1© 2002, Cisco Systems, Inc. All rights reserved.
The Business Case and ROI Analysis for IP Telephony at
Cisco Systems
Cisco Account TeamDate
© 2002, Cisco Systems, Inc. All rights reserved. 222
Table of Contents
1 Cisco’s Internal IP Telephony Deployment Strategy
2 Background to the ROI Analysis
3 Results of the ROI Analysis
4 Appendix I: Detail Behind the Results
5 Appendix II: Sensitivity Analysis
3© 2002, Cisco Systems, Inc. All rights reserved.
Cisco’s Internal IP Telephony Deployment Strategy
© 2002, Cisco Systems, Inc. All rights reserved. 444
Cisco AVVID and Cisco IP Telephony:
Supply Chain
E-Learning
Key Components of Cisco’s E-Business Strategy:1) Optimising Cisco’s Workforce2) Caring for Cisco’s Customers
Customer Care
Workforce Optimisation
© 2002, Cisco Systems, Inc. All rights reserved. 555
Cisco IP Telephony: Key Ingredient to Employee Mobility in an Optimised Workforce
HR Scalability
’94–’96
Productivity
’97–’00
ExtendedEnterprise
’01–
CiscoAnnual
ProductivityGains E-Finance
E-Procurement Basic e-HR
$74MEmployee Mobility
Integrated Self-ServiceWorkforce Development
$500M+
Directory CommunicationsStatic Portal
$19M Cisco IP Telephony is a key enabler of Cisco employee mobility
© 2002, Cisco Systems, Inc. All rights reserved. 666
Cisco IP Telephony: Key Ingredient of “The Contact Enterprise”
Agent/Employee Management Senior Executive
Center
VirtualCenter
Branch
Home
Vehicle
Level
Loca
tion
CallCentre
ContactEnterprise
Example: Cisco’s CEO, John Chambers is proactively notified
of high priority technical support cases that have not met their required service levels and
follows up directly with the relevant individuals involved
Cisco IP Telephony and Cisco IP Contact Centre
are key enablers of Cisco’s vision of “The “Contact Enterprise”
© 2002, Cisco Systems, Inc. All rights reserved. 777
Business Drivers for Cisco’s Internal Adoption of IPT
Showcase Cisco’s Technology
Hard Cost Reduction
Increase Employee Productivity
Cultural Enhancement
© 2002, Cisco Systems, Inc. All rights reserved. 888
Single Tel # E-mail Address
Single IP Network
Cisco Employee After 2002
• Routing• Queuing
The Role of Cisco IP Telephony
Home Tel #Mobile Tel #
Office Tel #
Voice Networks
Data Network
E-mail Address
Cisco Employee Before 2002
User constrained by:• Geographic location• Different devices on different networks• Lack of contact transparency
• User chooses preferred device, on demand
• User defines business rules concerning contactability
• Wired and wireless connectivity• User benefits from integrated
productivity applications:• Messaging applications• Inbound/outbound routing
applications• Web-access applications• CTI applications• Audio & video conferencing
applications
© 2002, Cisco Systems, Inc. All rights reserved. 999
Cisco’s IP Telephony Deployment Strategy
2000 2001 2002 2003 2004
Bus
ines
s B
enef
it of
C
isco
IP T
elep
hony
(Rel
ativ
e Sc
ale)
2005Year
Office 1 Office 2 Office 3 Office 96. . . . . App 1 App 2 App 3 App x. . .
Cos
t of C
isco
IP T
elep
hony
(Rel
ativ
e Sc
ale)
Deployment of Converged E-Business Applications
Maintenance & App Dev Cost
Focus on deploying converged applications
on IPT infrastructure across all Cisco offices
IP & Web Foundation Expanded to Include Voice
Infrastructure Cost
Focus on changing out PBX infrastructure with IP
Telephony infrastructure across all Cisco offices
10© 2002, Cisco Systems, Inc. All rights reserved.
