There is a clear tendency within the VoIP world: IP-based phone services are growing at an accelerated rate. This is reflected not only in the news but in the sales numbers. The increase is noticeable and its effects are challenging because a VoIP service requires many components to work satisfactorily. Voice quality, increased traffic, inadequate bandwidth, and, in some cases, networks that have been designed and implemented under constricting criteria, and, more recently, security, are some of the more common issues. Most of them result from the combination of hardware and software and conceptual design. A sound VoIP (pun intended) is like a performing orchestra: all elements have a role to play, and each individual role is always important. Fortunately, the industry has survived its growing pains and today we can say that reliability has increased substantially, most of the management modules are robust and complete making implementations simpler, and low cost continues to be the most attractive element of this equation. Enter the Cloud and things changed completely. We are all familiar with the traditional solution, today called On-Premises, in which the company has its own equipment (PBX, cabling, phones, and accessories) all in their place of operation. The formula is reliable: you own and operate all the elements. If you have more than one location, for sure you will have to replicate the service level: equal, above, or below, but replication will happen. Now we have the alternative of not owning the PBX and related equipment because everything is in the Cloud, namely, somewhere a provider is hosting our PBX making it virtual, non-physical, and providing the same or better functionalities than the traditional model. So what should you do? Is it Hosted PBX – or hosted VoIP – versus On-Premises PBX a.k.a. IP PBX?
The answer is: whatever you need. Your operations dictate the functionalities; your geographical footprint the connectivity; and your commitment to a model, the financial feasibility of the solution. From my point of view, these multi-level variables can be analyzed in many ways, but I propose a transformation to simplify the decision making process. It is based on reducing the analysis categories to three: Cost, Operational Future, and your need for Control. You will find that all factors you are likely to analyze will fall into one of the proposed categories without conflicts. There are many comparisons of Hosted PBX vs. On-Premises PBX available in the current literature, so I want to concentrate on how a CEO might go about deciding on this important issue.
Cost: At this level, you are moving between two completely different models. The OPEX model, which is an operational expenditure and, as such, is very simple to manage. Expenses incurred in the operation of the business and that do not include Cost of Goods Sold, taxes, depreciation, and interest. This is the model for the Hosted PBX alternative. For the On-Premises, is the other extreme, the CAPEX model, whereby you make a capital expenditure for future benefits. This requires funding and implies considering and managing life of the assets, maintenance, and depreciation.
Operational Future: Being a technological initiative, your system will require updates and upgrades. The first, to keep it current; the second, to solve scalability issues. Again, two extreme positions. In the first, you let the provider absorb all these costs, your scalability (both upward and downward) is guaranteed – up to a certain point, of course – and everything technological is transparent to you. In the second, the On-Premises, you incur in an initial setup cost which can be substantial; it places you into the TCO Model, or total cost of ownership, where you own, operate, maintain, and scale as you see fit. In the first option, the risk in on the provider side; in the second, it’s on you.
Control: How much control do you need? For mission sensitive operations, time-dependent, real-time situations, you need all the control you can get. In this case, On-Premises is the best option; therefore you need to design and abide to a well thought budget. If you are not concerned about control and your organization may use those recurring financial resources in some other things, then the Hosted alternative seems reasonable. One note of caution, though: in both cases, large deployments are not easy to implement or may not be feasible at all.
With that in mind, there is always the issue of decisional time frame. When do you need the VoIP solution? This relates to the current life phase of your organization and more than a cost factor is a trigger: you are considering VoIP because you need it. Can you afford the time to implement On-Premises or, on the contrary, you need a fast and easy solution, as in Hosted?
I do hope this helps you with your decision. It has simplified many an analysis with our clients and it always yields a feasible solution in the form of either one of the alternatives or the most flexible of all: the Hybrid, whereby you navigate both seas and get the best of both worlds. One added benefit of this approach is that if you have decided to migrate to Hosted from a legacy telephony system, it allows you to implement by phases or deployment blocks, giving you time to pilot, test, and implement incrementally under whatever strategy you choose.
So, at the end, there’s no one versus the other. The solution has to be defined in close attention to your needs and the capability of your provider to design it, accompany you in the implementation, and give you World Class support; but that will be material for another posting.
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