The decision is to opt for IP phones. This is so because even though IP phones are cheaper and provide a stronger financial argument, security issues with the system is a major setback for its implementations. This paper presents an argument for using IP phones over Skype even though Skype is more cost effective. The paper uses decision tree calculation to do a financial analysis of the using IP phones and Skype, and then we provide an argument for using IP phones over Skype.
First, we will provide a cost structure which will be required to implement and use Skype and IP phones. The set-up cost of Skype is zero as the software is free to download and free to use for local calls. For IP phones, we require a subscription plan of £40 per user for unlimited international calls. For Skype there will be need for Internet access, microphones and/or speakers which will cost £30 to £50. For IP phones the cost of a handset will come to £60. The cost of Skype use per minute is very cheap and with a subscription, the cost of unlimited international calls comes down to £5 per month. And for the same system, the cost of call on a subscription in IP phones comes to £40 per month.
But the disadvantage of Skype is in its security issues. The option of taking Skype also has certain advantages and disadvantages. From the above presented financial analysis, Skype is definitely the cheapest option available for international call making. Further making an international call can be free if the client being called has access to a computer. The software is downloadable for free and local calls can be made for free.
Though there are international charges for a call but they are much lesser than the IP phone tariffs. Skype provides extensive user friendly options like text messaging, SMS, video conferencing, etc. but it is not devoid of disadvantages. The problem with Skype is its security issues. Computers using Skype can be accessed by anyone and no firewall can stop it (Economist). Further, there are problems of one message being popped up in another computer before reaching its destination; again providing alarming security hazards (Economist). Malwares, viruses, and Trojan horses can be transmitted through Skype (Economist).
Further Skype does not provide any recording option of calls or video calls which violates financial and legal obligations under the Sarbanes-Oxley Act (Economist). Another problem that opens up with Skype is blogging (Economist). These above stated problems are the setbacks of Skype. On the contrary, IP phones are safe and secure and provide options for call recording and database backup features which makes the use of IP phones safer. As the problems with Skype are related to security, it is advisable not to opt for it as the firm deals with accounting of clients whose financial data are of top priority and security for the company.
This shows that using Skype can be highly risky. So the probability of successful implementation and usage of Skype is 0.4 while the loss of misuse and failure to implement has higher chances of 0.6. IP phones though costlier has higher chances of successful implementation and safe usage where the probability is 0.7, while the cost of failure to implement will also be 0.3. These probabilities are approximations derived from the above discussion of advantages and disadvantages of Skype over IP phones.
So we provide the following calculation:
Period 1 month
Skype – £2450
IP Phones – £4200
For the implementation of Skype as we see the probability of success is 0.4 then the profit of the venture is then the profit is (1):
(1) £4200 – £2450 = £1750 x 0.4 = £700
Then the loss of the venture will be (2):
(2) £4200 – £2450 = £1750 x 0.6 = £1050
For implementing IP phones the profit for implementing is the extra cost of implementing IP phones and the probability of not implementing it and vice versa. So we have the following calculations. The profit and loss is shown in equation (3) and 4 consecutively.
(3) £4200 – £2450 = £1750 x (1 – 0.7) = £525
(4) £4200 – £2450 = £1750 x (1 – 0.3) = £1225
Figure 1 shows the decision tree for the above calculation.
The above analysis shows that profit of implementing Skype over IP phone is higher. The loss of the former is also lower than that of the latter. But as the previous discussion shows, Skype have immense security hazards which cannot be compromised with cost effectiveness. So we opt for IP phones.
References
Economist. “Though a great alternative, Skype is open to abuse.” 2008. Web.
Skype. 2009. Web.