Background to the ROI Analysis
© 2002, Cisco Systems, Inc. All rights reserved. 111111
Real Benefits of Cisco IP Telephony
Single Network• Maintenance, Cabling, Administration, Support, Power, Moves/Adds/Changes
(MAC’s), Staff
• Voice Business Continuity• Integral component to an effective voice business continuity plan• Can be compared against other less effective plans• Voice message backup/restore
• Real Estate• Space Utilisation, Reduced Operational Costs, Flexibility
• Reduced Call Costs• Reduced mobile phone usage• Extension Portability Campus Roaming, Home Office, Other Location• Outbound Call Management• Unified Messaging• Audio Conferencing
• Small Branch Office• Centralised Call Processing• Elimination of voice trunks• IP Toll Bypass• No on-site PBX
Reporting, Billing, Cost Management• Cross-Enterprise telecom reporting• Cross-Enterprise call cost management• Predictability of telecom bills
• Reduced PC Costs• IP phone can replace a web-enabled PC or laptop in certain environments
Hard-dollar cost savings
Employee Productivity
• End User Applications• Audio Conferencing• Unified Messaging• Personal Assistant• Web Access• Computer Telephony
Integration
• IT Operations• Facilities Mgmt Ops
Productivity increases that can
be safely quantified Benefits that are very real, but
difficult to quantify
Cultural Enhancement
• Customer Satisfaction• Employee Retention• Geographic Flexibility• Competitive Positioning• Faster Application
Deployment• Voice Business Continuity• Difficult-to-Quantify
Productivity via Converged Applications
= Quantifiable benefits that are applicable to Cisco Systems and used in this ROI Analysis
© 2002, Cisco Systems, Inc. All rights reserved. 121212
Business Case Framework for the Benefits Applicable to Cisco Systems
BUSINESS CASE
ROI ANALYSIS
COSTS
Real Estate
• Space Management• Capex Avoidance• Workspace Sharing
Efficiencies
Bucket-Specific Costs
Common Costs
Single Network
• MAC’s• Maintenance• IP Toll Bypass• Staff• Cabling
Bucket-Specific Costs
Reduced Call Costs• Reduced mobile phone usage• Extension Portability
• Campus Roaming• Home Office• Other Location
• Outbound Call Management• Inbound Call Management• Unified Messaging• Audio Conferencing
Bucket-Specific Costs
Employee Productivity• End User Apps
• Audio Conferencing• Unified Messaging• Personal Assistant• XML
• TRC Case• Facilities Services• Taxi Services
• CTI• Screen Dial• Screen Pop
• IT Operations• Facilities Mgmt Ops
Bucket-Specific Costs
Cultural Enhancement
• Customer Satisfaction
• Employee Retention• Geographic
Flexibility• Competitive
Positioning• Faster Application
Deployment• Voice Business
Continuity• Difficult-to-Quantify
Productivity via Converged Applications
BENEFIT BUCKETS
© 2002, Cisco Systems, Inc. All rights reserved. 131313
The Business Case for IP Telephony at Cisco
Scope:• All Cisco offices in Cisco’s Europe, Middle East & Africa (EMEA) region
(total of 96 offices)• Five year time horizon: FY2000 - FY2005 (= August 99 to August 2004)• All Voice communications on IP Platform
• IP Handsets and Extension Portability• Cisco Softphone on laptops (Wired or Wireless LAN connectivity)• IP Blue Softphone on Compaq IPAQ PDA’s (Wireless LAN connectivity)• Suitable Productivity Applications:
• Cisco Unity Unified Messaging• Cisco Personal Assistant• Web Access Applications (via Web Browser on Screen of IP phone)• Computer Telephony Integration Applications (via JTAPI interface to Cisco Call Manager)• Audio Conferencing
© 2002, Cisco Systems, Inc. All rights reserved. 141414
Guiding Principles
Analysis must be “Boardroom Survivable”• Objective
• Analysis will be scrutinised by objective third-parties (e.g. Gartner Group)
