Are You Considering a Hosted PBX Solution?

Posted on April 14, 2015

By Eric Blaier

By now, you are likely quite familiar with “the cloud” and the various applications, platforms, infrastructure, and other offerings available today. Those solutions extend to what is considered standard need in offices-Telecommunications. IP Telephony has been one of the leading success stories of the internet boom. When I started in the telecommunications industry over 20 years ago (I’m dating myself here), I worked at a long-distance carrier. That genre of company was made, for the most part, obsolete by IP telephony. The digitization of one of the oldest transmission methods changed the industry seemingly overnight.

Moving to IP-Based Phone Systems provided easier cost structures to the carrier, which led to more simplified pricing to the customer. It offered the ability to utilize new technologies like SIP Trunks (Session Initiated Protocol) which allowed extension dialing to remote locations. Moves, additions and changes, became much easier to manage. And the cost structure dramatically decreased across the board.

Today, one of the primary topics of discussion that I am having with clients is whether they should move to a “Hosted PBX” model or continue to utilize a traditional PBX system. The discussion has almost become not “should, but rather “when?” The factors in that decision typically come down to cost, functionality, administrative capability, IT support, and risk/business continuity/compliance considerations. This article will address those factors, some of the business drivers for considering a hosted PBX, and the primary areas that must be addressed before moving to that model.

Some of the factors in moving to a Hosted PBX model across the enterprise:

Cost Hosted PBX models are, across the board, almost always more cost-advantageous. The reason for this is that the Hosted PBX model eliminates the need for “phone services”, which include dial tone, T-1 charges, Long Distance Charges, certain FCC charges, and trunk fees. The Hosted PBX model includes dial tone with full-featured functionality and does so for a monthly “rental fee/lease”. The typical savings in a properly designed Hosted PBX Migration is upwards of 30%.

Functionality On-premise phone systems and Hosted PBX systems have, for the most part, all of the same functionality and features. The difference in how they are delivered comes down to the PBX (or brain of the phone system) being hosted in the office telephone closet while the Hosted PBX receives features and functionality from the “cloud”.

Administrative Capability Moves, additions and changes are the life of a telecommunications coordinator. The on premise model involves making changes in a decentralized environment, which can mean travel costs for programming, additional insurance premium costs for the business, and higher power bills. The Hosted PBX model allows telecommunications administrators to make changes from a central portal as if they were physically located at the remote site. It also means less cost for travel, insurance and utilities.

IT Support The cloud has lessened the need to keep IT staff in each location. A cloud solution can be centrally administered as discussed above. Further, the hosted model involves either a lease or purchase of the handsets. These often involve full warranty and support for the entire contract. This has eliminated the need to pay for service calls or “service contracts” that are the lifeblood of standard phone system vendors.

As a matter of fact, the migration from traditional PBX systems to Hosted has changed the business model of PBX Vendors. Many leading manufacturers have developed their own cloud offerings and have educated their leading and long-time vendors to recommend the cloud solution. The vendor is compensated a small percentage residually in lieu of the service contract, so they still maintain the client relationship even if delivering the solution in a different method.

Risk/Compliance/Business Continuity: If your business must meet certain standards for risk/security/compliance, it is vital to find partners that can meet those needs. Suffice to say, the Hosted PBX providers of today have designed their platforms to meet those needs from a “hosted perspective”, but there is still work to be done. More on this issue will be discussed below.

So far, it seems that a hosted model meets or exceeds the traditional PBX deployment. What are the factors that are leading companies to go with a hosted model?

Business drivers in favor of the hosted model:

Demand Economics– Hosted solutions are an OPEX rather than a CAPEX environment. The ability to order what is needed at that moment allows an enterprise maximize efficiency and ROI immediately.

Scalability-Hosted solutions are highly scalable in due to the OPEX model. This allows for future growth as well as redeployment of assets from one office to another.

Risk & Compliance: The hosted model gives instant visibility into all assets on the network with a central administration point. Having the ability to patch and send instant updates amongst the entire network of phones is something inherent to cloud solution PBX’s. In a cloud environment, the update comes from the provider, thus removing this task from your administrator while giving greater visibility.

Total Cost of Ownership (TCO) Factors to consider include Equipment/Service Costs/Warranty Costs/Installation Costs/Power & Utilities/Insurance/Travel and Administration. In almost every scenario, the hosted solution provides a lower TCO. One of the best TCO calculators available is that of Evolve IP, a partner of my firm

So, with the benefits shown, what are the negatives?

Primary Areas to Consider:

Redundancy: if you move your phone system to the cloud, you are an internet outage from being out of business. This means finding redundant circuitry that runs in parallel to the primary circuit. In larger enterprises, primary circuits can be 20mbps-100mbps dedicated fiber internet connections from “carrier A”. To back that carrier up properly, it is imperative to get a secondary from a different provider (“carrier B”) that consists of a different loop provider and/hopefully a different entrance point into the building.

In smaller and home-office environments, there is a trend towards backing up either a smaller Ethernet circuit or cable modem with a DSL line or 4G wireless services. The latter is gaining in popularity.

Security: You are now in the cloud. Your phone system is now another IP address on your network. Thus, a solid Firewall is vital to keeping your system free from DDoS attacks, viruses, and all of the nasty stuff that data networks come across.

The latest Firewalls, often called Next-Generation Firewalls or Unified Threat Management Devices, provide many features including Intrusion Protection (IPS), Web Filters, Load Balancing and Failover. Failover is vitally important because if one circuit goes down, the device automatically routes to the secondary circuit.

Investing in a decent device can make all of the difference in the world when disaster strikes.

Administration: Having the ability to patch and send instant updates amongst the entire network of phones is something inherent to cloud solution PBX’s. In a cloud environment, the update comes from the provider, thus removing this task from your administrator.

Forces of nature: Up until this point, planning for disaster and how to recover was something the IT executive thought about in terms of servers, network and personnel. The facility itself was an afterthought, as they paid somebody else to worry about it.

What if the power goes out? Do you have the ability to fire up a generator? Is it your facility or are you a tenant? Do you have Power over Ethernet (PoE) switches and phones so that your phones stay connected even in the event of a power outage?

Working with a skilled telecom consultant can give your company the roadmap for addressing each of these “unseen” threats and mitigate them prior to them becoming an issue.

Given each of these factors, it is a matter of when (not “if”) your organization moves to a hosted PBX model. The benefits of a fully-deployed, redundant solution typically far outweigh the risks or costs with keeping a soon-to-be antiquated technology. I thank you for taking the time to read this article and look forward to seeing each other again in the near future.

About the Author:

Eric Blaier is the founder of Integrated Business Services, Inc. an Atlanta-based IT consulting firm founded in 2001. He has held sales and sales management roles for such companies as Allnet, Teleglobe, ATT and Equinix, and his firm partners with the leading cloud providers in the marketplace. If you are interested in having a TCO analysis done for your business, please contact Eric for a consultation.

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