STAFF REPORT

December 13, 1999

To: Administration Committee

From: Acting Commissioner of Corporate Services

Subject: Cost Benefit Analysis of the telephone systems available to the City, in particular, the Centrex System vs. the PBX System

Purpose:

Report No. 3 of the Administration Committee, Clause No. 2, "Office Consolidation Status Report", requested a cost benefit analysis of the telephone systems available to the City, in particular, the Centrex system vs. the PBX system. This report has been completed as directed.-.

Financial Implications and Impact Statement:

The one time conversion cost of $ 775,000 is funded within the Telecommunications improvement budget, account XR314 X31400 6803 - METR530733. As well, some cost recovery will be made at the end of conversion with the sale of the PBX.

Recommendations:

It is recommended that:

(1) The existing PBX systems be phased to the Centrex telephone system; and

(2) The Commissioner, Corporate Services be authorized and directed to take the necessary

action to give effect thereto.

Background:

An independent consulting firm was engaged through a public competitive tender, to review and recommend a telecommunications standard and strategy for the City of Toronto.

The consulting firm found that the City's requirements have changed fundamentally since amalgamation. Prior to amalgamation, the geographic areas served by each of the six former municipalities were relatively small. Even in the case of the former City of Toronto, entire departments were housed either at 100 Queen Street or in one of the adjoining buildings.

Prior to amalgamation, a combination of services (being a PBX for the City Hall complex, and Centrex for outlying offices) was both an efficient and an effective method of providing telephone services. Since most staff belonging to any one department were housed together, and because most individuals either started or ended their day at the City Hall complex, the PBX's services were very effective. The field service delivery personnel who were not based at City Hall (i.e. Recreation Centres, Fire Halls, Social Services offices, etc.) were accommodated on systems equipped with Centrex lines, or with Centrex telephones.

When the City amalgamated there were two types of telephone systems: 21,000 Centrex lines in the seven (7) municipalities and 2,700 telephones on two PBX systems. The PBX at East York City Hall was replaced earlier this year with Centrex lines, as were part of the PBX phones in the Toronto City Hall complex. The number of telephones still connected to the City Hall PBX system is approximately 2,000 sets.

Now that the six former municipalities and Metro have merged, staff in any one department are scattered across five or more buildings at different corners of the new City. Having two telephone systems is a barrier to effective communications, because it does not offer complete integration of voice mail system features and functionality for departments with offices spread across the city. For example, features such as Call Return (e.g. "press 8 to respond to voicemail"), Group Distribution Lists, and Message Transfer will not work between the two systems. Message Transfer is important because it allows staff at City Hall to delegate work to staff in the field by forwarding voice messages received at City Hall.

Maintaining two types of systems also requires the City to support two forms of administration processes and necessitates retraining City staff who relocate between sites.

Comments:

The independent consultants presented three options based on 5 year operational costs.

(A) Scenario #1: The status quo, Centrex everywhere but City Hall which has the PBX

This Scenario analyzed the implications of continuing to operate with two telephone systems.

Pros:

· This solution has the least direct cost. The five year total cost of ownership (present value calculation) = $ 28,809,000. This cost projection includes an expenditure of $ 388,000 plus taxes to replace the oldest PBX telephone sets.

Cons:

· Having two systems is a barrier to communications between staff at City Hall and staff located elsewhere because the PBX and Centrex versions of the Octel Voice Mail systems are different.

· Extra staff and overtime costs associated with maintaining two systems.

· In order to implement charge back to departments for services, additional equipment ($35,000 plus tax) and an additional full time employee ($38,000 per year) would be needed.

(B) Scenario #2: Install PBXs in the major buildings, build a private voice network.

This scenario assumes that the City retain the current PBX systems and install additional PBXs in 8 additional major buildings (Etobicoke, East York, York, North York, Scarborough, and Metro Hall Civic Centre, Ambulance Headquarters, and 703 Don Mills Road) and would require up front capital costs of $ 7,520,000.

Pros:

· The City would own more assets (vs. leasing).

Cons:

· The five-year total cost of ownership (present value calculation), including the capital investment would be at least $31,590,000. This is the most expensive solution due to the high initial capital cost and double administration.

· This is also the highest risk solution, with a network that would be vulnerable to failure, having little redundancy or backup and many single points of failure.

· An additional three to four more full time employees would be required to manage the network and ten (10) PBX's at an estimated additional yearly cost of $190,000.

· City PBX telephones would still require an upgrade at an estimated cost of $388,000 plus taxes.

(B) Scenario #3: Install Centrex everywhere

This scenario assumes the City will keep the over 769 buildings already on Centrex and convert the PBX system at City Hall to Centex.

· The five-year total cost of ownership, including the capital investment would be approximately $29,770,000. Part of this is the cost of converting 2,000 PBX phones to Centrex lines ($ 775,000 plus tax over a five-year period). This assumes no reduction in Centrex rates at the end of the current five-year contract (January 2002).

Pros:

· Positions the city for a competitive telephone quotation at the end of the current contract.

· Facilitates City-wide transparent operations. Departments can be virtual, moving staff freely between sites. Communications will be easier to facilitate with a corresponding increase in productivity.

· Only one system to administer. Most software changes done in "real-time".

· Service available on demand. Greater flexibility with respect to staff consolidations and relocations.

Conclusions:

In order to achieve a seamless, cost effective telecommunications service, the Consultants report recommends the adoption of the Centrex solution as the City standard for voice services. This is the least cost solution when all other benefits are considered and positions the city for a competitive telephone quotation at the end of the current contract.

Contact:

Jim Andrew

Executive Director

Information and Technology

Tel: 392-8421

Acting Commissioner of Corporate Services