Blair Pleasant
Blair Pleasant is President & Principal Analyst of COMMfusion LLC and a co-founder of UCStrategies. She provides consulting and market...
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Blair Pleasant | August 05, 2014 |


Where's the REAL Value of the Cloud?

Where's the REAL Value of the Cloud? I always encourage customers to look beyond the TCO numbers to other key factors that show the value of cloud solutions.

I always encourage customers to look beyond the TCO numbers to other key factors that show the value of cloud solutions.

I don't have a conversation with a customer or vendor these days that doesn't involve the cloud. I'm still amazed at how many of these discussions focus around the cost differences of cloud and premises-based solutions.

When discussing the benefits of the cloud, the first argument that usually comes up is the financial model. When speaking with vendors, the typical number-one benefit of the cloud is the subscription model and replacement of up-front capital expenses (capex) with ongoing operating expenses (opex), which they claim that CFOs prefer.

Really? There are so many more important benefits of the cloud rather than the payment model. In fact, I expect the opex vs capex argument to disappear in the near future, as some vendors are turning to subscription-based pricing for their premises-based UC offerings in order to meet customer preferences for this payment model.

The financial aspect of UC solutions is certainly top-of-mind for most organizations. In the past six months I've been giving many presentations to SMBs and mid-sized organizations discussing why they should consider moving to unified communications as a service (UCaaS), and during or after each presentation I'm usually asked about the total cost of ownership (TCO) of cloud versus premises-based solutions.

I could point to studies and papers claiming that cloud-based solutions have a lower TCO, and other studies that give the advantage to premises-based solutions. According to an analysis that Phil Edholm and I prepared on a hypothetical 300-person company as part of the UCStrategies UC Benefits and ROI Tool, the overall six-year TCO is lower for cloud-based UC. Other studies that have been presented at Enterprise Connect and elsewhere show that premises-based UC solutions end up having a lower TCO than cloud-based services after only three years. Clearly, there is no one right answer.

I always encourage customers to look beyond the TCO numbers to other key factors that show the value of cloud solutions. For SMBs and mid-sized companies without large IT staffs, UCaaS (UC as a Service or cloud-based UC) should be a "no brainer." Smaller organizations don't have to worry about having the resources to manage and maintain a premises-based solution, and can focus on other things. Businesses with multiple locations don't need dedicated IT professionals at each site.

When trying to determine whether UCaaS or premises-based UC is right for you, there are many things to consider. The oft-touted benefits to cloud-based UC solutions include:

Flexibility: Cloud-based UC offers more flexibility, as companies only pay for the services needed for the end users on the system, and the services can easily scale up or down as needed. In some cases, customers can subscribe to cloud-based services on a feature-by-feature basis and avoid paying license fees for unused features. They can try the service and get their feet wet, and then add more users and locations when they're ready. However, much of this depends on the terms of the UCaaS contracts.

Simplicity: Cloud services are much simpler for organizations to deploy, manage, maintain, and upgrade than premises-based solutions, which can be somewhat complex. This can and should be measured by properly assigning the staffing costs in the TCO analysis.

Speed of Deployment: Cloud services can be up and running quickly and easily, without having to install and configure servers.

Business Continuity: Redundancy and disaster recovery are delivered by the service provider, which includes elements such as backup power, site redundancy and high-capacity bandwidth connectivity--reducing downtime in emergency situations. As long as employees can access a mobile phone or the Internet, they can be in business, even in the case of natural disasters or situations where they can't get to the office.

Technology refresh and updates: Companies avoid the cost of technology refreshes, as they automatically get the latest versions, saving time and money.

Reduced Risk: UCaaS reduces the risk of technology obsolescence and other issues, as well as offering a lower risk to get started.

There are downsides to the cloud as well. Companies in heavily-regulated industries such as health care and financial services are wary of cloud-based services that may not provide the security and control needed and may not meet all the compliance requirements. For companies that require a good deal of customization for their specific needs, premises-based solutions may win out. With cloud-based UC, your business communications are dependent on the reliability of your Internet connection, and when it's offline, you're offline.

Which Approach Has the Advantage?

Source: COMMfusion 2014

I've spoken with companies that swear they'll never move to the cloud because of security issues, and some that will never go back to a premises-based solution because they don't want the hassle of managing and maintaining the solution. It's essential to look at your organization's specific requirements and goals before selecting the deployment model that is best suited for your individual needs. Cloud-based UC services are getting all the buzz for many reasons, but if you move in this direction, make sure you're doing it for the right reasons.

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