How to evaluate funding options for technology purchases – using the Avaya IP Office phone system as an example.
This subject is a very important one to consider when making a telecommunications purchase. Leasing versus buying is usually a pertinent topic that arises in our consultation process while discussing life expectancy and maintenance options. It is also one that we find most other telecommunication Value Added Resellers (VARS) do not discuss in their presentations. While some may view disclosing products short technology life expectancy counterproductive to a standard sales pitch we believe it is important to educate our clients so they can make the most informed decision about their investment.
The life expectancy of telecom equipment in today’s world is determined by the change in technology available, not necessarily the hardware durability. Avaya, like the former Nortel and Cisco brands offers some of the most durable systems on the market today. A consumer can expect the hardware on these systems to last anywhere for about 8-15 years with routine service (possibly replacing a couple parts along the way). However, due to the evolvement in technology, business owners can find themselves needing an upgrade to their telephone systems every three to five years to stay current and competitive in their marketplace.
One of the best examples to illustrate how the evolution of technology has changed the telecommunications industry is by considering the pricing structure of *T1’s. Over the past few years, the cost of voice and internet T1’s have dropped significantly (nearly one-third of what they were five years ago in some cases) due to changes in the technology available and competition. These innovations have not only reduced the cost but also increased the general availability of access to high-speed internet bandwidth. This in turn, triggered a rapid advancement in Voice over Internet Protocol (VoIP) products and services such as *SIP Trunking and *Dynamic T1/PRI’s. As this new technology is released, companies that purchased their telephone systems three or five years ago may not be able to take advantage of new features or the substantial cost savings it brings because the hardware of their phone system cannot support the new technology that is available today. When we talk about features and benefits of a telephone system, some organizations may not think that they need the newest technology and it may not be a concern in their overall business plans; however, when you consider a cost savings of 10-75% of monthly telecom expenditures, it may.
Additionally, consider how major advances in technology may affect the way your competition does business; we will use remote VPN phones for this example. Let’s say your company’s main competitor decides to *virtualize their office space, creating a remote work environment for their employees. After completing some research, you find out that they have dropped their price for a similar product or service by 10% and now you are unable to compete in your local market. How did this happen you wonder? It’s easy! The competitor was able to reduce the total cost of rental office space, office furniture, utilities, parking, building maintenance, office supplies, cleaning services and even providing simple things like coffee to their employees. Instead of the owner of the business keeping the new found money, he has now offered to pay his workers a differential for working at home and reinvest the remainder of the savings into his company by offering reduced prices to his and YOUR customers.
With office virtualization, an owner can employee a more diverse group of workers: stay at home mom’s or dad’s, people who live on opposite coast lines to keep “the office” open three hours later (or earlier), or experts in the product/service that may not be local. These workers are making more money than you can afford to pay your employees, are not impacted by conditions like traffic and weather, and are often happier because they can do a load of laundry or two during the average work day. Higher paid, happier and more knowledgeable employees can easily be translated into superior customer service. With this advancement in technology, your competitor may decide if he can rapidly expand his service offerings into California – why not Canada, Colorado, or even, Copenhagen?? Before long, your local competitor has become an international powerhouse and you could be out of business!
While the above examples may seem extreme, these are just two ways we have witnessed the development in technology affect our clients over the past few years. No one knows what to expect in the future, but what we do know is that more change is upon us as manufactures race to deliver the latest technology. We are in a time where the advancement in telecom technology is developing more rapidly than ever before. When making a sizable investment for your business, like a phone system, it is important to consider the *technology lifecycle from this advancement perspective so you can make an informed decision about finance options.
So, when you are deciding on what telephone system to buy, also consider what makes the most sense to finance the investment. Will you pay out right for the new technology? Rent the system and pay for the maintenance? Or use a *Fair Market Value (FMV) lease so you can trade it back in and get the latest and greatest at the end of the term? There are several factors that can be considered when trying to make an educated decision, such as: your industry, the size of your business, your prior growth history and your five year business plan. Whatever you decide, you can trust Teltek to assist you in making this decision and to deliver the highest quality products with honest and reliable service.
Contact a Teltek consultant to learn more about leasing verses buying and the latest technologies available today that may change the way your company is doing business.
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*Definition of a T1 – A type of dedicated telephone and internet service (provided by the telephone companies, i.e. Verizon) used in small to mid-sized businesses. T1’s usually offer up to 24 telephone lines, 1.544 megabits of internet speed per second, or some combination of both.
*Definition of Technology Life Cycle – “The Technology Life Cycle (TLC) describes the commercial gain of a product through the expense of research and development phase, and the financial return during its “vital life”. Some technologies, such as steel, paper or cement manufacturing, have a long lifespan (with minor variations in technology incorporated with time) whilst in other cases, such as electronic or pharmaceutical products, the lifespan may be quite short”. Source: www.wikipedia.org -1-17-2010.
*Definition of Avaya IP Office – Avaya’s primary phone system for the small-to-medium sized business (SMB) market place.
* Definition of SIP Trunking – Session Initiation Protocol (SIP) trunking is the use of Voice over IP (VoIP) to facilitate the connection of a private branch exchange (PBX) to the Internet.
*Definition of PRI – Primary Rate Interface (PRI) offers the platform to deliver voice and data transmissions between a network and a user consisting of 24 channels.
*Definition of Dynamic PRI - Dynamic PRI’s offer a dynamic allocation of bandwidth between voice and internet on a single T1 circuit creating a more efficient utilization of access to the service available. (i.e. if an organization that has one Dynamic PRI and when they are not on the telephone they can achieve up to 1.5 Meg of internet speeds, alternatively when large volumes of phone calls are required the bandwidth will slow down to accommodate the usage of voice trunks). A single Dynamic PRI will support most any combination of up to 24 voice lines (simultaneous calls) and 1.5 Meg of internet speeds. Business benefit from the most cost effective use of their Internet T1/PRI.
*Definition of Virtualizing an Office – A modern business concepts which utilizes advanced remote access and telecommuting technologies so that a company can enable its workforce to function effectively from remote locations. Some businesses are using this concept to completely eliminate the need of maintaining traditional brick and mortar office space. Traditionally, this will reduce operating expenses and enable the ability to employ more qualified workers.
*Fair market Value Lease – An equipment lease where at the end of the lease term the lessee has the option to continue the lease at the same rate or to buy the asset for the fair market value.
Tags: Avaya IP Office, Fair Market Value (FMV) Lease, Phone system leasing, technology life cycle., Teltek MD
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