One of the challenges organizations face is obtaining reliable cost data for UC and IP-PBX solutions and in being able to make apples-to-apples comparisons between them. Add the complexity of trying to compare on-premises to cloud to overlay deployment options, and the task of evaluating the numerous possibilities quickly becomes overwhelming.
To help make this task easier, 16 vendors offering a total of 24 solutions have shown vision and foresight by stepping up to respond to a mock RFP created jointly by David Stein of Stein Technology Consulting Group, Marty Parker of UniComm Consulting and UC Strategies, and Brent Kelly of Constellation Research. These solutions, covering cloud, overlay, and on-premises options* were presented at Enterprise Connect 2012 in Orlando last March.
The RFP was for 2,000 UC seats. The fictional organization consisted of a headquarters location and two branch offices. A 75-person call center was also included.
Based on the responses of the vendors themselves, and using only the public data presented, we have compiled the data into a format that makes it easy to compare the TCO over a five-year period for all of these solutions.
* These options were, specifically:
Option 1--Premises-Based (Private Cloud). Install a new IP PBX, including UC functions, on the enterprise premises.
Option 2--Cloud-Based or Fully Hosted. License and deploy PBX and UC functionality via a "Cloud" or hosted option, that is, any system servers and software will be hosted and run at the provider's site with only user devices and necessary gateways and similar equipment on the enterprise premises.
Option 3--Overlay or Side-by-Side. Install only the UC functionality so that it will co-exist Side-by-Side with the enterprise's existing TDM-based or IP-based PBX(s). Although overlay deployments can be implemented either on-premises or in the cloud, this report focuses only upon the on-premises option.
Option 1--Premises-Based (Private Cloud). Install a new IP PBX, including UC functions, on the enterprise premises.
Option 2--Cloud-Based or Fully Hosted. License and deploy PBX and UC functionality via a "Cloud" or hosted option, that is, any system servers and software will be hosted and run at the provider's site with only user devices and necessary gateways and similar equipment on the enterprise premises.
Option 3--Overlay or Side-by-Side. Install only the UC functionality so that it will co-exist Side-by-Side with the enterprise's existing TDM-based or IP-based PBX(s). Although overlay deployments can be implemented either on-premises or in the cloud, this report focuses only upon the on-premises option.
In addition to using the data as bid by each vendor, we normalized the solutions so that a true apples-to-apples comparison can be made. For example, if a solution did not include audio or web conferencing, we have added in reasonable costs for procuring these capabilities separately. Many of the hosted options include unlimited long distance as part of the offering, so we added reasonable SIP trunking toll charges to each solution that did not include them. The on-premises and overlay solutions do not include the costs for power and rack space that come at no charge with the hosted options (because the hosted provider pays for these costs). We have also included reasonable estimates for staffing costs given that there is a clear difference between the human resource costs required to operate and maintain on-premises solutions versus hosted offerings. Finally, we have added PBX phase-out costs if the PBX is to be completely replaced as in the cloud and on-premises options; likewise we took into account existing PBX support costs for ongoing PBX operations in parallel with the overlay UC solution.
The following figure shows the average costs for the nine on-premises offerings, the seven hosted solutions, and the eight overlay systems. Actual costs ranged from $1.37 million for the lowest TCO offering up to $5.97 million for the most expensive solution over the five-year period covered in the RFP.
We have learned a number of lessons while doing this analysis. First of all, there is a clear crossover point between on-premises and hosted solutions. Furthermore, the hosted offerings initially cost less, but almost universally turn out to cost more by the end of the five-year period.
That being said, the hosted providers are also showing double-digit growth, so there is clearly more than just TCO at play when companies make these decisions.
Another finding: The overlay options almost always come out less expensive over the TCO period. We also note the concern as to whether an overlay solution will meet an organization's long term needs, or if it will evolve into a complete IP PBX and UC solution with adjusted TCO at some future date.
It is interesting to look at the costs for vendors who bid multiple solution types. For example, Microsoft's overlay option is more expensive than its on-premises offering, while Avaya's and Cisco’;s on-premises solutions are less expensive from a TCO perspective than their hosted options, but more expensive than their overlay solutions. The Cisco cloud-based solution represents Cisco Hosted Collaboration Solution (HCS) offered by Verizon; the Microsoft cloud-based solution represents Microsoft Lync hosted by BT.
It is also informative to compare how the different vendor offerings stack up one against another in terms of capabilities. We have reviewed each of the 24 solutions and have prepared a capability matrix, a sample of which is shown below for the cloud offerings.
An overview of the report containing the executive summary, and the table of contents is available by clicking here. Alternatively, any of the authors may be contacted. Because this information is so relevant for end user organizations investigating UC solutions, pricing for these organizations has been made very attractive. We know of no other document with such comprehensive TCO data available in our market.
In addition, anyone wishing to obtain a copy of the original RFP used for this study may contact any of the authors.
Authors' Acknowledgement to Participating Vendors
The authors express their sincere appreciation to the 16 vendors who invested time and energy into preparing the RFP responses which serve as the foundation for this report. Without their efforts, this report would have been impossible to prepare. We applaud their vision and their willingness to explore multiple options versus promoting and protecting one traditional approach. Universally, these vendors have expressed that this multi-option RFP exercise has been a valuable learning tool for them as it has helped them better position their offerings for this world of UC capabilities delivered as private cloud/on-premises solutions, cloud-based communication services, overlay deployments, and hybrid systems.
David Stein is Principal, Stein Technology Consulting Group> He can be reached at [email protected] E. Brent Kelly, Ph.D. is Vice President and Principal Analyst, Constellation Research, Inc. He can be reached at [email protected] Marty Parker is Principal, Unicom Consulting, LLC. He can be reached at [email protected]
