Reducing Skype for Business Costs via Proactive Management Using management tools cuts SfB operational costs by more than half

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1 Fall fssdfd 2Q 17 Reducing Skype for Business Costs via Proactive Management Using management tools cuts SfB operational costs by more than half Skype for Business (SfB) implementations are on the rise, especially as a replacement for legacy digital and IP-PBXs. However, over the last several years Nemertes annual Unified Communications and Collaboration (UCC) Total Cost of Operations has found that operating a SfB platform results in higher than average operational costs. Organizations that use management tools see a 63% reduction in their operational costs. Compass Direction Points: ± Using third-party management tools with Skype for Business results in a 63% reduction in operational costs and an 11% reduction in implementation costs. IT should plan for the use of third-party tools in a Skype for Business implementation. ± Just 15.8% of Skype for Business users use third-party operational management tools. Make sure these tools are part of your Skype for Business implementation. ± It s not just about cost savings. Those using third-party management tools free up ITE resources and improve adoption of collaboration tools. By Irwin Lazar Vice President and Service Director Nemertes Research Nemertes Research Group Inc

2 Table of Contents TABLE OF FIGURES 3 EXECUTIVE SUMMARY 4 THE ISSUE 5 THE RISE OF MICROSOFT SKYPE FOR BUSINESS 5 OPERATIONAL COSTS, ADOPTION CHANGES 6 FCAPS MODEL 7 SPECIALTY TOOLS FOR IPT, UCC 8 USING MANAGEMENT TOOLS TO REDUCE SKYPE FOR BUSINESS TCO 8 ADDITIONAL BENEFITS FROM USING THIRD-PARTY MANAGEMENT TOOLS 10 GLOBAL CONSIDERATIONS 10 CONCLUSION AND RECOMMENDATIONS 11 METHODOLOGY 11 INDEPENDENT RESEARCH PROJECT 11 RESEARCH DATA CAPTURED 12 Nemertes Research 2017 ± ± ± DN5953 2

3 Table of Figures FIGURE 1: CONSOLIDATING ONTO A SINGLE PRIMARY UC PLATFORM ( )... 6 FIGURE 2: ADOPTION OF THIRD-PARTY PERFORMANCE MANAGEMENT TOOLS, FIGURE 3: MICROSOFT CUSTOMERS USE OF MANAGEMENT TOOLS... 9 FIGURE 4: SKYPE FOR BUSINESS FIVE-YEAR TCO COMPARISON... 9 FIGURE 5: SKYPE FOR BUSINESS FIVE-YEAR TCO (WITH/WITHOUT TOOL COSTS) Nemertes Research 2017 ± ± ± DN3661 3

4 Executive Summary The more enterprises embrace the benefits of Unified Communications and Collaboration (UCC), the more complex it is for IT professionals to deliver a wellorchestrated solution. This is especially true for those adopting Microsoft Skype for Business (SfB) as their primary telephony platform. Skype for Business, as a pure software application, replaces a voice-optimized hardware and desktop phone deployment model with one in which IP telephony and UC applications run on virtualized servers, with most users relying on softphones as their primary interface. Merging voice onto desktop and laptop computers as well as on mobile devices via VoWiFi means that traditional approaches to ensuring voice quality such as isolating voice traffic onto its own VLAN, and applying appropriate QoS to that VLAN, are no longer feasible. As a result, Nemertes has repeatedly found that Microsoft Skype for Business adopters face higher than average costs than those deploying other platforms. One means of reducing operating expenses is the use of dedicated tools for Skype for Business operational management. Thus, it s surprising that just 15.8% of those using Skype for Business for voice in our study, are using monitoring and management tools provided by companies that specialize in such technology. These providers cover various areas of management including operations, performance, and event management. It is worth noting that many adopters of Skype for Business for telephony are still early on in their deployments and have not yet investigated thirdparty management tools. Nemertes interviewed or surveyed more than 700 companies for its annual UCC Total Cost of Operations research project, and found that most organizations that use both performance and operational management tools from vendors who specialize in UCC management and monitoring tools reduced implementation and operational costs. These savings are even more pronounced for those using Skype for Business where use of third-party tools results in a 63% reduction in operational costs and an 11% reduction in implementation costs. This report reviews the trends in IP telephony and UC that are driving cost changes, specifically for Microsoft Skype for Business, and the need for monitoring and management tools to reduce operational costs. Nemertes Research 2017 ± ± ± DN5953 4