• Transparent• All assumptions and calculations supportable to the most granular level of
detail
• Conservative• Similar to manner in which third-party consultant would perform analysis
• Standard: Use Generally Accepted ROI Principles & Practices• Use Cash Flow analysis, not Profit/Loss analysis
• Simple• Use Plain English Terminology
© 2002, Cisco Systems, Inc. All rights reserved. 151515
ROI Approach & Methodology
• Individual Cisco offices form the fundamental building blocks of the ROI analysis• All offices categorised as Large, Medium or Small• Perform detailed analysis on one of each of the three office types• Tie all benefits to a “per employee” benefit• Total EMEA-wide ROI figures prorated based on office size and office headcount• Pricing of Cisco equipment is representative of what a large enterprise customer
would pay, not what Cisco Systems would pay• Analysis takes into consideration the timing of each individual office going live on
IPT infrastructure, as well as the time in which applications launched EMEA-wide• Only 50% of any benefits dependent on integration and/or development are
realised in the first year of deployment• In line with the highly conservative nature of the analysis, the approach assumes
Cisco offices are NOT greenfield sites: i.e. the “Do Nothing Option” is to continue using and maintaining an existing PBX
© 2002, Cisco Systems, Inc. All rights reserved. 161616
The ROI Model for Cisco Systems
Large Office(Bedfont Lakes)
Medium Office(Frankfurt)
Small Office(Sophia Antipolis)
ROI (Small)
Payback Month (Small)
NPV (Small)
Range: 1-50 Employees
ROI (Large)
Payback Month (Large)
NPV (Large)
Range: >151 Employees
ROI (Medium)
Payback Month (Medium)
NPV (Medium)
Range: 51-150 Employees
Country Office Relevant Headcount
Deploy
Date
ROI Payback Month
NPV
UK Bedfont Lakes
1147 Xx/yyyy ROI (BL) xx NPV (BL)
NL Amsterdam 883 Xx/yyyy ROI (Ams) xx NPV (Ams)
France Paris 576 Xx/yyyy ROI (Par) xx NPV (Par)
Cisco EMEA ROI = xx%Cisco EMEA Payback Month = yyCisco EMEA NPV = US$zz
S. Africa Durban 2 Xx/yyyy ROI(Dur) xx NPV(Dur)
Zimbabwe Harare 2 Xx/yyyy ROI(Har) xx NPV(Har)
Latvia Riga 1 Xx/yyyy ROI(Rig) xx NPV(Rig)
Linkage of the Large/Medium/Small office ROI analyses to the EMEA-wide consolidation
17© 2002, Cisco Systems, Inc. All rights reserved.
Results of the ROI Analysis
© 2002, Cisco Systems, Inc. All rights reserved. 181818
Actual ROI Results for Cisco EMEA: FY2000 - FY2005
2000 2001 2002 2003 2004
Bus
ines
s B
enef
it of
Cis
co IP
Tel
epho
ny(R
elat
ive
Scal
e)
2005
IP & Web Foundation Expanded to Include Voice
Deployment of Converged E-Business Applications:
•Unified Messaging•Personal Assistant•2 x CTI Applications•3 x XML Applications
•Web-Based Audio Conferencing
Year
Net
Ben
efit
(US$
)
2000 2001 2002 2003 2004 2005
$2.6 m=$340/emp.
$12.4m=$1625/emp.
$33m=$4320/emp.
$9.4m=$1230/emp.
$33m=$4320/emp.
• ROI = 126%• Payback Month = 10• NPV (@12 %) = $60 million
19© 2002, Cisco Systems, Inc. All rights reserved.
Appendix I: Detail Behind the Results
© 2002, Cisco Systems, Inc. All rights reserved. 202020
Benefit Differences of the Large, Medium, Small Offices
• Large Office Results:Cisco EMEA Headquarters, Bedfont Lakes/London, UK: 1147 Employees
ROI = 130%Payback Month = 9NPV = $12.3 m
• Medium Office Results:Cisco Eschborn/Frankfurt, Germany: 171 Employees
ROI = 120%Payback Month = 10NPV = $1.8 m
• Small Office Results:Cisco Sophia Antipolis, France: 35 Employees
ROI = 111%Payback Month = 11NPV = $330 k
© 2002, Cisco Systems, Inc. All rights reserved. 212121
Breaking Down the Benefits: Large Office Example
The Single Network
Cabling (+)
Staff (!)
(!) = Annual Recurring Benefit(+) = One-Time Benefit
Maintenance (!)
