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Making the Hosted UC Decision, Part 1: The Pros

Posted by Paul Desmond

Jul 30, 2014

The market for unifiedcloud-unified-communication communications solutions is expected to reach $75.81 billion by 2020, according to a recent study by Grand View Research, Inc., and cloud-based systems are poised to make up an increasing chunk of that total.

As Digital Journal reports:
On premise unified communication accounted for over 60% of the market in 2013. However, the cloud-based or hosted product segment is expected to rapidly gain share over the forecast period. This is mainly due to the high initial cost of installation, as well as additional maintenance cost associated with on premise solutions.

Grand View Research summarizes the interest in cloud-based UC solutions nicely:
On premise systems offer greater customization and control capabilities and are easier to manage, but need a well trained staff and sufficient maintenance. This makes on-premise systems less attractive than cloud-based/hosted unified communication systems. With the rapid adoption of cloud technology, cloud-based/hosted systems have been increasingly adopted. They are faster, easier to maintain, provide seamless scaling abilities and reduce capital expenditure.

Those sorts of benefits should sound familiar, as they are essentially the same as for any other cloud-based offering. But they are especially attractive to small- and medium-sized businesses that often don’t have the budget or expertise to buy and deploy all the various components of a UC solution.

Consider that a full-blown UC system may encompass technologies including voice, instant messaging, desktop collaboration, video, document sharing and speech recognition. Cobbling together such solutions from different vendors is likely beyond the scope of most SMBs, which leaves them the option of going with a single vendor to provide all the components. That may well limit them in terms of functionality, preventing the customer from going with a “best-of-breed” approach for each component.

The Cost Consideration for Cloud vs Premise-Based Unified Communications

The premise-based UC model means shelling out up front for all required hardware and software, along with any professional services required to help with deployment. That is a considerable capital expense.

The cloud model, on the other hand, allows for an annuity-based model, with a regular, fixed monthly payment that is likely easier for most SMBs to handle. What’s more, they can contract for exactly the number of users they need today and add or remove users over time as business needs dictate. It also enables customers to take advantage of economies of scale that the cloud provider can achieve which would be unavailable to individual SMBs.

An analysis by the hosted UC company 8x8, Inc. put the 4-year savings for a fairly basic cloud UC deployment serving 55 end users at $130,495 - and that’s not including the cost of any technology refresh that would likely be required in year 4.

Deployment Considerations for Cloud vs. Premise-Based UC

Cloud also enables companies to easily start with a limited feature set and add to it over time. Perhaps the company deploys a core feature set of phone, voicemail and audio conferencing then adds on from there as users become comfortable with the technology. When they want to deploy a new feature it’s simply a matter of “turning it on” with the cloud provider - there’s little to no integration work on site.

Indeed, one solution provider I talked to recently said customers can deploy cloud-based solutions like Microsoft Office 365 about 5 times faster than they could a premise-based solution. What’s more, when it’s time to implement a new software version or patch, the cloud provider takes care of it, which greatly eases ongoing maintenance for the customer.

Of course, cloud-based UC is not without its drawbacks, including the need for data protection, meeting regulatory requirements, providing emergency services (E-911) and the need to customize the solution. We’ll cover these potential drawbacks in a future blog post.

Topics: cloud, networking, Business Case