The Cost of Technology Obsolescence and Hosted Unified Communications

David Byrd : Byrd's Eye View
David Byrd
Chief Marketing Officer for ANPI

The Cost of Technology Obsolescence and Hosted Unified Communications

As previously noted, technology obsolescence comes in many forms, with each affecting the operations or OPEX of a business. The five forms are:

  • Planned Obsolescence
    • Technical Obsolescence
    • Functional Obsolescence
    • Style Obsolescence
    • Postponement Obsolescence
    • Unplanned Obsolescence

In last week’s blog, I described each form, but did not include any data to calculate the price or cost of each form to the business. It is important to understand that with Hosted Unified Communications, a business is protected from all five types of obsolescence. With a cloud solution, technical and functional obsolescence are addressed through continuous additions of features and services via the service provider, many of which are made available to current subscribers at no cost. Even when there is a potential charge for the new capability, it is usually a very small incremental cost and may not be required for every employee. When a change such as this is needed in a premise-based implementation, the cost cannot be leveraged across other companies and requires a much larger upfront investment, along with an accompanying increase in annual maintenance fees. Moreover, according to a study done by Hopkins and Keller, as much as 20% of money spent on upgrades is wasted. In addition, the Standish Group reports that 71% of such projects did not meet the users’ expectations.

Phone Wire estimates that an IP PBX with enhanced UC features will cost between $500 to $900 per employee, with smaller businesses paying the higher amount. Network World projects the life expectancy of an IP PBX at 6.5 years. And the general rule of thumb to estimate upgrade cost is 40% to 60% of the initial purchase price. Assuming two upgrades over the life of the PBX, obsolescence will cost our two companies – in addition to annual maintenance fees, operations and other ownership costs – the following amounts:

Obsolescence

   

22

Employees

 $          3,046.15

cost per year

100

Employees

 $        11,538.46

cost per year

TCO not including Obsolescence

 

22

Employees

 $        19,800.00

cost per year

100

Employees

 $        90,000.00

cost per year

 

Going forward, we can now estimate the cost of technology obsolescence as an additional 13% to 15% of the Total Cost of Ownership, all avoidable by selecting a hosted UC solution.

The final cost element of this blog series will cover business continuity. When all is said and done (and written), I will total the value of the primary benefits associated with Hosted Unified Communications.



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