What are the Benefits of Implementing VoIP for Universities?

Dartmouth College's S. Bradley Noblet liked what he saw when he ran the numbers for Voice over Internet Protocol (VoIP). “Replacing our current PBX was going to cost us about $4 million in addition to the $2 million we were going to spend on the data network anyway,” says the director of technical services at the Hanover, N.H., school. Adding real-time voice services to the beefed-up data network cost only about $2 million, or half the PBX price.

VoIP offered one other key benefit when Dartmouth began its move to the technology in 2000. VoIP bolstered a comprehensive IT makeover that replaced an ancient traditional phone system, an aging data network and a campus cable television system “that was still mired in the 1970s,” Noblet says.

Dartmouth is one of a growing number of colleges and universities that are gravitating to VoIP to reduce infrastructure and maintenance costs for communications services. But while the cost reductions often are real, experts say the savings aren't automatic. Before committing critical communications to VoIP, schools need to evaluate all of the technology's financial and technical trade-offs, including staying alert to hidden costs that delay return on investment (ROI).

Double Duty

One potential cost saving that shouldn't influence VoIP decisions is the so-called “toll bypass,” the ability to cut long-distance bills by avoiding traditional telecom carriers. A prime selling point in the early days of VoIP, toll bypass benefits have become insignificant in this era of cheap long-distance rates, says William Stofega, research manager for VoIP Services at IDC, a technology research firm in Framingham, Mass.

Nevertheless, cost savings are still possible with VoIP. “We consider Voice over IP a cost saver for overall telephony services,” Stofega says. “Typically, we see a 30 percent reduction in overall spend with respect to communications services.”

Topping the list of savings opportunities is network consolidation. Rather than running separate data and phone networks, each with its own cabling and hardware, schools need to maintain only one IP network for both types of content.

This is especially significant for higher education, where sophisticated data networks often are the norm. “Data communication is mission-critical,” says Noblet. “Most teaching, learning and entertainment activities today are driven off the network. Once you put that data infrastructure in place, converging services like voice requires a relatively small investment.”

Mark Hoeting, CIO at Arkansas State University (ASU) in Jonesboro, also saw price benefits when he installed IP telephony to replace the 81 campus telephone systems that relied on Centrix, a communications service provided by telecom companies. The local telecom provider was charging about $55,000 a month just for basic dial tone for all the systems. “We weren't able to provide any advanced services, such as voice mail, for our users without going to great expense,” he recalls.

Today, Hoeting's monthly voice expenses come to about $6,000 with VoIP, which also provides voice mail and other new features. The savings are paying for the $1.2 million investment in VoIP equipment. Hoeting expects to hit the break-even point after using the new phone equipment for about 15 months, he adds.

Additional VoIP cost savings come when schools need to move, add or change phone connections as people relocate to new offices. With traditional hard-wired phones, telecom reps must perform expensive onsite work that can cost between $75 and $135 per job.

With IP phone sets, the school staff person just unplugs the phone from the Internet jack in the old office and reconnects it in the new office's jack. “IP phones know how to reregister with the administrative server,” says Craig Smythe, development manager for Cisco Systems, a networking and VoIP vendor.

Unexpected Costs

Results like this validate the VoIP business case for higher education, but they don't tell the whole story. The technology also presents some hidden costs that can sidetrack ROI for the unwary.

Hoeting admits he initially underbudgeted the cost of uninterruptible power supplies (UPSs), which added almost $100,000 to the total VoIP price tag. “That certainly was an area that caught us off guard,” he says. At about $300 each, UPSs protect critical networking hardware from power spikes and provide backup power to keep communications flowing during blackouts.

Staff training was another surprise. Hoeting's training budget went from about $10,000 to almost $30,000 to certify his technical people on new IP telephony equipment and maintenance procedures.

VoIP adopters also may overlook the additional training costs to bring telephony staff up to speed in data network management and to educate data specialists about the intricacies of telephony applications, Hoeting adds. “I was paying under $10,000 a year for training [before VoIP], and now we're paying close to $30,000 for training and certifications,” he says. “It's a trade-off: The cost of [telecom] service has been reduced, but the cost of maintaining personnel has increased.”

And while ASU and Dartmouth already operated or were building high-speed networks when their VoIP projects began, schools with older infrastructures need to factor in upgrades before jumping to the technology.

“We were in a unique situation where we had to replace our PBX and network infrastructure at the same time,” Dartmouth's Noblet points out. Without those decisions already in place, “it might have been a lot more difficult to make the case” for VoIP, he says.

$49,000

The monthly savings Arkansas State University achieved after switching from a local telecom provider to Voice over Internet Protocol.