Convergence | Press Releases
Meanwhile, Customers Grow Weary of Carriers’ Convergencei Inertia

NEW YORK … November 16, 2004 –Voice-over-IP start-up costs swing dramatically, from $515 to $1,512 per user, depending largely on the vendor and the size of the rollout, according to Nemertes Research’s latest benchmark series, Convergence: Reality at Last. ShoreTel and Nortel posted the lowest per-unit startup costs; Avaya and Cisco posted the highest.

“We find significant disparity between vendors when it comes to the true operational and capital costs to implement their products,” says Robin Gareiss, principal research officer for Nemertes Research and author of the 128-page benchmark, which includes a detailed cost analysis. “It’s vital for CIOs to understand those cost components and how they affect long-term convergence strategy.”

Across all vendors, companies with 1,000 or more VOIP users spend an average of $525 per user on initial costs; those with fewer than 100 users spend an average of $763 per user. The figures include IP PBXs or switches, handsets, equipment upgrades specific to the VOIP rollout, as well as the baseline network assessment, planning, installation, and troubleshooting the implementation to working order. Companies spend an average of $17,220 on their baseline network assessment, which evaluates the “readiness” of the IP network to handle voice and video traffic.

The research also found that roughly 80% of companies want carriers to bolster their convergence portfolios with managed services (46%), hosted applications (17%), and wireless integration (11%), among other offerings. “IT executives are getting impatient with the carriers,” Gareiss says. “They haven’t effectively marketed convergence services, so decision-makers usually don’t even have carriers on their short lists.” About 70% of organizations are using VOIP technology today, and another 25% plan to use it within a year.

Several applications are driving corporate decisions to converge their networks, including videoconferencing (55%), unified communications (36%), collaborative tools (29%), and call-center/CTI (26%). “Companies also are exploring ways to leverage converged networks with industry-specific applications,” says Gareiss.

Other findings include:

• Large companies that converge their networks reduce local-loop costs by $9,600 to $28,000 per site annually; midsize companies reduce costs by $4,800 to $9,600 annually.

• Cabling costs for new buildings drops by 20% to 40% in converged networks.

• ShoreTel earned top rankings in all categories against Avaya and Cisco, and in all but “solution experience” against Nortel, where they tied.

• Technology, customer service, and management tools are the most important buying criteria.

• ShoreTel has the highest sales closing rate, at 87%, compared to Avaya (50%), Nortel (43%), and Cisco (40%). Nortel’s rate climbed from 19% last year, while Cisco’s dropped from 58%.

• Organizations assess between one and six vendors, most frequently two (37%), followed by three (28%). Nearly 20% only assess one vendor.

• Organizations generally do not budget for separate VOIP management tools initially (though they end up going back for funding within about 12 months of the rollout) or provide separate funds for VOIP security.

• IT executives want management tools to be more intuitive, providing information such as which applications are using bandwidth, how network decisions affect the cost, root-cause analysis and proactive suggestions on how to resolve problems.

• The employee-to-convergence-staff ratio ranges from 105:1 for companies with revenue below $100 million to 9,473:1 in companies with $20 billion plus revenue. Salaries rise with the added responsibility, from $62,500 to $104,333, respectively.

• More managers and directors (19%) are making the buying decisions surrounding convergence than previously, though “group decision” remains most common (40%).

The five-month study, drawing on input from 65 IT executives from organizations across a range of industries, includes recommendations for enterprises and vendors. Topping the list for vendors is to improve value (39%), develop applications (25%), and innovate/improve products (25%).

Nemertes Research is a leading research firm that specializes in analyzing the business impact of technology. For more information, visit www.nemertes.com.

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For more information, contact:

Christine Zimmerman

Nemertes Research

Phone: 888-241-2685

Cell: 815-693-6869

chris@nemertes.com