ncompass uc budgeting

Pricing and Budgeting for IP Telephony and UC

N’compass Solutions, Inc.Douglas Carolus, MBA

Director, Consulting Services & Operations

1

Getting more “bang” from smaller budgets…

Where is UC Going ?

2

“Gartner has received some negative feedback on Cisco Unified Workspace Licensing (CUWL) from clients because of premium pricing (over standard IP telephony pricing), all-inclusive cluster licensing, and sales pressure to adopt now. Companies should ensure that they understand the full cost of ownership of CUWL and select it once the roadmap is in place…”

• Gartner Corporate Telephony Magic Quadrant, August 2007-2008

"Appeasement, said Winston Churchill, consists of being nice to a crocodile in the hope that he will eat you last. At the moment, the biggest crocodile in the world is Microsoft, and everybody is busy sucking up to it."

• John Naughton, The London Observer

N compassThe Power of Strategic IT

http://images.google.com/imgres?imgurl=http://upload.wikimedia.org/wikipedia/commons/thumb/3/37/Winston_Churchill.jpg/300px-Winston_Churchill.jpg&imgrefurl=http://commons.wikimedia.org/wiki/Commons:Potd/2006-11_(pt)&h=363&w=300&sz=9&tbnid=YgXLnC3za0juIM:&tbnh=121&tbnw=100&prev=/images?q=winston+churchill+picture&um=1&start=1&sa=X&oi=images&ct=image&cd=1

3

……the call processing function…has been transformed over the years. Most of the intelligence for call processing now lies in the software component of the call-control solution. R&D, entrepreneurial endeavor and innovation are also shifting to the software side. With creative energies expended to the software, the approach to pricing has logically evolved toward device licensing.” - Cisco UCM Licensing Pricing Model Q&A document.

1996 2003 2009

Functions in Software Functions in Hardware

Evolution to Software –based Architecture


Mainstream - “Not yet”

~30% of enterprise-class companies have fully implemented unified messaging

~ 80% have deployed limited IP Telephony but only <20% have fully implemented IPT.

4

Estimated UC Revenue:

2007: $22.6B

2010: $45.4B

Voice

($21

.7B)

Messa

ging

($14

B)

EIM ($

830M

)

Confe

renc

ing

($7.

8B)

UM (750

M)0

5

10

15

20

25

2010 R

evenue (

in b

illions)

Source Data from Microsoft, In-Stat, and Wainhouse

Current Unified Communications Market


10 people = 10 definitions

Products still evolving

Capital & staff investment

Deployment/support concerns

5

Technology & Capital Challenges

Understanding TCO

ROI elusive

Vendor skills still maturing

What “horse” do I bet on…?

Justification & Vendor Issues

Cool Technology But Slow Adoption…Why?


6

“Pricing complexity is a problem that pushes some companies to purchase rights to more software licenses than they might need…Software license management is often a fulltime job – and one that often generates more ill will than satisfaction with software vendors.”• Dwight Davis, Summit Strategies Analyst


Strategy: Bundling

Approach: 9-tier “Transactional Framework” for most product families

Type: “All Inclusive” bundle replaces Essential, Standard, and Advanced Editions

New UC “All-in-One” Standard Edition includes six applications… one-X Mobile one-X Portal one-X Communicator Microsoft OCS and IBM Sametime integration VPN remote phone licenses Extension-to-Cellular (EC500)

UC Advanced Edition Replaced with Meeting Exchange + Web Conferencing

7

Avaya


CM Standard Edition – All Inclusive is $50/user (list) CM Enterprise Edition – All Inclusive is “free” entitlement license “All Inclusive” Standard requires 3-year SS+U agreement

(annual or pre-paid) More positive changes on their Modular Messaging platform…

• 40% reduction in MM license fee in Nov 2008• Message store on other mfg server does not increase license

cost• Every voice mail box is now speech-enabled • NEW: Speech- to-Text module is incremental feature

8

Avaya (cont.)


IPT Example: Two types of Communication Manager 5.0 Licenses (500 users) CM Standard (with DCS and QSIG networking) - $195 per user

CM Enterprise (for “hub and spoke” designs and local survivability) - $295 per user

User License based on Unique Designated Number, not user or device

UC Example: 500 users with Enterprise CM, MM, and All Inclusive licenses:

9

CM 5.0 Enterprise Edition $295.00

9620 IP Phone (List) $200.00

Modular Messaging w/ one-X Speech $246.00

UC Standard “All Inclusive” Bundle $0.00

Software Support with 24x7 TAC Access and Upgrade Subscription

$45.50

Avaya “Dollars and “Sense”


New Software Support includes 24x7 remote TAC access

More flexible software and on-site technical support (finally)

Support Cost Overview: Software Support: Reduced from 15% to 7% net license cost Software Support + Upgrades: Reduced from 21% to 13% of

net license cost

Hardware/Gateway maintenance per port basis for $1.75/port per month (List)

