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Buying into VoIP

October 13, 2003 By

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

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