5 The Issue Implementing Skype for Business for telephony is disruptive. Skype s architectural model is fully software-based, typically relying on call control servers running on virtualized hardware. In addition, because Microsoft customers want to rely on the value of true unified communications that integrates voice, video, messaging, and conferencing into a single app, most SfB deployments heavily rely on softphones rather than on desktop telephones. This paradigm creates challenges for IT shops used to running telephony on dedicated hardware, and provisioning telephones in which voice traffic is isolated into separate virtual LANs (VLANs) that are optimized to meet latency and jitter requirements for high-quality voice. What s more, the technology is relatively new, so there has been a learning curve, resulting in increased costs for systems integration and additional staff. As a result, Nemertes finds that Skype for Business operational costs typically exceed the mean for all IPT implementations, especially for larger rollouts of more than 1,000 endpoints. Thus, IT leaders seek approaches that they can utilize to reduce these operational costs. The Rise of Microsoft Skype for Business Microsoft entered the voice market with a bang in 2007 with the Office Communications Sever VoIP As You Are campaign, enabling customers of its instant messaging and web conferencing software to integrate existing telephony platforms to support unified communications. Since then, Microsoft has continually evolved its offering to Lync, and now Skype for Business, to enable it to not just coexist with existing IP and digital PBXs, but to completely replace them. Microsoft s current iteration of Skype for Business provides a robust feature set that has enabled Microsoft to compete with the likes of Avaya and Cisco in not just the SMB, but increasingly, in the large enterprise telephony space, as well. Microsoft s ability to leverage its presence on the desktop has allowed it to rapidly gain mindshare and market share in the enterprise voice market. Although just 8% of companies now say that Microsoft is their primary IP telephony provider, Microsoft stands to benefit from the growing desire of enterprise IT leaders to converge their unified communications and collaboration platforms onto a single primary vendor and its ecosystem. Nearly 43% of participating organizations in the Nemertes Unified Communications and Collaboration Benchmark plan to consolidate on a single primary UC vendor. Of those, 54% are going with Microsoft. (Please see Figure 1.) Nemertes Research 2017 ± ± ± DN3661 5

6 Consolidating Onto a Single Primary UC Platform ( ) UC Consolidation 45.0% 40.0% 35.0% 38.1% 42.8% What are you consolidating? 100% IM 94% desktop video, web conferencing, voice 30.0% 25.0% 25.7% Figure 1: Consolidating Onto a Single Primary UC Platform ( ) Most all Microsoft Skype for Business deployments are on-premises, however interest in leveraging Office 365 s capabilities to shift SfB PBX functionality to the cloud is strong. Even in the cloud PBX deployment model, PSTN access typically remains within the domain of enterprise control, necessitating the need for proactive operational management of voice quality. Operational Costs, Adoption Changes IT managers have five choices when it comes to monitoring and managing their IP telephony and UCC systems: 1.) Use the tools the platform or cloud vendor provide, typically for free 2.) Use existing network management or device management tools and retrofit them to work with IP telephony and UCC 3.) Use third-party, or specialty tools from companies that focus on IP telephony or UC performance management 4.) Use third-party tools from companies that complement the performance management tools, with a focus on administration and operational management 5.) Do nothing at all. Most companies use some combination of the first two options, especially in their initial rollouts (which, ironically, is when operational management tools are most effective). They receive tools from their platform or service vendors for no extra cost, and they already have invested in their existing network management tools. They believe they will allow for effective technology management. Nemertes Research 2017 ± ± ± DN5953 6

7 Nemertes found in 2017 that just 23% of companies were implementing third-party tools to improve their operations and reduce costs. Figure 2: Adoption of Third-Party Performance Management Tools, 2017 FCAPS Model Third party tools typically provide one or more of the management capabilities defined in the International Standard for Organization (ISO) FCAPS (Fault, Configuration, Accounting, Performance, and Security) model for network management. Each of these is defined in greater detail below: Fault management Recognizes faults to isolate any detrimental effects, quickly correct the fault, and logs those corrections; generates and manages alarms; conducts diagnostic testing. Configuration management Simplifies configuration and operations by collecting and storing relative data in a central database; tracks configuration changes for network devices; tracks resources (asset management), handles network provisioning, backup, change management, and auto discovery. Accounting management Tracks and collects user data (link utilization, storage usage, etc.) for billing management; sets quotas for usage; helps with audits and fraud reporting. Nemertes Research 2017 ± ± ± DN3661 7