10

Avaya – Other Costs


Strategy: Bundling

Approach: Cisco Unified Workspace Licensing (CUWL) “bundles”

Type: 3 Editions for IPT + UC solutions: Business, Standard, and Professional

Client software, server software, and access rights included in each edition

Other costs… Plus - SmartNet required for hardware parts and replacements

(optional) Plus - Essential Operate for software support (required for CUWL) Mandatory 3-Year Pre-Paid Software Subscription for Standard and

Professional

Old model still used: Server License + Device License Units (List $50 per unit) Cisco IP or 3rd party SIP Phones use 1-6 DLU (ex. 7902 = 1 and 7985G

= 6 units)

11

Cisco


12

“Device licenses for Cisco Unified CM remain separate from the price of the phone but the price of the device license component has increased starting with…Version 5.0” • Cisco UCM Licensing Pricing Model Q&A 2007

Pre-CM5.0 (<2006)Traditional ModelBase Server Application +Device License Unit Pricing

CM5.0 – Bundled (2007)Introduced 4 bundleswith two tier structure:50-299 or 300-1500 users

CM5.0 – UnBundled(2007)Returned to TraditionalModel (90% of deals)

UCM Business EditionTargeted 50-500 userswith bundled solution.

Standalone UCM 6.0(FCS 7/2007)Every Server has a License (on publisher)Plus DLU Plus Hardware

Unified WL Introduced (August 2007)Workspace LicensingBundled for enterpriseCustomers 100+

Today

UCM 7.0(2008)New CUWL or “Old” DLU

Cisco Unified Workspace Licensing (CUWL) Evolution


13

Business includes UCM 7.0 with DLU for one device. Intended for <500 employees, < 20 sites.

CUWL Comparisons


Business Edition: $315 per user (List) 3-Year UC Software Subscription: $70/user (pre-paid) Essential Operate Services (Software support): $21/user per year UCSS and Essential Operate Required

Standard Edition: $325 per user (List) 3-Year UC Subscription Service (Software Releases): $70/user (pre-paid) Essential Operate Services (Software support): $21/user per year UCSS and Essential Operate Required

Professional Edition: $425 per user (List) 3-Year UC Subscription Service: $125/user (List) Essential Operate Services (software support): $27/user per year UCSS and Essential Operate Required 25 CUWL Licenses = 1 UCCExpress Agent or 1 MeetingPlace port

14

Cisco “Dollars and “Sense”


Strategy: Ala Carte or Bundling

Approach: Server/Client Access Licenses (CAL)

Type: Three Licensing components: Server + Application + Client

“Rule of Thumb” IM/Presence/Chat = OCS 2007 Standard CAL

IM/Presence/Chat + Voice + Web/Audio Conferencing = OCS 2007 Enterprise CAL

Unified Messaging = Exchange 2007 CAL

15

Microsoft


Office Communications Server 2007 Release 2 now generally available

Enterprise-class telephony still not ready for “prime time”

OCS Release 3 (“Wave 14”) focuses on:

Survivable remotes

Full telephony functionality/E911

Audio conferencing

OCS R3 planned for 2010 (same year Nortel ICA expires!)

16


Microsoft OCS R2 – What’s New

New OCS R2 (cont)

Release 2 “Highlights”

No license fee increases from Release 1

Customers with active R1 SW Assurance (SA) contracts entitled to R2 (free)

External connector costs no longer required (was $1999 for OCS 2007)

CAL still required for users who authenticate with Active Directory

New CAL features with OCS R2 Group Chat in Standard CAL Suite

Desktop sharing + telephony/conferencing features in Enterprise CAL Suite

17


Unified Messaging (unified inbox) - $175 Purchase: $71 / user ($47 (SCAL) + $24 (ECAL) Software Assurance: $29 / user Office Outlook 2007 Client: $58 / user + $17 (SA)

Unified Communications “Basic” (Unified Messaging + IM + Presence) - $231

Purchase: $93 / user ($71 UM + $22 (OCS Standard CAL) Software Assurance: $35 / user ($29 (Exchange SA) + $6 (OCS Standard SA) Office Outlook and Office Communicator Client: $79 / user + $24 (SA)

Unified Communications “Advanced” (UC + Audio/Video Conf + IPT +

App Sharing) - $352 Purchase: $190 / user ($71 UM + $119 (OCS Standard CAL and Enterprise

CAL) $59 / user ($29 (UM SA) + $30 (OCS Standard and Enterprise SA) Office Outlook and Office Communicator Client: $79 / user + $24 (SA) 18


Microsoft “Dollars and “Sense”

“Ala Carte” Standalone Server License for Exchange Server 2007

Standard $488 with 1-year SA $122 Enterprise $2791 with 1-year SA $698

“Ala Carte” Standalone Server License for Office Communications Server 2007

Standard $488 with 1-year SA $122 Enterprise $2791 with 1-year SA $698

Key difference between Standard and Enterprise is that the Enterprise solution offers increased scalability plus redundancy. Functionally, the products are the same.

