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Unified Communications
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UC Mag
David Schenkel
Senior Technology Analyst

On Premises or Hosted - Which Is Right for You?

One of the basic decisions you will have to make when selecting a UC system is whether to use an on-premises or hosted unified communications solution. So what's the difference, and how can you choose which is best for you?

The choice is governed by many factors, including the intended business application, types of UC capabilities, cost, reliability, control and security considerations.
Most hosted UC offerings include PBX functionality as well as various UC services, and sometimes IT services such as e-mail. The host platform is housed by a service provider with broadband IP connectivity to the client's location(s), by private or public Internet networks. A hosted provider delivers service to multiple customers using shared hardware and software to gain capital and operational cost benefits. All voice communications, either station-to-station or outside calls, and the UC features themselves, are controlled and supported by the service provider's UC system.
The shared infrastructure and productized services of hosted solutions limit the available customizations. They tend to integrate poorly with in-house IT, and offer fewer opportunities to build business process improvement applications. Hosted solutions also integrate poorly with existing PBXs, so going hosted is best done as a green-field approach.
Hosted solutions have lower up-front capital outlays, but higher fixed monthly charges and higher total cost of ownership than on-premises solutions, and can get very expensive as the number of users grows. In many cases, phones and network gear are provided by the hosted service provider and are included in a monthly service charge.
You own (or lease to own) an on-premises solution and locate all the UC system components on sites of your choosing. Communications and services are contained within the site. Inter-site communication, though, still requires IP or PSTN connections to other sites. On-premises UC can be implemented on most existing PBXs and can often provide a smooth migration to VoIP-based UC.
Note that both approaches require essentially the same premises network infrastructure. So where do these two approaches shine best?
Hosted offerings are most suitable for small companies (under 30 users) with high geographic distribution and little in the way of central IT and where line of business application data is not available for communications- enabled business processes customizations.
On-premises solutions are best for organizations with more than 30 users who already have an investment in IT and have in-house IT skills. Integration with the IT infrastructure means that LOB data is accessible for customized business process improvement applications such as IVR, CEBP, call redirection, and out calling. User management also can be integrated with IT user management, reducing complexity and management costs. On-premises solutions tend to have higher up-front capital outlays, but lower TCOs than hosted UC solutions, and tend to get less expensive per user as they grow larger.
Of course, one of the advantages of a UC solution over a simple PBX is that UC has an ROI. Hosted UC tends to offer soft, more difficult to quantify ROIs based mostly on productivity and collaborative type features, rather than the hard more easily quantified ROIs offered by on-premises solutions that are associated with customized business process applications.
Hosted providers can offer improved system availability, as well as site diversification. However, since hosted services require an IP connection to the host site, any failure in this link may cause complete disruption of communications, which cannot be mitigated by a simple "emergency" backup line. This isn't a problem for intra-site communications for premises-based solutions as communications are all contained within the site.
If security of corporate data is of particular concern, this may be reason enough to consider only an on-premises solution. Although a hosted provider may have impeccable security, you are still not in total control of the security for off-site information such as e-mails, voicemail, and LOB data, whereas on-premises solutions allow you to use your existing data center safeguards.
From a control viewpoint, hosted solution providers may disrupt your communications at an inconvenient time due to maintenance outages or upgrades over which you have little control, whereas these are within your control for an on-premises solution.
So, if you don't have an IT infrastructure, have a small or highly geographically distributed organization, want a fairly standardized UC feature set that includes unified messaging, fax, and e-mail, or want to minimize your up-front costs and favor a fixed monthly fee, then hosted UC is probably your best bet. However, if you have an IT infrastructure, want customizable capabilities to improve business processes, have existing PBXs that you want to migrate to UC, are more concerned with reducing longer term TCO and getting a hard ROI rather than reducing up-front costs, then you probably need an on-premises solution.
Either type of solution can be made to work, just remember to take into account those lurking UC ROI opportunities that will let you justify UC in the first place.
David Schenkel is senior technology analyst with ADTRAN (www.adtran.com).

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