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Selecting Hosted VoIP

By: Richard "Zippy" Grigonis

The market squabbles over the definitions of hosted, managed IP PBXs, IP Centrex and CAS (Communications as a Service), which results in a lack of clarity of their different respective value propositions in the customer’s mind. In particular, the term hosted and the term managed don’t mean the same thing. “Hosted” means “hosted somewhere else.” It doesn’t mean managed, necessarily. But it can mean “managed by default” simply because it originates at the service provider. With true managed services, the equipment part of the system sits at the customer premise and the provider takes care of it, so the customer can pretend it’s not there.

A few companies have the flexibility to offer their technology as either customer premise based (CPE) or as a provider play. CosmoCom (News - Alert), for example, offers Consolidation 2.0, the all-IP contact center strategy for large and complex enterprise requirements. CosmoCom technology enabling Consolidation 2.0 is available as a premise-based solution within the enterprise, and as a service from global service providers hosting it. Also, CosmoCom’s Contact Center On-Demand (CCOD) is a hosted or network-based contact center that allows Network Service Providers (NSPs) to provide basic transport services to contact centers, leaving the high-margin revenue of advanced contact center features to vendors of premise-based equipment. Operators thus not only gain access to new higher margin revenue, but also protect critical existing sources of revenue from price-driven churn.

Smaller companies that don’t have the time to formulate a sophisticated IP Communications strategy can simply avail themselves of a hosted service such as the Packet8 Internet phone and videophone service, introduced in 2002 by 8x8 (News - Alert), Inc. Designed with both residential and business customers in mind, Packet8 allows anyone with broadband Internet access to make unlimited calls to anywhere in the U.S. and Canada for as little as $24.99 per month. All Packet8 subscribers get worldwide unlimited calling to other Packet8 subscribers at no extra charge. Calls to non-Packet8 International numbers (outside the U.S. and Canada) are billed at very low per minute rates. There’s no extra charge for popular features such as voicemail, Caller ID with name, call waiting, three-way calling, follow me/find me, etc.

For most SMBs, however, things are a bit more complicated.

Todd Habersang, Vice President of Business Development, U.S. for Siemens (News - Alert) Enterprise, says, “In our discussions with customers, they have certain expectations when they consider moving from a legacy TDM environment to VoIP and in particular a hosted offer. The four topics that keep popping up are: First, reduced cost. Second, ease of system administration and management. For example, there are a lot of discussions about self-service portals. Third, they want a strong feature set. Fourth, they want a clear path to migrate from the current environment. Businesses want to avoid equipment obsolescence, which makes hosted services attractive. As we move from hardware-based businesses to software-powered environments, businesses are inclined to do less capital investment in hardware in favor of software and hosting, and they want upgrades built into hosted models.”

“Certainly most customers don’t have specialized skills,” says Habersang. “In terms of looking at a fully converged offer as it goes from the core to the edge, there are some serious challenges in a customer environment involving customer skill-sets. Businesses want to focus less on training their employees to work on these systems and focus on their core business. There are also high expectations that the IP PBX (News - Alert) features that they know so well will be available in any type of a hosted offer. They like the idea of little or no capital cost, other than maybe some small set-up fees regarding the design and assessment of the network as they anticipate moving to an IP environment.”

“Then there are the presumed employee productivity gains,” says Habersang. “By adopting a hosted model, the employees focus on the core business and efficiencies are gained. As we move toward communications as a service and ‘one-stop shopping’ for an end-to-end solution from a provider, businesses can partake of a less fragmented communications approach and productivity benefits will be realized more and more.”

Mike Fasciani, Vice President of the Global Technical Sales Support Team for Siemens Enterprise, says, “Obviously, the whole self-care and self-management option not only improves the operational efficiently of the service provider, who doesn’t need as much staff to offer a hosted service, but they can actually make it easier for smaller businesses too, since you don’t have to contact a help desk and figure out what to do. Instead they can go on the web and make changes, or whatever. Everything becomes simplified from end-to-end for all of the players involved.”

“The other piece of the puzzle we should talk about is the migration step,” says Fasciani. “That’s something that some of the less savvy enterprise players don’t really understand how to do. How do you take a legacy PBX and allow them to move smoothly away from that piece of technology and toward something different, while at the same time not lose any business steps along the way? It’s not always the easiest piece to get to work smoothly.”

Habersang adds: “A migration strategy formulation lends itself to a great need for more consulting and professional services. It involves the customer sharing what their business strategy is, and then mapping that to the convergence strategy and making sure it’s all well thought-out. But there’s still some basic ‘block-and-tackle’ stuff we see out there. We still have many customers who are confused about the benefits of moving to VoIP from TDM legacy. So you still have to earn that badge first before you can get into a discussion of hosted services. It’s important for providers to take the time to go over the value of VoIP converged solutions, before they try to sell hosted services. And of course customers are unsure about which hosted provider they should go with. There are very diverse views of what hosted means, and that confuses the value proposition. You can combine that confusion or lack of awareness with the customer’s failure to perform an ROI comparing customer-owned versus managed versus IP Centrex or hosted scenarios.”

