Over the last decade we have seen a big increase in the amount of applications that are deployed in either a hosted or SaaS model for numerous reasons. In the past year in particular, economic conditions have spurred the increased adoption of hosting communications platforms in the cloud over spending CapEx money on a premises-based solution. Which is better for you and why?
There seems to be a great debate about the cloud vs. premise solutions. From everything from CRM and email, to storage and data mining. How does communications fit into this debate?
Tim Passios--When people think about communications, they often think just about voice. However, we use so many different types of communications today, it is best to think of it in forms of applications. Emails, Instant messages, SMS, contact center, these are all communication applications used by different organizations. In today’s world of tight budgets, having your communications run in the cloud – known as Communications-as-a-Service – makes a lot of sense with a ton of benefits:
- Little or no capital expenditure
- Predictable monthly costs instead of a large up-front payment
- Less IT overhead
At Interactive we call our hosted offering Communication-as-a-Service. There is a lot of info on our CaaS.com website.
Is it probable, or even possible, that we will see a major shift in the way companies buy and deploy business communications?
Brad Herrington--I think it is already happening and it all started with two events.
- The movement towards VoIP. With packet-based or soft switching, vendors started routing voice over the corporate data network in the late 1990’s. As VoIP picked up steam, along with the wide spread adoption of MPLS networks, it became increasing apparent that you could run your communications system across a wide area network (WAN) without losing audio quality or impacting security.
- The financial crisis. As organizations stepped back to evaluate their spending in light of the economy, they became determined to find better ways to complete their communications projects without spending a lot of money on hardware, software and maintenance contracts. This opened the door for the adoption of hosted-communications solutions or CaaS solutions.
Because of these two events, you will start seeing more and more companies adopting a CaaS model for their communications so that they too can reap the benefits it provides.
Do you see mainly SMBs using cloud based services, or larger companies too? What about the loss of control issue that some larger companies complain about?
Tim,
I do think its the ultimate try and buy, if they choose to start with hosting and then decide they want some or all of it in house. Even if companies start with only a piece or as back up or as a business continuity option. It also depends on what it is you want to host too. For example, with a contact center it is an easy business case choice to use hosting for seasonal overflow, as opposed to deciding to build a contact center for all customer support from the ground up. For UC, hosting certainly provides the option of going all in or just providing capabilities for certain UC functions to specific groups of employees.
I just came across a very powerful article, "Managed service providers: Outsourcing unified communications applications" written by Katharine Trost of Nemertes Research, that presents numbers that indicate that the Unified Communications (UC) boom has only just begun. What was even more interesting is that there is a dramatic increase in organizations considering a UC implementation through a managed service provider (MSP).
Here are some of the important facts that she presents:
I have some more insight into the MSP effect on UC in my blog: https://blog.smoothstone.com/bid/29920/Ready-for-the-Managed-UC
But there is clearly an increaseing amount of consideration given to Managed Service Providers.
John Wesselman
Smoothstone IP Communications
So, particularly in the area of UC, which is just starting to see more of in a hosted environment, what are some of the more compelling reasons to check into communications-as-a-service?
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John -- great post. These stats are right on target with what we continue to see in the market today!
Thanks for the stats.
Tim
Tim Passios wrote:
"As for the concern of larger customers losing control, I think this still remains an issue and may even be a sticking point for many companies considering moving to a CaaS solution. However, while there are many ways to overcome those issues, many organizations are finding the control issue to be far less important than cutting IT costs and capital expenditures and are willing to lose some of that control. And in many organizations, they are more then willing to give up that control for the same reasons as mentioned in the point above - they just don't want to maintain an IT staff and the costs associated with it."
Tim, normally I would say something like "it goes without saying", but in this case not. I think it needs to be said that part of the issue of control is that any company that is concerned about security and loss of control just needs to vet out the company that they are thinking of doing business with. Hosting providers should be able to prove their track record with security, as well as give a customer a really good sense of good the people are that will be running their communications/contact center etc.
Also, one of the pro and cons for hosting versus premises is that if you develop and maintain your own applications and systems you have to also attain and retain the talent to run them. A good hosting provider has that talent, and can also bring new capabilities to their clients often quicker than premises-based customers.
Tim: I think you left out another point about the value of a hosted service - customers don't have to constantly upgrade to the latest release of a product - the service will automatically ensure that the customer has the latest and greatest, with no upgrade costs or hassles.
So what about the con side of pro and con (and where did that come from anyway?). Kidding aside, besides the perception of loss of control or security issues, are there any cons to employing communications-as-a-service?
Nancy
Any company looking to move functions of their contact center to the cloud needs to make sure they have the flexibility to address their future needs, and not just the next 12 months. Make sure the CaaS offering will scale to meet their growth plans, and even allow for the eventual transition of all the CaaS features to be brought in as a full on-premise solution, if their business model dictates the need.
And while size is a simple problem to address, control is also important. When looking at a CaaS solution, one set of features doesn’t work for everyone. Companies need to have options as to how much or little control they want over something as basic as the audio path for a call, having the flexibility to offload all audio to the remote site or the security of keep audio local, while maintaining the same set of features is a big advantage for companies looking for a CaaS solution. The most glaring pitfall is being locked into something that does not meet future needs.
Brad
Brad,
That is an interesting point that maybe some hosting vendors would jump in on. Obviously Interactive provides this, but where will customers go to get CaaS services?
