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On-premise or cloud telephony – which one is right for my business?


Cloud communications

Whether refreshing your existing outdated telephony, or perhaps even buying your first business telephone system, you will be faced with the same decision ~ “should I invest in cloud telephony or buy my own telephone system?”

Not an easy decision as there are many things to consider.

Certainly, much of the initial guidance you might receive will be around cloud. “Cloud is the future” you will be told. “Cloud is ‘plug and play’”. “Cloud enables you to connect many sites together as a single system”. “Cloud telephony costs less”, cloud saves you money on calls”, “cloud means you can have VoIP”. Cloud Cloud Cloud.

However, the simple truth is that no two customer’s needs are the same and as such there is no single right or wrong answer.

So, let’s take a look at some of the key factors that you will need to consider.

Cost is usually somewhere towards the top of the list. So how does cloud telephony compare versus owning your own telephone system?

Cloud communications cost

With regard to the cost of the actual system itself,

  • Certainly, it would be fair to say that there is an initial ‘up-front cost’ when you buy your own telephone system. This is because you will need the server, licences, handsets and skilled engineering resource that comprises a new telephone system. However, as a cash line item this can be offset as an operational expenditure by utilising lease facilities over a fixed time period. At the end of the lease you will have an asset that your business owns and will have no more payments to make to use your own telephone system, beyond skilled support and that all important manufacturers software assurance.
  • When committing to a cloud solution, the business model is very similar to that of a mobile telephone contract. You might be required to commit to a handset cost upfront or the handset may be packaged into a monthly service charge that will include a host of features available to each user on your selected cloud platform. Adding a new user is simplicity itself, the new user becoming an additional recurring cost line on the monthly invoice. However, as long as you use the system you will always be required to pay that ongoing recurring monthly charge per user.

So, the big question to consider is the Total Cost of Ownership or “TCO” of the solution across its expected life cycle. Would it be more cost effective to buy outright or to pay a monthly rental charge in perpetuity for the many years that you would expect to use your new system?

What about telephone lines and how you pay for your cloud telephone calls?

Cloud telephone calls
  • With your own telephone system, you also need your own telephone lines. This means you will have to pay a monthly rental for these lines and of course are potentially limited to the number of lines you have installed, depending on which types of lines you have. Then of course there are the costs associated with making telephone calls.
  • With a cloud solution, typically, each user subscription comes with it’s own line or some providers offer a bundle of shared lines. So, having enough telephone lines should never be an issue. But, are you paying for more lines than you really need? Also, just like the mobile networks many cloud providers include a bundle of minutes within each user subscription. However, just like mobile networks how many of those minutes are you actually using compared to the price you are paying for the seemingly bottomless calling bundle?

The question to consider here is how does paying for what I use compare to paying for what I might not use?

The buzz phrase often associated with Cloud telephony is VoIP. So, what is VoIP and how is that relevant?

VOIP concept

VoIP or Voice Over Internet Protocol, is basically telephone calls over the internet in the form of IP data packets.

VoIP is relevant in that it is the very backbone of Cloud telephony. Without it you cannot have cloud telephony. It is fair to conclude that to have Cloud telephony you need to have good available bandwidth broadband access. It is over this that you will need to be able to safely send your unencumbered voice IP data packets.

  • You can use VoIP calling with your own on premises telephone system. This is achieved by installing IP telephone lines (SIP channels) over your existing broadband lines. SIP lines are typically much cheaper to rent than traditional telephone lines, offer lower cost calling charges and offer flexibility with regards to resilience, redundancy and scale. However, when using your own broadband for VoIP telephone calls you do need to ensure that your IT environment is securely protected from this additional access resource.
  • Cloud telephony comes with VoIP as standard. However, the quality of your calls is wholly dependent upon the quality of your available broadband services. Typically, you can rely on the cloud service provider to ensure a high level of cyber security but should always ensure that irrespective of source your enterprise is safely secured.

An important differential is that with your own telephone system you are not committed to using VoIP services should your broadband availability not be up to the job!

