Buying into VoIP

With the right preparation, VoIP doesn't have to be a trip to uncharted waters.

by / October 13, 2003
Voice over IP (VoIP) technology may be maturing, but it hasn't run plain old phone systems out of government offices yet. More enterprises, however, are switching to VoIP as the quality of service improves and CIOs and IT managers discover ways the technology saves money.

Government agencies that use VoIP like the return on investment, but acknowledge that implementing these solutions involves more than buying a bunch of IP phones and plugging them in. Making sure the network is ready to handle the increased traffic is critical, observers say, and that can turn into a hefty expense up front.

The price tag can be daunting, but current VoIP users say it's worth it.

Worth Every Penny
The Minnesota Department of Labor and Industry (DLI) took an inside-out approach. First the department deployed VoIP in its central office -- with 300 employees -- two years ago, said Cindy Valentine, CIO of the DLI. It then outfitted seven other DLI offices with VoIP in June. Overall, the DLI deployed 450 IP phones, she said, producing substantial savings in several key areas.

The DLI's monthly phone bill dropped, and the agency consolidated functions.

"Before we started the IP phone system in the main office, our phone bill was about $21,700 per month," said Mary Benner, project manager of the DLI's VoIP implementation. "Our bill following the installation was about $13,400. Those [monthly bills] include costs we were paying for two small call centers we administered externally through the Department of Administration, which runs our central mail hub and is the traditional telephony provider."

Before VoIP, the DLI paid the Department of Administration $23 per month per phone line for telephony services, which included basic Centrex and voicemail. The DLI now administers its own telephony services and pays just 22 cents per month, per line.

To replace the five phone systems in the central office with a single phone system, the DLI initially looked at traditional telephony solutions, but was soon convinced IP telephony would provide cost savings over time. With the old phone system, Valentine said, the DLI spent a minimum of $100 per employee per move -- a cost that's now eliminated. Employees who move need only unplug their IP phones from their old locations and plug them in at their new cubicles or offices. There's no need for a technician to switch phone wiring to accommodate the move.

"It really is the gift that keeps giving," Valentine said. "Once the initial investment has been made, the savings just keep on coming -- the flexibility this has given us, and the avoidance of toll charges between our office in St. Paul and our offices in the rest of the state. The savings are only going to be more impressive over time."

The DLI expects to save an additional $3,000 to $4,000 per month as a result of the seven satellite DLI offices going live with VoIP, because calls from those offices to the central office don't travel over a carrier's phone lines, saving the agency long distance charges.

"If you work in government, you're always conscious of spending money," Benner said. "With these folks, they didn't contact each other by phone without thinking, 'This is costing me per minute.' The fact that we're able to call each other for free now allows much greater communication between the offices. It's really an inclusion of the far-flung offices with the central office in a way we haven't had before."

Though the transition has been good to the DLI, the agency had to spend money to make money -- something that's more difficult for state and local governments to do now.

The initial out-of-pocket expense for the VoIP system was $435,000 for hardware, software and services, Valentine said.

"Ironically, when we put the phone system in -- the project formally began in late fall 2000 -- we weren't in the budget trough nationally that we're in now," Benner said. "This was less about ROI at that point in time. The trickiest part about VoIP is you have to put money in the infrastructure up front. You have no choice but to put money into your infrastructure, or VoIP won't work. You have to make certain your line capacity is adequate. You have to make sure all your routers and switches are IP ready."

Valentine said other state agencies, cities and counties expressed interest, and the state has put the finishing touches on an RFP that would study the feasibility of migrating all state agencies to VoIP.

Despite that interest, she said, there is reluctance in the public sector to switch to VoIP.

"Part of it, I suspect, is not everybody necessary believes the quick return on investment," she said. "Some folks might not be in a position to put the money up front. We got lucky in terms of having the money at the right time. I don't have an explanation beyond that because everybody we've ever talked to, once we've shared our information, has been pretty impressed."

Local Advantage
In Bend, Ore., IT staff took the outside-in tack when deploying VoIP to city buildings, said Steve Meyers, IT director for the city. Bend spent two years rolling out IP telephony to various satellite buildings first, and finished with City Hall.

Meyers said Bend faced a fairly common problem: It seemed every new city office had its own phone system, and several new public safety buildings threatened to make it worse.

"We started with the four new fire stations we were building," Meyers said. "The fire stations have police substations in them, and they were talking about adding in yet another key system, which would have been possibly another brand and definitely another system we weren't familiar with. IT had the responsibility of supporting the phone services, and we said, 'Wait. We're going the wrong direction here. We should be converging.'"

The new fire stations and an administration building for the fire department presented the opportunity to deploy VoIP and start the city down the path to IP telephony throughout all facilities, he said.

Bend then focused on its public works and wastewater facilities -- installing VoIP to replace old key/switch systems that couldn't keep up with demand -- and then turned to its new 10,000 square foot police station that houses a staff of more than 75. The main facility left was City Hall, which was outfitted with IP telephony in April.

Meyers said the city has spent $125,000 specifically on VoIP equipment, and the entire project has cost $275,000, including infrastructure upgrades.

As a local government, Bend had a distinct advantage over state agencies when it came to beefing up its network to handle voice and data packets -- its franchise agreement with the local cable television company stipulated the cable provider must allow the city to put its signal on the company's infrastructure.