19


Server CAL “Dollars and “Sense”

Microsoft’s approach to the market - run thin, use Partner-led Selling

Buy from Dealer -- Implementation VAR #1 – Service/Support VAR #2?

Don’t expect to “negotiate” off VLP like a typical telephony deal

Channel partner support fairly pricey $150 - $200/hour (MSFT ~300/hour)

Nortel – Microsoft playbook has Nortel leading with Exchange 2007

20


Microsoft – In the Details

21


IP Telephony Pricing Guidelines

“Net new” IP Telephony Minimum Discount >45%

Aftermarket IP Telephony Committed Discount >35%

Avg. cost for enterprise IP Telephony (HW and SW only)

$700-$800/user

Multi-Line IP phones “plastic on the desk” (List):

Low end phone with monochrome display & speakerphone

$225

High end phone with color display & speakerphone

$600

IP Telephony user software licenses (List) $300

Other major cost elements

UPS (access switches and telephony servers) TBD

LAN/WAN Upgrades + Cable Infrastructure Remediation

TBD

Server and Technology Room Remediation TBD

Upgrade staff skill sets for IPT and UC TBD

22


IP Telephony Pricing Guidelines (cont.)

Unified Messaging license $75-$100

ACD/Contact Center Agent License $1500-$2000

IP Softphone $0 - $100

Advanced Call Recording + Install + Professional Services

$3000/port

Advanced Speech Recognition Professional Services

$5000/port

Enterprise Audio Conferencing $900/port

IPT Installation + Professional Services + PM $300-$400/user

E911 Systems (application running on separate server)

$25-$30/user

SIP Access/Trunk $150/Vtrunk

System Technician Hourly Rate (on site) $80-$250/hr

23

Vendor B

25.0%

Total One-Time Costs

Maintenance Years 2-5

~ Project Discount

396,956$

6,262,044$

512,946$

3,528,054$

51.0% 55.5% 61.0%

60.0%Committed Discount

258,283$

5,746,717$

245,239$

3,268,761$

38.0% 25.0%

63.0%

5,459,000$ 3,491,000$ 4,825,000$ 2,824,000$

6,659,000$ 4,041,000$ 6,005,000$ 3,514,000$

Total Costs w/o S&T

Total Costs Years 1-5

1,200,000$ 550,000$ 1,180,000$ 690,000$

S&T (in above pricing)

3,145,000$ 527,000$ 2,491,000$

Vendor A Vendor B Vendor C Vendor D

-$ Variance from Lowest Bid

89.5% 70.9%15.0%% Difference 0.0%


Competitive Pricing for 4,000 station IPT/UM /CC Design

1. Have you conducted an appropriate feasibility study?

2. Is your entire network infrastructure tested and REALLY ready for the new enterprise applications? Power, cooling, cable, QoS, PoE, carrier services, data electronics etc…

3. How will you define success and do you have clear, concise, and objective evaluation criteria to select the vendor(s)?

4. Do you have the appropriate user groups represented on your project team and executive sponsorship to help support & defend your project?

5. Do you have the right internal resources needed to select, implement and support the selected technologies?

24


UC and IP Telephony Procurement - Top 10 Questions

6. Have you defined what you REALLY need implemented on “Day 1” and the existing assets you can leverage? Easy to bite off more than you can “chew”…

7. Do you have a clear service and support plan for after system acceptance?

8. Do you have sufficient growth and network refresh costs in your budget?

9. Do you understand how your decision will impact your organization and your vendor relationship(s)?

10. What is the best procurement and implementation methodology to support your strategy ? (HINT: Competitive procurement + POC/Pilot)

25


Top 10 Questions (cont.)

Have you conducted a feasibility study to align your technology roadmap with your company’s strategic business plan?

Feasibility Study = Analysis of a problem to determine if there is an effective solution. The operational, financial, and technical aspects of the analysis are critical and intended to address:

What are acceptable alternatives to the current technologies? What are the costs, benefits, and risks associated with the viable

alternatives? What is the best solution (current state, upgrade, migration, “rip &

replace”)? Can the best solution be “built” and supported and if so, in what

timeframe? The final objective is to answer the question: Should we implement the

solution?

26


Before You Buy Anything…

IP Telephony and Unified Communications software-based architectures require new understanding of vendor technology, licensing models, and pricing…

Vendors have varying and evolving technology, software licensing, and costs…

Customers will need to do their homework to understand these vendor models and how they impact the total cost of ownership…

Begin with the end in mind; perform feasibility study, define your requirements, “Must Haves”, measures of success, and align with the business strategy…

Competitive procurement process yields the best pricing and service support offers…it’s not easy but well worth the effort!

27


Summary ---

THANK YOU and Questions…

28

N’compass Solutionswww.ncompass-inc.com

Douglas [email protected]

612.437.1477


http://www.ncompass-inc.com/

mailto:[email protected]

ncompass uc budgeting

Education

standard ip telephony

premium pricing

limited ip telephony

device licensing

software component

software based architecturethe

unified messaging

biggest crocodile