Cities: The Next Frontier for VoIP

Utah’s Missoula city government recently decided to completely trash its current phone program; replacing it with a VoIP system.


The initial cash outlay for the VoIP phones may be large ($425,000), but ongoing costs for the system will be only about $65,000 per year, city information technology director Dave Boring said.
The city’s present phone system is a Nortel private telephone switch operated by Missoula County. The voice service itself comes from Blackfoot Communications. The city pays Missoula County about $103,000 per year for the phone service.  The problem with this is that private telephone switches build up large amounts of bills when a lot of remote sites (such as the city’s fire stations, parks and street department offices) are involved.
Also, aging phone switches, routers and other hardware must be replaced periodically.
It was these looming replacement costs that prodded Boring to consider piggybacking an order of VoIP phones with a state contract with California-based Cisco Systems Inc.
Montana is one of 15 states in the Western States Contracting Alliance, formed in 1993 to purchase recycled computer paper. In the years since, the group has grown into a bulk-purchase contracting alliance that sometimes makes for significant savings, said Brad Sanders, head of the state procurement office in Helena.
The bulk of Montana’s group purchases this year are three computer contracts with IBM, Hewlett-Packard and Dell Computers for a total of about $4.2 million.
“We can pick and choose what (contracts) we want. It allows us the leverage of a bigger buying pool,” Sanders said.
In the case of VoIP, the state procurement office asked for bids but found a Western States Contracting Alliance bid with Utah offering nearly 43 percent in savings undercut them all. The state filed an addendum to get into the Utah contract, and Missoula filed an addendum to join the state’s contract.
Cisco likes the group government contracts because it’s battling for phone market share with VIA Systems and Nortel, said analyst Matthias Machowinski of Infonetics Research near San Jose, Calif.
Until a few years ago, Cisco accounted for a small portion of North America’s business phone market, which was dominated by VIA and Nortel. Almost overnight, Cisco has used the new hotspot VoIP to get itself into a three-way race with the two giants.
“The Voice Over IP market hadn’t taken off until the early 2000s. Now everything is going that way. It’s the technology of the future,” Machowinski said. Cisco has almost 75 percent of the pure VoIP market.
Boring said the city’s old phone system, with the upgrades and yearly fees to the county, would have cost $180,000 a year. Taking that figure into account, the investment in the VoIP system will pay for itself in just four years.

Summary

Utah’s Missoula city government recently decided to completely trash its current phone program; replacing it with a VoIP system.


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VoIP = ROI

Just my 2 pennies
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Posted by Michael White on April 22nd, 2006 at 8:41 pm
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