SHARE



ABOUT THE AUTHOR


Dave Michels
Dave Michels is a Principal Analyst at TalkingPointz. His unique perspective on unified communications comes from a career involving telecommunications...
Read Full Bio >>
SHARE



Dave Michels | January 25, 2012 |

 
   

Premises vs. Cloud: Does It Matter?

Premises vs. Cloud: Does It Matter? Enterprises are looking for broad services, features, ability to customize and integrate, and reliability at the lowest cost. Where should they look?

Enterprises are looking for broad services, features, ability to customize and integrate, and reliability at the lowest cost. Where should they look?

Car buyers do their research carefully on various models--reliability, performance, depreciation, and safety. Then they check reviews, perform a test drive, and do other forms of research. The issue of buy or lease comes last; that's just a financial question.

But in telecom, UC, and collaboration, it is more likely a decision up-front. There are big financial ramifications (expense vs. capital), but there are--or were--even bigger technical differentiators between UCaaS and a premises solution--starting with the fact that the two options often involve different vendors. If you're leaning toward a premises based solution, check out that group of vendors. If leaning toward hosted services, check the other vendors. However, separation by business model is beginning to fade.

No Jitter and Enterprise Connect have traditionally been more heavy on the premises side, but last year's conference was used for some big hosted announcements including news from Verizon and XO expanding their offerings. This year at Enterprise Connect, exhibitors include 8x8, Broadvox, M5, and Thinking Phones, to name a few. Increasingly, buyers are considering either/or and hybrid models.

Should cloud and premises vendors be grouped together into a single pool of UC alternatives and solutions, or is it best to keep them separate? More and more, customers are now comparing and deciding between these two models. Gartner, for example, publishes separate Magic Quadrant reports for UC premises vendors and UCaaS providers. Perhaps a hosted Cisco solution versus a Cisco premises solution is primarily a financial question, but in most cases, hosted versus premises involves different underlying technologies. Broadsoft is a major vendor/supplier to hosted providers, and doesn’t sell to end users directly (although large organizations can obtain the platform from Aastra).

As hosted services grow and expand, the collisions with premises vendors are increasing, requiring adjustments on both sides.

Many of the hosted voice providers (not all) are turning their services into commodities as they are unable to differentiate on SLAs, reliability, endpoints, or features. When I speak to hosted voice vendors and ask about their customers and their data centers. I'm generally assured they are targeting larger enterprises and that they utilize robust data centers--but it is rare to get specifics; SLAs are very rare, the names of large customers are even rarer. Few hosted providers stress their underlying software. A large number use software from Broadsoft, but don’t play it up as they wish to differentiate their services from one another's. Many make their own software, or base it on Asterisk. A growing number are using major brands of premises equipment.

As quickly as hosted services have grown, overall penetration is quite small, which indicates a huge growth opportunity. Some suggest the market penetration is only around 5 percent--yet there is rapid growth by numerous providers. 8x8 just announced record growth (again); its revenue grew 21% year over year.

What's a bit ironic is that both premises vendors and hosted service providers agree on a similar vision of off-site solutions. The premises vendors are largely embracing virtualization and centralization--both of which are often accomplished with off-site data centers. Though it may be extreme to expect you'll have no on-site equipment. Premises vendors offer various forms of survivable gateways. Most hosted providers offer to fail-over to mobile phones, but some, such as Fonality, offer a hybrid approach using a managed branded gateway.

Premises vendors are beginning to move into hosted services. Mitel, Interactive Intelligence, and Siemens Enterprise are using their own solutions to move into hosted--reportedly with better than expected results. Microsoft is moving rapidly into hosted services. Some hosted providers integrate with premises solutions--such as Broadsoft and IBM Sametime.

An additional alternative, managed services, are also growing, typically associated with owned premises equipment. Aastra is experimenting with managed services in Denmark that allow customers to purchase a managed, dedicated system per line. Martello Communications targets Mitel dealers with enhanced managed service offerings.

But there are also some stark differences between the two worlds. The premises vendors have been focusing on UC and collaboration and rely heavily on channels. The hosted providers are struggling more with operations (to manage their growth) and, although this is shifting, have relied more on direct sales. One provider revealed that about 80% of their sales are direct--of which 40% close on the first call.

One big area of difference is that the majority of hosted providers require access over the public Internet, leaving them unable to manage or guarantee overall quality of service. But this too is changing. Thinking Phone Networks for example, advocates private networking as their default delivery for hosted services--using the Internet only for teleworkers and ad hoc mobile workers.

Both camps are working hard to integrate their solutions with mobile devices. ShoreTel is using its mobility products to penetrate competitor accounts. FMC solutions typically involve an additional server, but that's all built into most mobile offerings. Rich UC clients for Android and iOS are rapidly becoming standard issue.

Managing growth has not been a big problem for premises vendors over the past few years. Conversely, it's a major problem for hosted providers. Any business growing at 15-30% annually requires heavy investment. The ongoing conflict is balancing that investment between infrastructure and marketing. Hosted providers monitor key metrics such as customer churn, months to new customer profitability, and system availability. The vast majority of hosted providers are private companies.

Over the next few years, the hosted, premises, and carrier sectors will continue to converge and merge. Many carriers have acquired VoIP providers, software vendors are expanding into services (Microsoft/Skype), and premises vendors are getting into hosted services. But it is the customers that are really going to drive consolidation--they are looking for broad services, features, ability to customize and integrate, and reliability at the lowest cost--and less and less important is where the technology lives and who manages it.