Nancy,
Companies are likely to begin looking at CaaS solutions by turning to their existing communications vendor if they are happy with them. However, the few vendors who do offer CaaS solutions today provide a wide variety of services and service levels, so most companies issue a RFP (Request for Proposal) to receive bids. When developing a list of RFP candidates, most companies will research competitors or rely on consultants to develop a list of CaaS candidates.
Some companies may consider turning to one of the major telecom providers. The problem is that the telecom providers offer a hosted telephone system. They bought some vendor’s phone system and are trying to resell and share that system while making it fit your business. But they are selling a service, not a product. Because it’s not really their product, they don’t know it as deeply and can’t offer the wide range of feature updates and latest releases, or provide the in depth support that can be offered by a orginal vendor. For example, at Interactive Intelligece, we make our software and offer it up as a CaaS solution. We know the product inside out, and our experience with 3500 companies in 93 countries gives us a great starting point to create a deployment that works and thinks they way you need it to, not like what is best for the majority.
You know how a home owner always makes sure everything works great and invests in things for the future good of the home while the renter just uses the property? We’re the home owner; the telecom companies are the renters. Who would you rather deal with?
UC is More Than Person-to-Person Voice
There are several operational and strategic drivers ( besides simply cost savings) for planning UC as a hosted or managed service rather than a premise-based, in-house technology. These include, the growth of wireless mobility using multimodal "smartphones, " the complexity of developing proactive, multimodal, self-service business applications, and enabling customer/end user flexibility in accessing their choice of available live (real-time) assistance. However, we need to separate the sourcing of the networking facilities required from that of developing application software for servers and endpoint clients differently than in the past. This will be especially important in dealing with mobile customer/consumers who will be choosing their own devices and communication services for interacting with everyone.
This should really mean the end of the "walled garden" approach of the carriers who supply the public wired and wireless communication connections, as well as increasing the need for interface/device-independent application software, and flexible and end-user choice of mobile devices and "smart-phones." That's a future to plan for, while at the same time still supporting the voice applications or the past. We are, after all, in the middle of a transition from siloed to open and converged software-based communications, not only for person-to-person contacts, but also between people and automated self-service applications (inbound and outbound). Real-time contacts can be now include 2-way instant text messaging (IM) as well as as immediate notifications via SMS. (Don't forget social networking too!) With presence-based "click-to-contact," efficient real-time contacts can be made on-demand, rather than traditional "blind" telephone call attempts.
Clearly, the burden of making it all work will require the IP network capacity to support and manage flexible UC traffic demands. However, the bigger challenge will be to design, implement, and manage the various kinds of business applications that will make up that communication traffic. So, now, who will you trust to be able to do that for the many different business applications and for both voice and visual interfaces?
Brad and Art,
Both good points. I like Brad's comment about the homeowner versus the renter. There are some obvious benefits to owning the stack as not only can you provide seamless integration of the business apps, but also add new releases, or even new release versions as soon as they are available, rather than waiting for a third-party to develop something you then plop onto your service offering.
I think that having ownership of a CaaS offering from one vendor is also good for the vendor, and ultimately the customer because you get an endless feedback loop on the apps that you put out there. OK, so there is some risk in "trialing" an interim release of a product on a CaaS customer, but its light years ahead of the way we used to do it, which was to have 18 month product development cycles, ending in a big release of a product, in which we hoped for the best.
But Art makes a good point too. We still have the outside service providers to contend with because no one owns the entire thing.
How about turning this in a different direction, since this is a UC site. Does CaaS help or hurt the UC movement?
CaaS helps the UC movement. Companies with constraints will find CaaS offers them new hope. If they need to deploy enhanced contact center applications, face limited technical staff resources, are facing a multi-site upgrade from a variety of legacy PBX systems, or need to deploy a consistent solution across their enterprise and contact center, using CaaS can bring those services to them.
Imagine a business with a mobile sales force and perhaps a few regional offices. They could use CaaS to deploy UC to everyone in their office and remote/mobile employees to facilitate conference calls, keep sales and inside sales in closer contact, deliver faxes to mobile devices for review or approval, send voicemails as emails, and everyone being able to see the availability of their co-works at all times. These features would change how quickly and efficiently a business can respond to customer demands.
Is the contact center unique when it comes to CaaS, or simply part of the bigger picture?
Contact centers will often lead the move into CaaS because of the flexibility it offers and the ability to integrate or utilize a rich set of applications into a business’ processes quickly and comprehensively. Contact centers will realize a greater reward and return on investment based upon the number of applications they utilize.
However, many enterprises will also find significant value in CaaS offerings, especially as companies seek to unify their environments, outsource their communications infrastructure, and build a stronger workflow across their organization. Individual returns for companies will be determined by the nature of their business and their business approach to the market. However, for many companies, there are significant savings and operational gains to be recognized.
I think there is a distinction between cloud and hosted and hosted does not make sense for custom UC. The issue is upgrade control. I can't have some hosting company upgrade systems that could impact my custom integrations. That is why I run a virtual environment - actual virtual environments; production and test. We throughly test all upgrades before implementing them - and I know for a fact that seemingly harmless upgrades can break an entire custom UC application.
Most of the current crop of hosting providers do not let the customer have any control over upgrades. But I think this will change as hosting companies provide virtual self contained systems for each customer. For now, virtualization seems to only be a private option. I have been looking for a hosted partner that can do this, but have not found one yet.