"They were performing a fiber upgrade," he said. "They did what cable companies often do with cities, saying, 'Well, instead of you putting your signal on our fibers and then us having to keep track of it and sort it, we'll just put in two pair of fibers for your exclusive use while we're doing this.'

"All we had to pay was the cost to extend the fiber into the buildings, and there's no ongoing cost. We wouldn't have been able to afford it otherwise."

Now, Meyers said, the city no longer deals with separate voice and data networks -- or the headaches each type of network creates. One network does it all, and like the Minnesota DLI, that one network means no more leased phone lines.

"We added it up, and in less than three years, what we were paying for those leased lines for the voice would pay for our investment in IP telephony," he said. "We did the hard dollar cost first and said, 'This makes sense just on hard dollars.' We know it pays for itself."

The city realized soft dollar benefits too, he said. Everybody in the city is now on one phone system; an employee can go anywhere and doesn't require additional training; staff are all on the same voicemail system, so they can forward voice messages to each other; and because there's only one telephone system to learn, IT support for city staff is simplified.

Bend's Neighbor
Joe Sadony, technology manager of Deschutes County (which includes Bend and two other cities), remembers when Meyers brought over an IP phone for him to test.

"The way I got turned on to this was the city came over, dropped a phone on my desk, plugged it in, and boom, I had their dial tone in my office," he said. "I thought it was very cool, but I couldn't impress anybody else with it. They said, 'So what? It's a phone, right?' I said, 'It's their phone system. It's here, and I can dial their extensions and I'm across town, in another building.'"

That's a perfect example of the VoIP paradox in the public sector, Sadony said. No matter how cool running voice over a data network may be, it's still perceived as simply voice. As a result, VoIP's penetration into the government market is slow.

"Still today, a phone is a phone is a phone," he said. "There's not a lot you can do to a phone to make it any prettier for most people, because the way you use it in your business is to call people. People just want something they can talk to somebody else with, and it's hard to get past that. It's hard to find a reason to go past that."

Sadony also is the director of computer information services for Redmond, Ore., under a contract between the city and county. He said the entire city of Redmond will migrate to IP telephony this budget year, and funds already are earmarked for the project. In Redmond's case, the change is happening because the city's phone system is old and nearing capacity. The move also makes sense because the city has sufficient infrastructure in place, through an arrangement similar to Bend's with its service provider.

In the end, the city is not looking to revolutionize the way staff uses the phone. "The customers I serve in Redmond aren't really going to care that it's VoIP as long as they pick up a phone and get dial tone," Sadony said.

The flexibility of VoIP is winning converts. Sadony said Deschutes County deployed IP phones in Redmond's municipal airport (between the airport's fire department and maintenance building) that run over an 11 MB wireless connection -- allowing the county to eliminate an entire infrastructure between the two buildings.

Deschutes also is experimenting with video over IP, he said. During the next 18 months, the county will move video arraignments from seven courthouses to its data network.

"We just converted one video arraignment system that goes between the county jail and the downtown courthouse from a proprietary ISDN [integrated services digital network] set up to run over our network with Polycom cameras," he said. "We're not paying the ISDN charges, and all that ancient equipment we had a hard time keeping running and getting parts for is gone.

"The room the video arraignment system was in was going to be taken over by another judge, so we had to move it because we needed the extra courtroom," he said. "We didn't even want to touch this old equipment, because we didn't think we could get it running again."

VoIP Grows Up
IP telephony clearly has made inroads into public- and private-sector enterprises, but it hasn't always been an easy trip. Analysts say the difficulty can be traced to lingering misunderstanding, VoIP's maturation, and as with many "hot new technologies," the vendors themselves.

VoIP still fights a bit of an image problem, said Jon Arnold, program leader for VoIP equipment at Frost & Sullivan. One issue is the benchmark to which many people compare VoIP technology: the public switched telephone network (PSTN), which is basically perfect.

"If they've had any exposure to IP in general, it's almost always associated with the early days of IP, which means 1995," he said. "At that time, you name the problem and it was a real problem, whether it was poor voice quality, the reliability of calls coming in and going out, the system crashing, security of information, the ability to operate on a large scale -- all of those issues were real."

The VoIP industry wouldn't have survived if it hadn't addressed those issues, Arnold said, and IP telephony quality climbed as a result.

"Those problems have been solved enough that anyone who really uses them as a reason not to do this is working with bad information," he said. "They don't have the right story. A problem here is the vendors are partly to blame, because they really hyped this market way beyond its capacity in the early days before the technology was perfected."

Several years ago, VoIP was roughly 70 percent as good as the PSTN, Arnold said, but it's 95 percent as good today, and users can live with the occasional imperfections. Governments, like any other enterprise, can save money with VoIP -- through reduced costs in operating and maintaining the enterprise's networks, because voice traffic doesn't need its own network and is routed to a data network -- and through avoidance of toll costs between agency locations.

"There are a lot of telephone calls between those offices, and your toll costs add up," he said. "On an IP network, most of those costs are eliminated. When you're on an IP network, your calls are all local calls because the calls aren't dependent on location. Any public-sector agency is always looking to save money. Budgets aren't getting bigger, and calling patterns aren't going to change. You still need to have all these regular points of contact between all these agencies and offices."
Shane Peterson Associate Editor