Cloud telephony move stuck on hold

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This article appeared in the May 2014 issue of CRN magazine.

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Cloud telephony move stuck on hold

The cloud story is so familiar that it could seem inevitable that almost all key infrastructure will migrate. Yet that is not true. Australia’s IP telephony (IPT) market is firmly anchored on-premise, says Gartner principal research analyst Bjarne Munch.

Munch says: “By far the majority of all deployments today are on-premise. I would even put my head on the block and say it is beyond 90 percent, perhaps even closer to 95 percent.”

There are a couple of reasons for this. The simplest is cost, especially for unified communications.

Munch says there are few business cases that really stack up in unified communications. “We don’t have a tradition of moving telephony into the cloud. I would argue that right now, because most deployments are in-house, a lot of people are asking, ‘Why would I move it into the cloud when I am able to extract savings through negotiation without the deployment risk?’

“Telstra, Optus and Macquarie Telecom are trying to maintain PSTN (public switched telephone network) revenues – and they are happy to cut deals.”

Munch tells CRN that despite the push towards unified communications, there remain firm boundaries in place within both businesses and government departments that tend to mitigate against it. He adds that investments in the required process re-engineering tend to undermine any business case.

Still, he acknowledged where the trend is heading. Indeed, Gartner is considering whether to continue with its magic quadrant for IP telephony at all or instead just focus on unified communications. “The vendors who feature in one tend to feature in the other, and Microsoft leads in both,” says Munch.

But the vendors are keen to highlight the advantages of hosted solutions. Chris Downes, channel sales director for Alcatel-Lucent Enterprise ANZ, says: “Hosted or centralised unified communications and collaboration will generally be most suited for clients that have good wide area network (WAN) connectivity to their offices, which is becoming increasingly common.”

Downes says that by leveraging their corporate WAN, enterprises can centralise resources, such as PSTN connectivity or session initiation protocol (SIP) trunking, instead of maintaining expensive separate connections and resources at each site.

“By moving to a centralised platform that is hosted and managed by a service provider, enterprises benefit from the economies of scale of sharing resources that are used by hundreds of other organisations. In this case, enterprises are effectively outsourcing a large part of their telephony requirements to the service provider so they can focus their people and capital on their core business.”

He points to the latest iterations from the likes of UXC Connect, with its recently launched integrated telephony as a service (iTaaS) offering based on Alcatel-Lucent. UXC’s iTaaS offers unified communications to enterprises on a consumption model.

“This allows companies to pay on a per user per month basis for what they use, not what they bought initially, and often without a fixed term contract, which in turn helps to reduce the total cost of ownership of that technology,” says Downes.

Steve Saunders, practice manager, services at UXC Connect, says “progressive organisations” can see that technology consumption is changing, and are more likely to jump on the hosted IPT bandwagon. These are the types of organisations who know that the market they operate in can be volatile, he says, and who understand that they may need to scale up and down rapidly.

“Ultimately, they aim to minimise their risk in technology procurement. Consumption-based models will favour those organisations looking to reduce the amount of capital, time and resources tied up in technology that is not core to their business operations,” says Saunders.

UXC’s iTaaS bundles unified comms, desktop hardware and online applications such as Google Apps. “This helps enterprises take advantage of the flexibility and cost-effectiveness of a cloud-based model to address the challenge of delivering communications services for a highly-mobile, application-driven workforce.”

Saunders says this type of solution is ideal for organisations wanting to transform from traditional ways of communicating into a highly collaborative workspace solution that provides tools which fit the message, circumstance or individual.

“Organisations whose IP telephony is critical to the core business, such as emergency services, will continue to invest in owning and maintaining their own IP telephony infrastructure,” he adds.

Horses for courses

Anittel CEO Peter Kazacos tells CRN that his company pursues both approaches.

“It’s horses for courses. For lower-end companies in particular, on-premise is a better option as long as they have a provider who can manage it for them.

“We provide remote management of the on-premise solution, and it is ready to go to the cloud for all intents and purposes.

“But it’s still on-premise and many companies want that because it’s actually cheaper,” he adds. Kazacos, whose company is firmly aligned to Cisco in the IPT space, says it is not really economical at the low end to have a hosted IPT solution. “If the phone breaks, how do you fix it? If it’s on-premise and it goes wrong, you ring your telco and they come out and fix it. If it’s hosted, it’s a much longer process if you haven’t got a support service behind you.”

