PRICING AND COSTS
Eliminating or decreasing capital expenses (CAPEX) is a compelling reason for an organization to consider a Hosted IP solution--and why not? The service provider is offering to maintain, upgrade, and operate the technical portion of the service during the term of the agreement. The Hosted IP services are normally based on a per-seat monthly recurring charge (MRC), so the CFO can predict operating expenses (OPEX) more reliably and consistently in budgeting forecasts. Customers need to maximize their value in relation to expenditures, especially in this slow yet turbulent economic environment. Credit is tight, and OPEX money is generally easier to justify then CAPEX.
But Hosted IP is not a free ride, and the organization must consider several other cost elements. First, the Hosted IP solution will require a Customer Gateway (CG) component of some sort, probably a router/ switch/ firewall assembly, and, in Star2Star’s case, an on-site PBX.
The customer might ask, "Is one of my installed devices able to accommodate the Hosted IP service?" Answer: "Usually not."
The service provider will want to place its components on site to minimize potential problems. If a new CG is necessary, who provides and pays for that? Usually the customer can buy the component or roll its cost into an operating lease included in the MCR. Sometimes it might be less that a more traditional CPE solution, but "your results may vary." Any organization should conduct a full lifecycle TCO evaluation on any solution it is considering.
Second, is the organization's current data network able to handle real time, i.e., voice, applications? Does it have quality of service (QOS) capabilities and enough bandwidth to prevent jitter, latency, and packet loss? If the Hosted IP is serving one location, the LAN probably has enough bandwidth to handle voice calls, even without QOS. However, if the Hosted IP must serve multiple locations and/or bandwidth-greedy applications are running on the network, then the organization will probably need to upgrade its backbone LAN/WAN significantly. Power Over Ethernet switches (POE) are a frequent issue as well. Since POE switches cost more than their non-powered brothers, many organizations typically would not install them prior to considering VoIP-POE demanding applications. Bob Phelan, President of Vantage Communications, notes that this is usually a necessary prerequisite for any organization considering a Hosted IP solution, but it especially applies to smaller (up to 15-20 stations) companies.
Third, as IP network access becomes more reliable and available, bundled T1 access links, which assured access to the Hosted IP facility from the service provider, become optional. The organization has more choices on how it wants to access the network, e.g., cable, DSL, SIP trunking. The customer must ensure that its access choice provides availability and service reliability as well as evaluating price for competing technologies.
Fourth, the customer usually purchases the actual telephones, since paying for them over the life of the hosted term recalls the days of "leasing for life" with Ma Bell.
MRCs for Hosted IP solutions are relatively consistent. Prices range from $25-$50 per seat depending on feature sets. Some providers offer a single, all inclusive price, while others have tiered pricing that coincides with "administrative," "professional," and "executive" feature/ function sets. Some providers provide a basic set of features and functions and then allow users to add others for additional monthly fees, much like Centrex pricing models. Most Hosted IP solutions provide the full feature function complement in the MRC, which as we saw earlier, includes messaging, unified messaging, some unified communications, and unlimited local and domestic toll calling. According to Phelan, "nearly 100%" of Vantage's customers have implemented unified messaging (UM), while the overall market penetration (for all service models) of UM is generally under 25%...a remarkably low figure for a technology that has been around since the early 90’s!
Advanced applications, such as call center, computer telephony integration (CTI), or customer relationship management (CRM), are usually priced separately as "special projects."