Moves, Adds & Changes (MAC’s) (!)
$500k
$120k
$60k
$450k
Notes:• Cabling benefit is a one-time benefit and is only
generally applicable during the year of a building move (Cisco’s “Large Office” moved in 2001 and thus realised this benefit)
• Costs for Moves, Adds and Changes (MAC’s) are based on the average cost of an outsourced PBX MAC, versus that of a Cisco IPT MAC Total
Recurring$630k
TotalOne-Time
$500k
© 2002, Cisco Systems, Inc. All rights reserved. 222222
Breaking Down the Benefits: Large Office Example
Real Estate
Workspace Sharing Efficiencies(!)
Capex Savings (+)
Space Management (!)
$452 k
$1.6 m
$66k
(!) = Annual Recurring Benefit(+) = One-Time Benefit
Notes:• Capex Savings benefits associated with real estate are
only generally applicable during the year of a building move (Cisco’s “Large Office” moved in 2001 and thus realised this benefit)
• The origin of the Workspace Sharing Efficiency benefit stems from Cisco IP Telephony’s ability to allow Facilities Managers not to have to accommodate “swing space” when planning a new building, or reallocating space in an existing building
TotalOne-Time
$452k
TotalRecurring$1.67 m
© 2002, Cisco Systems, Inc. All rights reserved. 232323
Breaking Down the Benefits: Large Office Example
Reduced Call Costs
Extension Portability > Home Office > Outbound (!)
Audio Conferencing (!)(!) = Annual Recurring Benefit(+) = One-Time Benefit
Outbound Call Management (!)
Unified Messaging (
!)
$270 k
$195 k
$970 k
$25 k
Notes:• Within this sub-section of the analysis, the benefits of Unified
Messaging only represent call cost savings associated with reduced external access to corporate voice mail - they do not represent increased employee productivity.
• Outbound Call Management represents the major call cost savings associated with mobile employees using Cisco Personal Assistant to route outbound calls over the Cisco corporate network, taking advantage of either IP Toll Bypass OR bulk corporate-discounted PSTN rates
• Audio conferencing addresses replacement of a portion of existing outsourced audio conferences by the Cisco Conference Connection product
• The Extension Portability > Home Office > Outbound benefit entails the use of the Cisco hardware VPN client to allow employees working at home to accept/receive calls on their DDI desk phone number Total
Recurring$1.45 m
© 2002, Cisco Systems, Inc. All rights reserved. 242424
Breaking Down the Benefits: Large Office Example
EmployeeProductivity
CTI Screen Dial Application (!)
XML Facilities Services Application (!
)
(!) = Annual Recurring Benefit(+) = One-Time Benefit
$590k
$475k
$1k
$12k
$24k
CTI Screen Pop Application (!)
XML Taxi Services Application (!)
XML TRC Case Application (!)
Notes:• The ROI project team made a judgement call that, even though
the productivity of Cisco employees is undeniably increased through the use of Cisco’s Unified Messaging (UM) and Personal Assistant (PA) applications, the benefits modelling process would be unacceptably vague because the associated business processes and policies are not yet defined (e.g. incurring a GSM call to have PA speak e-mail over the phone)
• This situation will change once the new business processes surrounding UM and PA are defined.
• Productivity benefits of CTI applications are substantial because they emulate those of agents at large, CTI-enabled call centres yet can be implemented at a fraction of the cost
• Benefits of XML applications are actually small for Cisco because almost all Cisco employees have laptops and ubiquitous access to the Web. Organisations that are not in this same situation will most likely benefit more than Cisco due to not having to provide a PC to all employees
Unified Messaging & Personal Assistant (!) $???k
TotalRecurring$1.1+ m
© 2002, Cisco Systems, Inc. All rights reserved. 252525
Breaking Down the Costs: Large Office Example
IPT Common Capex Costs (+)$1.1 m
TDM Infrastructure Capex Costs (+)
IPT Bucket Specific Ongoing Costs (!)