This is the reason why companies at the bigger end of town are more likely to pursue hosted solutions since they have the ability to provide some support services, says Kazacos.

Steven Miller, business group lead for Microsoft’s Office division, says it is all about what adds the most value to the customer. “If the customer wants a highly customised solution integrated across the various line-of-business applications, we see a trend towards on-premise voice and UC as well as dedicated partner-managed environments and other private cloud options. For a standardised product offering, we see multi-tenant hosting opportunities become a more compelling option. This is particularly evident for SMBs.”

Miller says many customers are adopting a hybrid deployment model for productivity reasons. “An example is Fortescue Metals, which moved to Office 365 because it provided an immediate answer to its scalability problem while having Lync voice on-premise.”

Resellers that want to dip their toes into the hosted telephony market should consider combining their expertise in selling traditional PBXs with IP services such as SIP trunking to connect the PBX to the public phone network. This is the advice of MyNetFone’s chief commercial officer, Jon Cleaver. “This also allows resellers to upsell internet solutions as IP communications, which requires a reliable fast-speed internet connection.”

As resellers become more familiar with selling the benefits of IP telephony, they can then move to specialising in pure hosted phone systems as well, thereby being able to offer their clients the solution that best matches their needs, whether it be traditional or hosted, according to Cleaver.

He also suggests that as more businesses introduce teleconferencing practices, resellers should expect to see greater tendency towards organisations offering their employees a full, collaborative experience regardless of where or when they are working. “Therefore, it is important for resellers to keep up with client needs and be able to recommend and sell solutions that are on-trend with business needs.”

Brendan Maree, Interactive Intelligence’s vice president, Australia, New Zealand and Japan, agrees that resellers should get behind hosted IPT if it is strategic to the client’s business and if they’re demanding it. “Cloud delivery makes this easier, especially if the software provider is also the one fulfilling the service. Resellers are considered as trusted advisors by their clients and are an important part of the evolving cloud ecosystem.”

However, he has a cautionary note as well. “Where we see issues is where resellers do not invest in understanding the vertical market or refuse to invest in pre-sales and marketing. I’m also a big believer in cloud brokers. What I mean by that is where resellers offer multiple cloud applications that are aligned to each other.”

Despite the risks, Maree sees hosted communications as a huge opportunity for resellers. “You have already invested in building a relationship with clients and it makes sense to maximise the range of services you can offer them. In particular, resellers that are focused on computer and IT services are finding it an easy transition to move into offering hosted phone systems. They already work with internet, office networks and computers, so an IP phone system is an easy next step.

“A good place to start is to look for reputable hosted phone system providers that are well-established but also innovative, and simply talk to their business sales teams about channel partnership opportunities,” says Maree.

He also suggests focusing on excellent and ongoing service, saying this was also vital. In the telco space, it’s not just ‘sell and forget’ he says. Rather, customers expect solutions that are ‘future-proof’ and will grow with their business. “A reseller must nurture their business relationships and make sure that the services delivered keep pace with the customer’s needs.”

“By understanding the industry and providing excellent customer service, resellers can be successful in expanding into IP telephony.”

Silver bullet

There’s no one silver bullet for success when pitching hosted telephony or unified communications as a service (UCaaS), says Downes. Instead, IT providers need to adapt their messaging to resonate with customers and target markets based on individual requirements and specific environments. Downes offers several areas where providers can highlight when pitching a hosted solution, including the flexibility of the technology. “Customers are able to easily scale the solution depending on the number of users and sites so that they can get the best value out of the solution they have purchased.”

Customers also need access to a system that is always up-to-date and which is being maintained by the service provider, so that they can focus their resources on the core business. Downes adds that companies put a high premium on predictable operating expenses. The ongoing payment model should allow businesses to better plan their expenses and avoid having to budget for large capital expenditure of system upgrades.

Finally, speed of implementation matters. For instance, Downes says: “We can implement a UCaaS solution from one of our service providers, such as UXC Connect, in less than a month, which is a significant reduction in comparison to the three to six months that it usually takes to set up an on-premise solution.”



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