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Experts: Vendors 'lying' about VoIP cost savings

Though vendors often promise that VoIP will lead to immediate and drastic cost savings, analysts at this week's VON Conference & Expo said, in reality, the short-term costs can be enormous.

BOSTON -- Thinking of implementing VoIP in your enterprise to cut down on costs? Think again, said a panel of industry analysts at the Fall 2004 VON Conference & Expo.

During a discussion earlier this week about the present state of VoIP in the enterprise and its prospects for the future, experts said there's still much to be wary of.

"How many vendors say that VoIP will save you money?" asked David Fraley, principal analyst at Stamford, Conn.-based Gartner Inc. "They're all lying," he said.

The panel agreed that while enterprise VoIP may offer future long-term cost consolidation and productivity gains, the short-term costs can be enormous. IP to the desktop frequently requires complete removal, replacement and reconfiguration of equipment. Although that can be done in stages, the total up-front cost is frequently much higher than IT departments anticipate.

According to Ronald Gruia, program leader with San Antonio-based consulting firm Frost & Sullivan Inc., implementing VoIP will not help businesses save money in terms of capital expenditures.

But it will offer savings in operating expenditures once businesses implement applications that increase productivity. The problem, Gruia said, is that gains in productivity are difficult to quantify.

"It's impossible to do a fair assessment of ROI at this point," said Stephen Elliot, senior analyst with International Data Corp., of Framingham, Mass. He said few VoIP implementations are actually completed and have gone on to successfully integrate communications applications that could contribute to cost savings.

In addition, Elliot said vendors are offering significant discounts to get their equipment out into the market. That way, they make up-front capital costs seem lower than they would be otherwise.

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Total cost is often higher than enterprises expect because typical ROI calculation methods ignore important parts of the equation, Gruia said. While VoIP simplifies some network functions -- like user moves, adds and changes -- it also requires network managers to consider a whole new set of issues hinging on network management and strict quality of service policies. So determining the true ROI of VoIP for many organizations, said Gruia, is much like a raffle at this point.

In addition, many IT departments severely underestimate the amount of training and specialized staff needed to operate VoIP.

"There is a massive knowledge gap," Elliot said. "A lack of management is going to catch up with people." He added that IT departments must make significant investments in bridging this gap before they can begin to manage and secure their converged systems effectively and cohesively.

Even though analysts agreed that VoIP is inevitable, it may be a long while before enterprises realize any cost benefit from the technology.

The question is, said Fraley, "How much do you have to spend before you get to that point? We truly haven't reached the stage yet where we're achieving synergy with VoIP. We're just starting to get to the point of promise."

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