8 Performance management Monitors ongoing operations of the network to evaluate efficiency; helps for future changes or upgrades to facilitate efficiency. Tools monitor the health of the network and log network parameters (throughput, error rate, downtime, etc.), which help to determine if an event may occur under certain conditions and can be stopped before damage results. Security management Authenticates and authorizes network access and encrypts data; handles security alarm and event reporting, data privacy, security audit trails. Specialty Tools for IPT, UCC Several vendors specialize in tools or services that provide management and monitoring data for IP telephony and UC. They cover any combination of the FCAPS components. Across all areas of the FCAPS components, analytics also come into play to leverage real-time and historical information to improve reliability and efficiency of the network and applications running across it. Using Management Tools to Reduce Skype for Business TCO Data gathered by Nemertes for our 2017 Unified Communications TCO study from more than 700 end-user organizations shows the following median first-year costs for on-premises UCC implementations (including telephony) on a per-endpoint basis: Capital: $298 Implementation: $272 Operational: $576 Total First Year Costs: $1,146 Figure 3 below shows the dramatic potential savings from using third-party performance management tools for Skype for Business. Nemertes Research 2017 ± ± ± DN5953 8

9 Microsoft Customers Use of Management Tools $1,000 Use tools Don't use tools $800!$817!! $600 $400 $200 $-!$352!!!$314!!!$325!!!$300!!!$304!! Implementation Capital Operational Figure 3: Microsoft Customers Use of Management Tools For Microsoft Skype for Business customers, the use of third-party tools for voice quality management and troubleshooting offers the opportunity to reduce first year costs from an average of $1,469 per endpoint to $943, a savings of nearly 36%! The reduction in ongoing operational costs by 36% would result in a five-year savings of $2,578 per endpoint (Please see Figure 4.) Skype for Business Five -Year TCO Comparison Year Without Tools With Tools Total Savings 1 $1469 $943 $526 2 $817 $304 $513 3 $817 $304 $513 4 $817 $304 $513 5 $817 $304 $513 TOTAL $4737 $2159 $2578 Figure 4: Skype for Business Five-Year TCO Comparison Note that Table 1 does not show acquisition costs of such tools. For a 5,000-seat implementation, Nemertes finds that the typical cost of implementing specialty tools works out to about $29,000 in capital investment, and $8,000 per year in maintenance. Extrapolating these costs out over the same five-year window yields a total five-year cost of $61,000. For a 5,000-seat Skype for Business deployment, Nemertes Research 2017 ± ± ± DN3661 9

10 including management tool acquisition and maintenance costs, the total savings is $12,954,000 as shown in Figure 5 below. Skype for Business Five-Year TCO 5,000 Seat Comparison (with Management Tools) Item Year 1 Year 2 Year 3 Year 4 Year 5 Total Tool Acquisition $29,000 $29,000 Tool Maintenance $8,000 $8,000 $8,000 $8,000 $32,000 IPT Implementation $1,570,000 $1,570,000 IPT Operational $1,520,000 $1,520,000 $1,520,000 $1,520,000 $1,520,000 $7,600,000 TOTAL $1,599,000 $1,528,000 $1,528,000 $1,528,000 $1,528,000 $9,231,000 Skype for Business Five-Year TCO 5,000 Seat Comparison (without Management Tools) Item Year 1 Year 2 Year 3 Year 4 Year 5 Total Tool Acquisition Tool Maintenance IPT Implementation $1,760,000 $1,760,000 IPT Operational $4,085,000 $4,085,000 $4,085,000 $4,085,000 $4,085,000 $20,425,000 TOTAL $5,845,000 $4,085,000 $4,085,000 $$4,085,000 $4,085,000 $22,185,000 Figure 5: Skype for Business Five-Year TCO (With/Without Tool Costs) Additional Benefits from using Third-Party Management Tools Nemertes has documented several other benefits achieved by those using thirdparty management tools for UCC: 15% improvement in user adoption of UC licenses 115% reduction in the number of FTEs required to support the IPT/UC solution (based on a 5,000 seat roll-out). Global Considerations Those rolling out Skype for Business for telephony outside of the U.S. face several unique challenges compared with those only deploying in the U.S. and Canada: Higher cost, lower availability of SIP trunking. Nemertes finds that more than 70% of IP trunks in North America are SIP, while in Europe-Middle East-Africa (EMEA) adoption hovers around 27%. In Asia, it s less than 5%. Most deployments of Skype for Business use SIP to connect to the PSTN. Absence of SIP-trunking availability requires transcoding, typically using a Session Border Controller (SBC), adding additional complexity and cost, and requiring proactive management to determine potential problems at the SIP- TDM interface. International calls, even over the corporate network, introduce time of travel delays and potential language barriers from non-native speakers. IT leaders must ensure that specifications for delay and jitter are maintained to ensure high quality voice. The use of wideband codecs can also improve voice quality, but may require additional bandwidth, again driving the need for Nemertes Research 2017 ± ± ± DN

