Blair Pleasant
Blair Pleasant is President & Principal Analyst of COMMfusion LLC and a co-founder of UCStrategies. She provides consulting and market...
Read Full Bio >>

Blair Pleasant | May 19, 2015 |


Is the Cloud Just a Ruse?

Is the Cloud Just a Ruse? The cloud is about so much more than a way for vendors to get more money from customers for essentially the same products.

The cloud is about so much more than a way for vendors to get more money from customers for essentially the same products.

We all know that the cloud brings many benefits to organizations -- fewer IT resources needed, better enablement for mobile workers and remote offices, automatic updates, built-in redundancy, and more. But, is the cloud basically a big ruse for getting businesses to pay more to their vendors? And if so, does it matter?

In a recent article on Office 365, Microsoft's hosted offering that includes Skype for Business, IT reporter Gregg Keizer wrote that moving a corporate customer to Office 365 "rent-not-buy" subscriptions results in almost a doubling of revenue for Microsoft. While customers traditionally buy Office once every five to seven years, if they subscribe to Office 365 (specifically the E3 plan, which includes the core Office application suite, cloud-based Exchange, SharePoint, and Skype for Business), "Microsoft can realize an 80% increase in revenue over the years-long relationship," he said. "In other words," he added, "for every $100 Microsoft earned the old way, it reaps $180 under the newer subscription regime over the long haul."


While Keizer looked specifically at Office 365, you could make the same argument for most UCC solutions. Moving from the traditional capex model of premises-based deployments to the subscription model of hosted solutions provides increased revenue to the vendors, which benefit from a steady stream of recurring income. At Enterprise Connect 2015 and elsewhere, several of my colleagues have pointed out that hosted offerings cost organizations more than premises-based solutions after just a few years.

In addition, UCC vendors that have added hosted services to their traditional portfolios have been trying to entice channel partners to move to the cloud by demonstrating how much more profitable they can be by selling based on a recurring-revenue model. If the channel partners can earn more revenue from selling hosted services, we can assume that the customers end up paying significantly more.

So isn't this all a ruse and a way for the vendors to get more money from customers for essentially the same products?

The answer is clearly, "NO." Moving to the cloud isn't – or shouldn't be – about saving money. It's about increased flexibility, reduced IT requirements, and the ability to stay current.

In his article, Keizer noted that "while Microsoft is reaping the benefit of this kind of subscription model, the customer essentially owns nothing and must continually pay Microsoft." This is true, but it leaves out some important facts.

Think about leasing a car. By leasing a car and paying a monthly fee, many individuals are able to drive more luxurious and expensive models than they would be able to do if their payments accounted for the vehicle's full cost. The downside is that after paying the leasing company each month, the customer doesn't own a car. But is that really a bad thing? If newer models have more gadgets, safety features, and better performance, then the customer may be better off being able to dump the leased car and sign up for a newer model rather than needing to drive a purchased car for years on end.

The same is true in the UCC world. Why be saddled with older technology when things are changing so quickly? As ShoreTel CEO Don Joos pointed out at the company's recent partner event, CIOs used to look for payback on technology investments over three to five years, but they're now looking for it in 18 to 24 months. Why? They know the technology will change so much that they don't want to tie up capital for that longer period. Hosted UCC can provide the payback and reduced total cost of ownership that CIOs want, and overcome the challenge of having to deal with rapid technology change.

My UCStrategies colleague Dave Michels, an analyst at TalkingPointz, likes to point out that there's a big difference in the risk factor between premises- and cloud-based UCC solutions, and I totally agree.

With a premises-based solution, an organization takes on the risk of obsolescence, the risk of something not working right, the risk of the vendor going out of business and no longer supporting the product, and so on. The organization is basically stuck with a solution until it's depreciated or getting rid of it is financially feasible. With a hosted solution, the provider takes on the bulk of the risk -- running and managing a data center, staying current with features and functionality, etc. The customer makes little or no capital investment (unless its network isn't up to snuff and it needs more bandwidth), so making a switch from one vendor and service to another is easier than it would be in the premises model. Of course, most organizations will invest in integration, customization, and so on, making it undesirable to switch providers, but the risk or cost of doing so is much lower than for a premises-based solution than in the cloud.

In addition, the customer can get the "luxury model" that it wouldn't be able to afford on a capex basis. Hosted customers can get contact center capabilities, Web and video conferencing, and other capabilities much more easily and affordably than if they had purchased an on-prem solution.

And the ease of deployment can't be understated. As one commenter on the Reizer article noted, "I was able to use Office 365 to set up Exchange, SharePoint, Lync, Yammer in less than 20 minutes." If the company had opted for a premises-based solution, "It would take months of planning, negotiations, presentations, proposals to purchasing, then testing and finally deployment, not to mention hiring an outside VAR for additional help, plus the entire IT department of 10 to 20 other persons to help with system administration."

Do the vendors end up getting more revenue from subscription-based hosted services than on-prem solutions? Yes. But the customers end up with fully featured solutions that require less management and maintenance, that remain current, and provide scalability, redundancy, and flexibility. Looks like it's a win-win for everyone.

Follow Blair Pleasant on Twitter and Google+!
Blair Pleasant on Google+


March 7, 2018

Video collaboration is experiencing significant change and innovation-how can your enterprise take advantage? In this webinar, leading industry analyst Ira Weinstein will present detailed analysis

February 21, 2018

Business agility has become the strongest driver for enterprises to begin migrating their communications to the cloud-and its a benefit that enterprises are already realizing. To gain this benefit

February 7, 2018

Enterprises are starting to grasp the critical importance of security and compliance in their team collaboration deployments. And once the risks are mitigated, your enterprise can integrate these n

March 12, 2018
An effective E-911 implementation doesn't just happen; it takes a solid strategy. Tune in for tips from IT expert Irwin Lazar, of Nemertes Research.
March 9, 2018
IT consultant Steve Leaden lays out the whys and how-tos of getting the green light for your convergence strategy.
March 7, 2018
In advance of his speech tech tutorial at EC18, communications analyst Jon Arnold explores what voice means in a post-PBX world.
February 28, 2018
Voice engagement isn't about a simple phone call any longer, but rather a conversational experience that crosses from one channel to the next, as Daniel Hong, a VP and research director with Forrester....
February 16, 2018
What trends and technologies should you be up on for your contact center? Sheila McGee-Smith, Contact Center & Customer Experience track chair for Enterprise Connect 2018, gives us the lowdown.
February 9, 2018
Melanie Turek, VP of connected work research at Frost & Sullivan, walks us through key components -- and sticking points -- of customer-oriented digital transformation projects.
February 2, 2018
UC consultant Marty Parker has crunched lots of numbers evaluating UC options; tune in for what he's learned and tips for your own analysis.
January 26, 2018
Don't miss out on the fun! Organizer Alan Quayle shares details of his pre-Enterprise Connect hackathon, TADHack-mini '18, showcasing programmable communications.
December 20, 2017
Kevin Kieller, partner with enableUC, provides advice on how to move forward with your Skype for Business and Teams deployments.
December 20, 2017
Zeus Kerravala, principal analyst with ZK Research, shares his perspective on artificial intelligence and the future of team collaboration.
December 20, 2017
Delanda Coleman, Microsoft senior marketing manager, explains the Teams vision and shares use case examples.
November 30, 2017
With a ruling on the FCC's proposed order to dismantle the Open Internet Order expected this month, communications technology attorney Martha Buyer walks us through what's at stake.
October 23, 2017
Wondering which Office 365 collaboration tool to use when? Get quick pointers from CBT Nuggets instructor Simona Millham.
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 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.