“Cloud and VoIP good for connecting multiple sites together”

Cloud connecting offices

This is true, but so is traditional telephony. Both solutions are good for multi-site and remote telephony users in their own way.

  • If you have your own telephone system, other locations, remote offices, home workers and even mobile telephone users can be incorporated into the single system securely and seamlessly. Indeed, many companies successfully network their sites together to offer their customers and users calling flexibility, resource availability and a host of other UC (Unified Communications) functionality.
  • Cloud telephony by its very nature is location agnostic. It provides excellent multi-site / multi user flexibility, scale and ease of deployment, usually by a web based administrator portal.

Both cloud and on-premise telephony offer opportunity for a multi-site single telephony solution.

However, a single advantage that on-premise telephony might have over Cloud is that in poor broadband coverage areas an on-site system can be better flexed to spread resource between inter site networking and traditional lines for inbound/outbound/ breakout calls.

There is a view that Cloud telephony costs less to support and maintain, but is that true?

Cloud telephony maintenance
  • With your own telephone system outside of simpler administrative functions businesses need the support of skilled telecoms engineers for any major changes you might need or to resolve any faults or problems that might occur. You will also need to keep up to date manufacturer software assurance to ensure you are protected from the latest cyber challenges and benefit for software upgrades, improvements and revisions. A good rule of thumb would be to allow 12% to 16% of the system value for this each year.
  • With a cloud solution all the above is included within the monthly rental charge, so you do not need to allocate additional annual budget to this. However, as all your system management is done by your own administrator via a web portal you do need to have trained and available resource within your organisation.

Whereas a cloud system will be kept automatically up to date by your provider, you are dependent upon the diligence and availability of your system maintainer if you own on the premises telephony.

Finally, there is a view that with Cloud telephony a business has access to everything that it might need, available whenever it needs it.

Cloud telecoms concept

Due to the key differences here, we will first of all take a look at what a Cloud offering might deliver: –

  • Most Cloud telephone systems include many of features that a business might wish to use, already built in as standard. These would include all basic telephony elements, through to compliant call recording, call reporting, mobile applications, desktop applications and even some contact centre functionality. Some of these features are included in your monthly subscription and others can often be added as a cost option. However, with Cloud being a ‘one fits all’ type of solution, the offering can be adequate but in some cases limited. What is more, should you wish to add features or need any type of specialisation then you are dependent upon the plans and progress of the cloud provers services roadmap.
  • With your own telephone system, if a feature is not available then you must buy it. However, with the ability to add a much wider range of solutions to your system you can often have greater flexibility. Simple examples might include: – integrating a none mainstream CRM, or industry specialised software such as taxi cab solutions, hospitality industry PMS to name but two. Typically call reporting data is not as intelligent or as flexible as specialist off the shelf solutions.

Cloud services providers maintain a stable solution environment for their customers and so typically do not allow any external solution access or integration into their closed platform environment.

Due to the standalone nature of an on the premises system, manufacturers encourage platform developers to provide solutions and features that enhance the capabilities of the system for their wide ranging and varied customer base.

However, something to be mindful of is that some Cloud/VoIP providers penalise their customers if they need to cancel or reduce users inside the first 36 months of the contract.

One thing is for sure, Cloud telephony and the associated functionality is moving forwards at pace. However, if you need specialisation you might have to seek out a specialist provider and may have to regularly ‘change horses’ should your specific needs outgrow the capabilities of your current cloud service. At the very top end there are some services that support active solution integration and will provide highly skilled developers to support bi-directional integration into their specialist cloud service.

And we haven’t even mentioned ‘Hybrid’ yet, but perhaps we will leave that one for another day!

So, given the above, how do you most easily decide which solution is right for you?

Many decide purely based on financials. Others, find the plethora of features and technical information confusing and make a decision based on the relationship that they have formed with the proposing supplier.

One thing is for sure, you should always engage a knowledgeable provider. A partner that will review and consider all aspects of your commercial and technical needs. This way you are more likely get a solution that is just the right fit for your business.

Should you require any guidance on any of the topics raised in this article, please feel free to contact me personally or any member of the Evoke Telecom sales team on 01509 278278 or at sales@evoketelecom.com