11 proactive management to identify potential challenges associated with bandwidth limitations. Conclusion and Recommendations IT leaders responsible for implementing and operating Skype for Business for their telephony and UC needs must have the right management and monitoring tools in place. By leveraging third-party tools, organizations reduce both up-front implementation as well as ongoing operational costs. Best practices for management and monitoring of Skype for Business include the following: Budget for the tools with the initial deployment. Far too many IT professionals think they have enough tools in place, but the real-time nature, extensibility, and regular pace of change requires specialty tools. The data is clear: Using third-party management tools with SfB reduces operational costs, even after the costs of the tools themselves are factored into the equation. By using the specialty tools, you will be able to reduce FTEs managing the solution. Re-purpose these employees to new, preferably more strategic areas. Methodology For the 2017 UCC Total Cost of Operations research, Nemertes gathered data from 723 companies. Nemertes conducted interviews with 14 IT leaders to establish parameters for a survey, which captured cost data from another 709 IT leaders. In the research, we asked companies to provide information on their primary IP telephony and strategic UC providers, recognizing many have more than one. We gathered data on cloud, on-premises, and hybrid services as well as management approaches for these services. Participants include a broad span of industries and organizational sizes including those with global operations. Independent Research Project No vendors sponsored this research. The research is part of Nemertes annual schedule. Research Advisory Service clients may provide input into the research hypotheses and questions, but Nemertes maintains final authority over the interview and survey questionnaires. Providers may pay for access to the research once it s complete, and they also may purchase marketing collateral based on the research. All enterprise IT leaders who agree to be interviewed for the study receive the research findings, as do all of Nemertes Research Advisory Service clients whether vendor or enterprise. Nemertes Research 2017 ± ± ± DN

12 Research Data Captured Our research data captures the following on IP telephony and UC. We still separate IP telephony and UC because the majority of companies continue to operate each separately, often from separate vendors and separate budgets. Measurements for On-Premises Deployments o Capital: Includes PBX, endpoint devices and licenses, servers, other hardware. In some cases, bundled licenses include certain UC apps = Total capital costs / number of endpoints o Implementation: Includes staff time and third-party consultants and integrators = (Staff time * loaded hourly rate)+3 rd party costs / number of endpoints o Operational: Includes staff time, equipment maintenance, 3 rd party managed services, training and certification = ((Number of FTEs * average annual loaded salary) +(equipment maintenance + managed services + training/certification)) / number of end points Measurements of Cloud Deployments o Capital: Includes endpoint devices and licenses, servers, other hardware purchased up front as capital. = Total capital costs / number of licenses o Implementation: Includes staff time and third-party consultants and integrators = (Staff time * loaded hourly rate)+3 rd party costs / number of licenses o Operational: Includes staff time, equipment maintenance (if applicable), 3 rd party managed services, training and certification = ((Number of FTEs * average annual loaded salary) +(equipment maintenance + managed services + training/certification)) / number of licenses o Monthly service: Includes monthly service fee to provider, per license About Nemertes Research: Nemertes Research is a research-advisory and consulting firm that specializes in analyzing and quantifying the business value of emerging technologies. You can learn more about Nemertes Research at our Website, or contact us directly at Nemertes Research 2017 ± ± ± DN

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