Cloud (Hosted) VoIP vs. On-Premise IP PBX - Which is better?

Although hosted/cloud communications have gained widespread market acceptance, and most of the major manufacturers of PBX equipment are also moving their offering to a "cloud-based" solution, there is still a fundamental choice that each business must make:  Buy an on-premise PBX or buy communications as a service / Hosted VoIP system?

We go round for round to determine which approach is best:

Round 1: The power is out or the local internet connection is down: which approach keeps your business up and running? 

On-Premise - Internal calls still work (only if the PBX is on backup power) but connection to the outside world is lost.  Incoming callers hear fast busy but the main # of the business can be re-routed to cell phones / other numbers via the phone company.  Employees cannot take phones home or to satellite locations nor can they re-route their individual extension to their cell phone. 

Hosted - Internal calls will not work at the site but incoming callers will get to voicemail or be re-routed to cell phones, including individual extensions for each employee.  Employees can take their phone home or use a soft phone to retain full functionality if the outage persists, which creates a natural business continuity plan. 

Winner of Round 1:  We give the clear edge here to Hosted, both because there is more flexibility to re-route all calls and also because there is a long-term continuity solution if the outage is more permanent. 

Round 2:  Which approach offers more features / benefits?

On-Premise - The devil is in the details.  There are some very good PBXs that have features that are world-class and can integrate with a company's CRM or other software.  Like everything else, you get what you pay for and advanced features cost money.   Upgrading to new features may cost more money in the future or require more hardware which can be both expensive and a hassle to implement. 

Hosted - Again, it depends on the details.  Some hosted companies are "one size fits all" and offer adequate features but very little customization.  Other providers are highly customizable and can integrate their features with CRM or other software.  Upgrading features is usually standard as the provider evolves their offering (typically requiring no investment on the customer's part) . 

Winner of Round 2:  Slight win for Hosted but with one caveat:  for some specific scenarios there are PBXs that may be a better fit.  This is quickly changing as high-end cloud providers are filling in the gaps.  For 95% of the marketplace, Hosted offers same or better features and because those features evolve and get better with time we give the win to Hosted for this round.

Round 3: Which is more affordable? 

On-Premise - Certainly the model is different for premise-based PBXs.  These typically require an capital expense, significant installation fees and then a vendor maintenance contract that covers adds/moves/changes etc.  Most business decision makers don't love the idea of writing a big check for phone equipment but they see it as an investment and can of course use that phone system for years to come with only the monthly cost of vendor maintenance and phone services. 

Hosted - Most hosted models have little or no upfront costs and instead charge a "per user/phone" cost each month.  This typically means that the monthly costs are higher than a premise-based PBX, although in some cases this may not be true.  Hosted VoIP completely replaces vendor maintenance, phone service costs and of course the capital expense. 

Winner of Round 3:  Give the edge here to Hosted.  Like all "cost" analysis, one must look carefully at the details.  Apples for apples, hosted wins for two reasons:  1) the TCO (Total cost of ownership) is lower when you do the full analysis and 2) the costs are variable and can expand / contract with the changing needs of customer. 

There are other factors to consider:  quality of service/support, individual feature offerings, the tax implications of moving from capex to opex--but on the whole, the hosted model is winning the battle.  Perhaps this is why most premise-based manufacturers are quickly changing their business model to become cloud-based.

Careful analysis is always required before making any decision.  This should include a TCO analysis, a feature match up, an examination of future considerations and of course the philosophy of the customer should be taken into account.  Do they value owning hardware?  Do they prefer to have a "service provider" they can migrate away from if the solution isn't keeping pace with their need? 

The above is an informed opinion on the part of Stellis Technology Advisors.  We welcome your opinions and feedback. 

You may delay, but time will not - Benjamin Franklin

The truth is that organizations are moving their technology into the "cloud" for a lot of good reasons .  If your organization is the last one on the train...well let's just say you'll be fighting the battle with a sword while your peers are hanging out with the guy who helped them get the machine gun.

And on the subject of time:  The most important thing that we do at Stellis is that we save our clients precious time.  Time they can better spend on other matters.   Our value proposition is a simple one:  We deliver to you "best of breed" cloud and telecom solutions and our industry perspective means that you'll get the best pricing from innovative providers who can truly benefit your company.  

Cloud Overview

Sometimes I forget that other people don't eat, sleep and breath cloud and telecom services like I do.  So what is this cloud thing all about?  Why the rush to cloud solutions and why now?  

