Building A Credible And Conservative ROI For VOIP
by Robin Harris Foster, Avaya Practice Leader for ROI Analysis
Posted 10/2004; Published 05/2004

Abstract:

Understanding return on investment is always vital, but ROI has become a topic of particular interest and importance as enterprises migrate to voice over IP (VOIP) systems for their telephony needs. Many enterprise decision-makers remain uncertain about how to determine ROI for IP-telephony.

In general, ROI exercises, as they’re actually practiced, often include questionable assumptions about people and organizations, insensitivity to process costs, and an inadequate regard for the demands of financial analysis. To address these shortcomings, here are five simple rules for building credible, conservative ROI analyses that withstand scrutiny and raise ROI practice to meet the highest standard of business impact analysis.

1. Credible ROI analysis depends on reasonable expectations of people, not on what’s possible in an idealized model.

2. Costs recur, but they also evolve, and the pace of evolution makes a big difference over the course of an investment.

3. Never give a benchmark the benefit of the doubt.

4. A year of process changes doesn’t pay off on day one, but even a cautious accountant accepts payoff by day 365.

5. Fractions of people’s time add up to units of payroll, but cutting a fraction of effort may not yield payroll savings.

These five simple rules are common sense, but opportunistic ROI analysis frequently violates them. ROI tools often ignore considerations of human nature, accounting principles, and the true use and benefit of the investment in a given enterprise. Methodologies must be sensitive on these points and open for inspection. Only an adequately granular view supports conservative, credible forecasts that achieve the high standard of business impact analysis. Such a standard can assure the CIO, CFO or business unit leader that the moment for new investment is at hand.

About the author:

Robin Harris Foster is the Avaya Practice Leader for ROI Analysis. She has worked with dozens of clients and sales teams around the world in preparing ROI analyses for IP telephony, contact center, globalization projects and predictive dialers. Formerly with Bell Laboratories, she holds 18 patents for predictive and adaptive methodologies pertaining to contact centers. She holds a Masters of Engineering in Systems Engineering from the University of Virginia.

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