rich ROI database with thousands of customer data that has been crafted into presentations, case studies and white papers to assist the selling effort 6426_10_2002_c1_Kisch © 2002, Cisco Systems, Inc. All rights reserved. 6 Why is ROI/CNIC Important to Selling IP Communications? • ROI can be used to influence which projects customers will dedicate resources against for evaluation • Much of IP Communications value proposition is based upon ROI/cost savings • Customers are prioritizing rapid payback projects that generate cost savings and tangible business benefits • A business case with ROI data can improve the likelihood of a project being approved by 60%* • A business case with ROI data can reduce the sales cycle by 30-40%** 6426_10_2002_c1_Kisch © 2002, Cisco Systems, Inc. All rights reserved. *Source: Gartner **Source: IDC 7 Holistic Approach to ROI A single ROI calculator for multiple Cisco solutions A central support resource that Cisco sales and partners can depend on for fast answers CNIC User Support Standardized approach to building ROI models and engaging with customers 6426_10_2002_c1_Kisch E-learning and instructor led training on ROI Training Best Practices © 2002, Cisco Systems, Inc. All rights reserved. 8 Mapping ROI to the Sales Cycle Level 1 – ROI White papers Level 2 – ROI Case Studies Level 3 – ROI Snapshots (ROI Lite) Level 4 – Custom Analysis with CNIC 6426_10_2002_c1_Kisch © 2002, Cisco Systems, Inc. All rights reserved. 9 6426_10_2002_c1_Kisch © 2002, Cisco Systems, Inc. All rights reserved. 10 6426_10_2002_c1_Kisch © 2002, Cisco Systems, Inc. All rights reserved. 11 6426_10_2002_c1_Kisch © 2002, Cisco Systems, Inc. All rights reserved. 12 6426_10_2002_c1_Kisch © 2002, Cisco Systems, Inc. All rights reserved. 13 6426_10_2002_c1_Kisch © 2002, Cisco Systems, Inc. All rights reserved. 14 The ROI for IP Communications 6426_10_2002_c1_Kisch © 2002, Cisco Systems, Inc. All rights reserved. 15 Hard Cost Savings Network Administration Equipment/Maintenance •Reduction in cabling costs for new facilities •Reduction in infrastructure cost at remote sites •Improved productivity of network support staff Elimination of certain PBX related tasks via centralized call processing Consolidation of skill sets •Increased utilization of core networking assets •Consolidation of message store/back-up systems •Reduction in PBX upgrade/expansion costs Centralized application and network management •Reduction in the costs of Moves, Adds and Changes (MAC’s) •Reduction in ongoing maintenance costs Toll-Bypass/Integrated Access •Toll-Bypass savings for intra-company traffic Domestic: Material if call volume is substantial to offset declining toll rates in neighborhood of 2-5 cents or if organization lacks size to negotiate prime rates with carriers International: Still significant with average toll-rates of 12-15cents •Consolidation of voice and data access -Reduction in number of dedicated voice lines -More efficient use of existing bandwidth 6426_10_2002_c1_Kisch © 2002, Cisco Systems, Inc. All rights reserved. 16 Examples of Business Benefits •Real Estate Savings Better utilization of real estate by leveraging extension mobility to increase worker to workspace ratio from 1to1 to X to 1 Significant savings in high-rent areas like NY, London, Chicago •Platform for New Applications Unified Messaging – Improved productivity per user by 25-40 minutes per day Audio Conferencing – Ability to offload SP provided minutes (8-12 cents/minute) for smaller conference calls to internal service offering •Ability to standardize infrastructure and extend corporate capabilities to branch offices 6426_10_2002_c1_Kisch © 2002, Cisco Systems, Inc. All rights reserved. 17 Summary of Customer Engagements thru Q1 2002 • 2800+ Customer Analysis to date (program started 10/01) • Total # of Partners accessing CNIC: 284 • Incremental revenue impact of $25-35M in FY03 • Strong representation across all major verticals • All types of deployment scenarios (greenfield, centrex, centralized call processing, replacement of new/old PBX, lease/buy) • Different size deployments ranging from a 100 phones to 45,000 phones • Flash cuts to 5 year migrations • Global focus including U.S./ Europe/Asia/Latin America 6426_10_2002_c1_Kisch © 2002, Cisco Systems, Inc. All rights reserved. 18 Summary of ROI Findings • • • • Positive Net Present Value 68% of the time Average payback of 16-18 months Average annual savings per user of $334 Average # of phones in analysis = 600 phones Avg. % Contribution to Cost Savings Toll-Bypass/Voice/Data Access 20% Equipment & Maintenance 32% 48% Network Administration 6426_10_2002_c1_Kisch © 2002, Cisco Systems, Inc. All rights reserved. Source: Converged Network Investment Calculator 7/0219 Key Drivers of Positive ROI • A compelling event is driving the decision New facility End of useful life of PBX/Expiration of lease Planned upgrade of data infrastructure • Phased approach to deployment starting with the most financially viable sites • Ability to leverage centralized call processing Deployment has number of remote sites that can leverage CCP • Dynamic organization with substantial employee movement 6426_10_2002_c1_Kisch © 2002, Cisco Systems, Inc. All rights reserved. 