Dave Michels is a contributing editor and independent analyst at TalkingPointz.com





COMMENTS



Enterprise Connect Orlando 2018
March 12-15 | Orlando, FL

Connect with the Entire Enterprise Communications & Collaboration Ecosystem


Stay Up-to-Date: Hear industry visionaries in Keynotes and General Sessions delivering the latest insight on UC, mobility, collaboration and cloud

Grow Your Network: Connect with the largest gathering of enterprise IT and business leaders and influencers

Learn From Industry Leaders: Attend a full range of Conference Sessions, Free Programs and Special Events

Evaluate All Your Options: Engage with 190+ of the leading equipment, software and service providers

Have Fun! Mingle with sponsors, exhibitors, attendees, guest speakers and industry players during evening receptions

Register now with code NOJITTEREB to save $200 Off Advance Rates or get a FREE Expo Pass!

November 1, 2017

Your customers (internal and external) demand that you offer them the ability to connect by any means. With the adoption of cloud communications tools you now have access to an expanded portfolio o

October 18, 2017

Microsofts recent Ignite event had some critically important announcements for enterprise communications. Namely, Microsofts new Team Collaboration offering, Teams, will be its primary communicatio

September 20, 2017

Customer experience can make or break your business. But how do you achieve outstanding customer service when you're dealing with outdated organizational structure, lagging technology, dated proces

September 22, 2017
In this podcast, we explore the future of work with Robert Brown, AVP of the Cognizant Center for the Future of Work, who helps us answer the question, "What do we do when machines do everything?"
September 8, 2017
Greg Collins, a technology analyst and strategist with Exact Ventures, delivers a status report on 5G implementation plans and tells enterprises why they shouldn't wait to move ahead on potential use ....
August 25, 2017
Find out what business considerations are driving the SIP trunking market today, and learn a bit about how satisfied enterprises are with their providers. We talk with John Malone, president of The Ea....
August 16, 2017
World Vision U.S. is finding lots of goodness in RingCentral's cloud communications service, but as Randy Boyd, infrastructure architect at the global humanitarian nonprofit, tells us, he and his team....
August 11, 2017
Alicia Gee, director of unified communications at Sutter Physician Services, oversees the technical team supporting a 1,000-agent contact center running on Genesys PureConnect. She catches us up on th....
August 4, 2017
Andrew Prokop, communications evangelist with Arrow Systems Integration, has lately been working on integrating enterprise communications into Internet of Things ecosystems. He shares examples and off....
July 27, 2017
Industry watcher Elka Popova, a Frost & Sullivan program director, shares her perspective on this acquisition, discussing Mitel's market positioning, why the move makes sense, and more.
July 14, 2017
Lantre Barr, founder and CEO of Blacc Spot Media, urges any enterprise that's been on the fence about integrating real-time communications into business workflows to jump off and get started. Tune and....
June 28, 2017
Communications expert Tsahi Levent-Levi, author of the popular BlogGeek.me blog, keeps a running tally and comprehensive overview of communications platform-as-a-service offerings in his "Choosing a W....
June 9, 2017
If you think telecom expense management applies to nothing more than business phone lines, think again. Hyoun Park, founder and principal investigator with technology advisory Amalgam Insights, tells ....
June 2, 2017
Enterprises strategizing on mobility today, including for internal collaboration, don't have the luxury of learning as they go. Tony Rizzo, enterprise mobility specialist with Blue Hill Research, expl....
May 24, 2017
Mark Winther, head of IDC's global telecom consulting practice, gives us his take on how CPaaS providers evolve beyond the basic building blocks and address maturing enterprise needs.
May 18, 2017
Diane Myers, senior research director at IHS Markit, walks us through her 2017 UC-as-a-service report... and shares what might be to come in 2018.
April 28, 2017
Change isn't easy, but it is necessary. Tune in for advice and perspective from Zeus Kerravala, co-author of a "Digital Transformation for Dummies" special edition.
April 20, 2017
Robin Gareiss, president of Nemertes Research, shares insight gleaned from the firm's 12th annual UCC Total Cost of Operations study.
March 23, 2017
Tim Banting, of Current Analysis, gives us a peek into what the next three years will bring in advance of his Enterprise Connect session exploring the question: Will there be a new model for enterpris....
March 15, 2017
Andrew Prokop, communications evangelist with Arrow Systems Integration, discusses the evolving role of the all-important session border controller.
March 9, 2017
Organizer Alan Quayle gives us the lowdown on programmable communications and all you need to know about participating in this pre-Enterprise Connect hackathon.
March 3, 2017
From protecting against new vulnerabilities to keeping security assessments up to date, security consultant Mark Collier shares tips on how best to protect your UC systems.
February 24, 2017
UC analyst Blair Pleasant sorts through the myriad cloud architectural models underlying UCaaS and CCaaS offerings, and explains why knowing the differences matter.
February 17, 2017
From the most basics of basics to the hidden gotchas, UC consultant Melissa Swartz helps demystify the complex world of SIP trunking.
February 7, 2017
UC&C consultant Kevin Kieller, a partner at enableUC, shares pointers for making the right architectural choices for your Skype for Business deployment.
February 1, 2017
Elka Popova, a Frost & Sullivan program director, shares a status report on the UCaaS market today and offers her perspective on what large enterprises need before committing to UC in the cloud.
January 26, 2017
Andrew Davis, co-founder of Wainhouse Research and chair of the Video track at Enterprise Connect 2017, sorts through the myriad cloud video service options and shares how to tell if your choice is en....
January 23, 2017
Sheila McGee-Smith, Contact Center/Customer Experience track chair for Enterprise Connect 2017, tells us what we need to know about the role cloud software is playing in contact centers today.