To: Ubisoft Capital Expenditures Board
From: Patti Mansbach
Date: May 1, 2014
Subject: Installing a voice over IP calling system could have a net present value of €10 million
The purpose of this memo is to explain why Ubisoft should install a voice over IP system in
order to make international phone calls.
Ubisoft is an international company that has 129 offices around the world; the largest of which
being in Paris, France and Montreal, Canada. In addition, it employs 9,200 employees in total
who work in 55 different offices around the world. Thus, there is a definite use for an
inexpensive international phone calling system.
The telecom company Vodafone charges €0.09 per minute for an international phone call. It is
assumed that each employee spends 130 hours per year on the phone (260 working days; 30
minutes a day). It is estimated that Ubisoft spends around €6.5 million each year on international
phone expenses.
A possible solution could be to implement a voice over IP calling system. The best way to
describe a voice over IP calling system is that it would be like a more reliable version of Skype.
International phone calls could be made using the internet as opposed to the telecom company.
Ubisoft will be using Cisco software for this voice over IP system. There are three crucial
hardware components to this system:
1. The Cisco Firewall. This encrypts the data that is going from point A to point B. It is industry
standard to have two firewalls per site. This is to ensure that data will always be encrypted even
if one firewall fails. The cost for all of the firewalls will be €266 thousand.
2. The Cisco Router. This will get the data from point A to point B. There will be one router per
site. The cost for all the routers will be €134 thousand.
3. The Cisco Interface Card. This sends the data from the router to the hardware (telephones).
There will be one interface card per site. The cost for all the interface cards will be €83 thousand.
The total cost for all the equipment will be €483 thousand.
After the equipment is purchased, it will need to be installed. The cost of the installations for
all of the sites will be €1.4 million.
In order to ensure that the equipment is working, Ubisoft will purchase a subscription service
from Cisco and insurance. The cost for the subscription service will be around €2 thousand a
year. The cost for the insurance will be around €29 thousand a year.
The total initial payment for implementing a voice over IP calling system at Ubisoft will be
€1.7 million.
The cash flows that Ubisoft will save by implementing this system will cover the initial
investment.
Other critical assumptions that are important for the net present value:
-The exchange rate is €0.75/$.
-The prices will increase 1% each year which is similar to the French inflation rate.
-The cost of capital is 18%.
-The technology will be depreciated over three years.
-Vodafone is the original telecompany that provides the international calling service.
In conclusion, this project is estimated to have a net present value of almost €10 million over
a three year period. The payback period for this project is less than one year. It is recommended
that Ubisoft install a voice over IP system in all of its offices.
Looking forward, if this voice over IP project is successful, then Ubisoft could possibly
implement a video calling system. This could save cash flows used for international travel in
order to have executives meet.