20 Key Drivers of Negative ROI • In some cases, a significant data network upgrade is necessary to provide the foundation for reliable voice • Difficult to justify on hard cost savings alone the replacement of a relatively new PBX at a single site • Delays in the deployment of the technology delay the realization of benefits • Failure to take advantage of key value producing features of the technology • Aggressive pricing from traditional PBX vendors 6426_10_2002_c1_Kisch © 2002, Cisco Systems, Inc. All rights reserved. 21 Summary of ROI Findings Deployment Scenarios •Paybacks vary based upon deployment scenario, with green fields producing the most rapid payback (Months) 24 18 12 6 0 6426_10_2002_c1_Kisch Green Field TDM Centrex Replacement © 2002, Cisco Systems, Inc. All rights reserved. Multi-site CCP Older PBX Replacement Newer PBX Replacement Source: Converged Network Investment Calculator 7/02 22 ROI Findings – By Vertical Payback in Months (Months) 28 28 18 18 13 14 6 0 6426_10_2002_c1_Kisch 14 6 Retail Education © 2002, Cisco Systems, Inc. All rights reserved. Government Financial Services Healthcare Source: Converged Network Investment Calculator 8/0223 “If You Build it, They Will Come”… (5 Steps to the CNIC Business Case) 1. What’s the Value Proposition/What are the Primary Cost-Benefits Drivers 2. Break the Analysis into Manageable Pieces 3. Built on Solid, Fundamental Financial Modeling 4. “What-If” capabilities 5. Pre and Post Deployment Analyses 6426_10_2002_c1_Kisch © 2002, Cisco Systems, Inc. All rights reserved. 24 Cisco Contact Information 6426_10_2002_c1_Kisch © 2002, Cisco Systems, Inc. All rights reserved. 25 Cisco Contact Information •Cisco Network Investment Calculator Home Page http://www.cisco.com/partner/cnic •Cisco Network Investment Calculator Web Training http://www.cisco.com/partner/cnic/training.shtml Cisco Network Investment Calculator Instructor Led Training Contact: Mike Kisch Dave Hume Phone: 408-902-3112 Phone: 919-392-8601 E-mail: [email protected] E-mail: [email protected] •Cisco ROI White papers/Case Studies/Presentation http://www.cisco.com/partner/cnic/understand.shtml 6426_10_2002_c1_Kisch © 2002, Cisco Systems, Inc. All rights reserved. 26 ROI Case Studies 6426_10_2002_c1_Kisch © 2002, Cisco Systems, Inc. All rights reserved. 27 ROI Case Study • National restaurant chain • Solution consists of 2500 Cisco needed to provide a more IP Phones leveraging centralized cost effective voice service to call processing remote sites • Updated WAN to facilitate • Wanted a standard solution integrated access where that would lower remote site available management costs and • Able to increase productivity of provide a consistent level of network support staff via service centralizing call processing • Wanted to greater leverage planned data network upgrade • Payback of 18 Months • Net Present Value of $2.7M • Achieved an annual savings of $361/per user 6426_10_2002_c1_Kisch © 2002, Cisco Systems, Inc. All rights reserved. 28 ROI Case Study • Securities firm needed to replace older PBX at central site that was nearing end of useful life • Needed to identify a way to reduce the costs of a constantly moving workforce • Needed to simplify management of the network and improve the productivity of the network support team • Deployed 1500 Cisco IP Phones • Deployed conference connection to offload smaller conference calls • Gave the user the ability to move their phone in an effort to save MAC charges • Leveraged extension mobility to improve utilization of real estate space • Payback of 19 Months • Net Present Value of $1.5M • Achieved an annual savings of $308/per user 6426_10_2002_c1_Kisch © 2002, Cisco Systems, Inc. All rights reserved. 29 ROI Case Study • Medium size east coast city was evaluating their future voice strategy • Had a mix of PBX, key systems and Centrex • Centrex contracts were coming due for renewal • Decided to deploy IP Telephony in place of Centrex service to 500 users across several city facilities as first step towards converging their network • Decided to lease instead of purchase new IP Telephony equipment • Annual lease costs for IPT were less then annual Centrex costs • Immediate Payback • Net Present Value of $117K • Annual savings per user of $335 6426_10_2002_c1_Kisch © 2002, Cisco Systems, Inc. All rights reserved. 30 ROI Case Study • Extension campus of large state university needed to replace existing end of life PBX • Needed to be able to continue to leverage a percentage of existing handsets • Was faced with an imminent upgrade cost to voicemail system and PBX • Reused 1500 analog phones, while deploying 700 IP phones of various models • Deployed (4) Call Managers and Unity voicemail • Upgraded data infrastructure • Payback of 11 Months • Net Present Value of $253K 6426_10_2002_c1_Kisch © 2002, Cisco Systems, Inc. All rights reserved. 31