IPT Common Ongoing Costs (!)IPT Bucket Specific Capex Costs (+)$0
$1.5 mTotal
Capex$2.6 m
$300 k
$20 kTotalOpex$320k
Notes:• In line with the highly conservative, non-greenfield
approach, the ROI analysis assumes that TDM-based infrastructure (PBX, voice mail system, multiplexors, etc.) was already in place, before migration to Cisco IP Telephony
• Hence TDM-based infrastructure capex costs are $0 – i.e. all capex costs used in the analysis are representative of Cisco IP Telephony equipment only
Costs
26© 2002, Cisco Systems, Inc. All rights reserved.
Appendix II: Sensitivity Analysis
© 2002, Cisco Systems, Inc. All rights reserved. 272727
Sensitivity Analysis:Examining Three Alternative Scenarios
Alternative Scenarios:1) No Real Estate• If organisation under consideration does not accept real estate savings as a legitimate
business benefit
2) No Employee Productivity• If organisation under consideration does not accept increased employee productivity
as a legitimate business benefit
3) Only Benefits of the Single Network• If organisation under consideration only accepts the benefits associated with those of
deploying and managing one IP network, instead of separate voice and data networks
Base Case = Cisco CaseIncludes all benefits applicable to, and accepted by, Cisco Systems
© 2002, Cisco Systems, Inc. All rights reserved. 282828
Sensitivity Analysis: Cisco EMEA:(7639 Employees)
Cisco EMEA Scenario Payback Month
ROI NPV
Base Case = Cisco Case• Includes all benefits applicable to, and accepted by, Cisco Systems
10 126% $60 m
1) No Real Estate• If organisation under consideration does not accept real estate savings as a legitimate business benefit
30 50% $32 m
2) No Employee Productivity• If organisation under consideration does not accept increased employee productivity as a legitimate business benefit
10 126% $44 m
3) Only Benefits of the Single Network• If organisation under consideration only accepts the benefits associated with those of deploying and managing one IP network, instead of separate voice and data networks
26 70% $6.2 m
© 2002, Cisco Systems, Inc. All rights reserved. 292929
Large Office: Bedfont Lakes/London, UK (1147 Employees)
Cisco Large Office Scenario Payback Month
ROI NPV
Base Case = Cisco Case• Includes all benefits applicable to, and accepted by, Cisco Systems
9 130% $12.3 m
1) No Real Estate• If organisation under consideration does not accept real estate savings as a legitimate business benefit
22 47% $6.8 m
2) No Employee Productivity• If organisation under consideration does not accept increased employee productivity as a legitimate business benefit
9 130% $5.8 m
3) Only Benefits of the Single Network• If organisation under consideration only accepts the benefits associated with those of deploying and managing one IP network, instead of separate voice and data networks
25 66% $715 k
© 2002, Cisco Systems, Inc. All rights reserved. 303030
Medium Office: Eschborn/Frankfurt, Germany (171 Employees)
Cisco Medium Office Scenario Payback Month
ROI NPV
Base Case = Cisco Case• Includes all benefits applicable to, and accepted by, Cisco Systems
10 120% $1.8 m
1) No Real Estate• If organisation under consideration does not accept real estate savings as a legitimate business benefit
19 55% $1.2 m
2) No Employee Productivity• If organisation under consideration does not accept increased employee productivity as a legitimate business benefit
10 120% $875 k
3) Only Benefits of the Single Network• If organisation under consideration only accepts the benefits associated with those of deploying and managing one IP network, instead of separate voice and data networks
17 78% $230 k
© 2002, Cisco Systems, Inc. All rights reserved. 313131
Small Office: Sophia Antipolis, France (35 Employees)
Cisco Small Office Scenario Payback Month
ROI NPV
Base Case = Cisco Case• Includes all benefits applicable to, and accepted by, Cisco Systems
11 111% $330 k
1) No Real Estate• If organisation under consideration does not accept real estate savings as a legitimate business benefit
20 62% $245 k
2) No Employee Productivity• If organisation under consideration does not accept increased employee productivity as a legitimate business benefit
11 111% $140 k
3) Only Benefits of the Single Network• If organisation under consideration only accepts the benefits associated with those of deploying and managing one IP network, instead of separate voice and data networks
16 74% $100 k
Top Related