The ROI of VoIP

Everybody says VoIP saves big bucks. But does it?

Advocates of Voice over Internet Protocol (VoIP) say it saves money on long distance calls by sending them over the Internet, improves communication by eliminating the Private Branch Exchange (PBX), and offers a host of neat features such as call forwarding, e-mail accessible voicemail, and more.

When it comes to measuring the dollars-and-cents impact of this technology, however, K-12 districts frequently find themselves in a bind.

Such was the case last year when officials at Tift County Public Schools in Tift, Georgia, set out to invest in a new telecommunications system. Harris Tucker, technology services director, had read volumes of material about VoIP but needed to prove to a new superintendent that an investment in the new technology would actually save big bucks.

"Besides being the newest telephone technology, [we knew] VoIP would provide the eventual placement of putting a phone in every room without having to pull new cabling to the rooms," he says. "We just had to justify it."

The Believer

For Tucker and Tift, the math was simple. Tift was paying approximately $4,700 per month for local phone service, or $56,400 per year. Of that, only $900 was eligible for E-Rate discounts, a paltry amount considering the school could have received a discount of up to 80 percent.

Determined to save dollars, Tucker put out a request for proposal for a VoIP system comprised of 257 phones, two phone switches, and two primary rate interfaces (PRIs). Mitel, a VoIP vendor in Ottawa, Ontario, beat out three other vendors with a $134,000 bid. Next, Tift entered into a Local Service Agreement with BellSouth Communications to provide local service for the two PRIs. The service bill dropped to $2,600 per month—a savings of $25,200 per year.

Because all of these new service charges are eligible for E-Rate reimbursement, this July the school can apply an 80 percent discount to the telecommunication charges. The results will reduce the monthly charge to $520, or $6,240 per year, a savings of $50,160 overall.

Because Tucker spent $134,000 on the Mitel system and will save $50,160 per year on service, he calculates that the district will break even on the system in about 2.5 years.

The Naysayer

With figures like this, it's hard to believe that anybody would decry the cost-effectiveness of VoIP. But Margaret Klee, CIO of the Los Angeles Unified School District, is a skeptic.

Klee's thinking is straightforward. After considerable research, she couldn't find a call manager for less than about $300,000. When she considers that the district pays less than two cents per minute on toll charges and factors in the district's 84 percent E-Rate district, Klee says deploying VoIP is not worth the cost.

Another reason Klee hasn't warmed up to VoIP is how vulnerable it would leave her network. She cites the system's single point of failure as a major problem—if the network goes down, the entire school district would lose voice communications. For this reason, Klee says she'd never completely abandon traditional lines, meaning that VoIP would always be an extra charge rather than a means to save money.

"Traditional phone systems are very reliable," she says. "The biggest potential savings for us is in the areas of the district where calls would incur toll charges for calling place to place and by routing the calls over the data network—we could avoid those charges."

That said, Klee is quick to add that Los Angeles Unified has invested in VoIP at a handful of remote sites to achieve the savings she mentions. On the whole, however, she says the district does not plan "significant deployment," and therefore does not see the need to conduct a cost-benefit study down the road.

Matt Villano is a California-based freelance technology writer.