Organizations seek to maximize value and minimize cost.  They move technology away from an on-premise approach and into a cloud environment because the economics make sense and the benefits gained are compelling.  For most companies, at least some (if not all) cloud technologies are adding up to big benefits and they're seeing a lower TCO (Total Cost of Ownership). 

What is a "Cloud" Service? 

When it comes to technology for your company you can either build it yourself or you can buy it from someone who has already built it.  A cloud provider has significantly more infrastructure because of their size and they typically have the level of redundancy that most organizations cannot build on their own.  So why build it all yourself when you can get better performance and more up-time, especially if it comes at a lower cost?  Why devote capital to software when you can move that into an operating expense that is both affordable and scalable?  A cloud service means you're not buying servers or phone systems or software, you're buying a "service" that meets your dynamic and changing needs.   

Build vs. Buy Analogy:

Andrew Pryfogle, industry expert and thought-leader in the cloud space, uses a great analogy to help explain the build vs. buy aspect of what a cloud service really is.   Imagine you need to fly from the east coast to the west.  You have two basic choices, you can build a plane from the ground up or you can buy a few seats on someone else's plane.   Both options get you to your destination so how do you choose the one that is right for you?  Clearly the benefits of both have to be weighed by the costs right?  Again, why build your technology from the ground up when you can simply just "buy a few seats on a plane" from a top notch cloud provider?   We're not saying that you should never build.  Sometimes it does make sense to build your own plane but without a doubt one should carefully consider the build vs. buy decision.  

The Four Categories of Cloud Services:

IaaS (Infrastructure as a Service) - Servers, Data Center Needs, Online Storage & Backup.  

This is where a lot of companies find their entry-point into the cloud.  Do you bother to replace that end of life server or simply move that infrastructure need into a data center with either a public, private or hybrid cloud approach?  

SaaS (Software as a Service) - CRM, Document Management, Office Suites etc.  

Almost everything is moving to a "SaaS" approach.  Why spend money on a license that you may not need in a year when you can buy a "service" that expands or contracts based on your dynamic needs?  Not to mention that you may not want to be tied to a particular software for a long period of time.  SaaS gives your organization choices and mitigates the risk of being stuck with a technology you may not want or an investment you cannot get back.  

CaaS (Communications as a Service) - Hosted Phone Systems, Contact / Call Center Solutions, Unified Communications, Video, Mobility

Everyone wants their workforce to stay connected and a cloud-based communications approach is perhaps the simplest and most effective way to make that happen.

ITaaS (IT as a Service) - Virtual Desktop, Hosted Exchange, Hosted Sharepoint, Disaster Recovery and Business Continuity, Managed Services

Organizations are rethinking the way they approach IT.  One thing is for sure, IT professionals are finding that instead of spending their time on all-night upgrades or fixing a slow laptop, they're able to spend more time focused on helping their organizational leverage innovative technologies.  Instead of being bogged down with break/fix issues all day they are able to stay proactive and ahead of the curve.  Instead of being seen as a "cost" to the organization they are seen as vital to revenue generation and strategy.  Cloud solutions don't replace good IT professionals, they actually help make IT even more prominent in the organization.  

Feedback

For thoughts or feedback on this overview please feel free to e-mail me at rwilliams@stellistechnology.com   

Where Would You Rather Be at 4am?

This post is all about how important IT people are, but not for the reasons you might think...

I have a friend who works in IT for a mid-size company.  He got the 4am phone call this morning from the boss asking him to come to work to help troubleshoot their mail server.  Sound familiar?  

Almost every IT professional will tell you that they would rather spend time with their family, friends or spouse (or would rather sleep once in a while).  Far too often you'll find the overtired IT person working hard to get that mail server (or whatever else is broken) back up and running.  That's just one example of what keeps our clients up at night or missing their nephews birthday party.

Imagine a world where....

• IT Directors focus on strategic technology needs, not on fixing what's broken or begging for money in the budget 
• The IT group is seen by upper management to be vital to revenue generation rather than a "cost" to the organization
• The IT group increases its prominence in the organization while simultaneously finding a way to work a normal schedule where things break less often and all-night sessions are few and far between.  

You aren't important because you're willing to be up at 4am.  You're important because technology is the engine of every business and you are the technologists that "get it."   As the world transitions to a new model for managing and implementing technology, we believe that this is perhaps the best opportunity for IT professionals to truly get the credit they deserve.