“Businesses must take the time to work with a potential provider to look at the acquisition costs,” says Habersang. “Such as the monthly recurring costs and the annual maintenance costs and understand how big the check will be that they write to any provider in a customer-owned scenario versus a hosted environment. So customers should keep in mind the benefits of VoIP, the definitions of the different types of models, and then they should have an ROI and understand the total cost of ownership comparing customer-owned systems versus hosted or managed services. The market itself doesn’t help the customer, since it’s exploding with new technologies and new service providers, and many mergers and acquisitions. Customers are confused as to what model is best and therefore who to turn to — traditional telcos, equipment providers, cable companies, ISPs? The dynamics make it very challenging.”

“Service providers also have challenges, both external and internal,” says Habersang. “Externally, they must have a strong marketing strategy around the launch of any such hosted offer. There must be customer education, key messages, clear differentiation and brand awareness. There must be a commitment to enhanced applications as the offer evolves. Internally, providers must have a strategic alignment with their marketing resources. There must an agreement on the key market messages, and funding for big media ‘splashes’, awareness campaigns, and so on. The provider has an opportunity here to maintain, establish or re-establish brand awareness relative to being a hosted provider.”

One-Stop Shopping

GlobalTouch Telecom (News - Alert) offers a vertically-integrated V-VoIP (Voice and Video over IP) platform as a one-stop single vendor solution. The solution is an all-inclusive private label offering (DIDs, order pages, PBX, residential SIP trunking and prepaid products, CRM, billing, and termination) for carriers, MSOs, Resellers, PTTs, ILECs, ISPs, CLECs, and marketing companies. The platform can be completely customized and rolled out in less than 30 days. Additionally, their ASP product enables low Capex/Opex offerings for both enterprise and residential deployments. GlobalTouch develops, owns and operates all aspects of its VoIP technology.

Greg Welch (News - Alert), CEO of GlobalTouch Telecom, says, “From the standpoint of hosted VoIP solutions, we’ve been in this marketspace since 2004. We focus on the wholesale side. We enable and power carriers and cable MSOs, Web 2.0 companies, and so forth — companies that want to really want to roll out a single-user or enterprise VoIP solution, both in terms of voice and video, and other applications and services. Nowadays everybody is calling this ‘unified communications’. In the last year, we’ve made a change as to the markets we’re pursuing. It’s based on our success and gathering of customers through multi-level marketing companies, in addition to telecom CLECs, ILECs, PTTs, RBOCs and carriers of that sort, we now have cable companies and Tier 2 and Tier 3 organizations in our crosshairs. That’s because every cable company wants to roll out a VoIP solution, usually as part of a triple play. They’ve seen the success of the Comcasts, Cox (News - Alert)’s and Charters of the world gathering subscribers and reducing churn. It also gives them the inroad to compete with the LEC or ILEC in their particular area. The cable company already has broadband, so broadband voice is obviously a great overlay.”

“There are several schools of thought,” says Welch. “Most companies want to be in the market in 30 or fewer days. They don’t want to have to build out infrastructure. They don’t necessarily want to become a CLEC. They have a hard enough time and they’re usually sufficiently small as MSOs so that they don’t want to reinvent the wheel, which might rule out a solution that they have to install in their core, and which they must manage and sell. From a distribution and marketing standpoint they’ve got to understand how to buy and sell and find phone numbers and do termination of calls, and those sorts of things. From our standpoint, GlobalTouch has been able to go right in there with a complete turnkey solution that allows them to affix their own label, look, feel and pricing plan to the service, and to get their MTA, ATA or videophone application out there immediately.”

A New Evolution

One of the latest companies to enter the field is EvolveIP, a Managed Technology Provider (MTP) that has formulated new ways for businesses to buy, manage, and secure the technologies that they use to communicate, and to convert their communications technologies into a competitive advantage. Their impressively broad range of expertise encompasses the areas of Managed Telephony, Managed Network Services, Hosted Applications and Network Security and Compliance. Evolve IP partners with businesses of all sizes to provide a complete outsourced solution or an augmentation of a current infrastructure.

Evolve IP delivers their services from geographically diverse technology centers that are managed 24x7 by a team of professionals. Their delivery architecture is the result of working with technology partners as Acme Packet, Broadsoft, Cisco (News - Alert), IBM and SAP, integrating and customizing their respective technologies.

Guy Fardone, Chief Operating Officer of Evolve IP, says, “We have four key areas of products. One is managed telephony, which includes both managed premise and hosted solutions. The second area is managed network services. That includes managed WANs and LANs. The third area in which we work is network security and compliance, in both the hosted and distributed form. Our fourth and final product area is hosted applications, an area into which we will grow. We’re doing hosted Microsoft (News - Alert) Exchange and some conferencing, data backup and recovery — as we move forward, that’s an area to which we’ll add many more products. The premise in our offerings is that these are all products and services with which we are familiar. We at Evolve IP are 20-year veterans of the data Internet and telecom industry, and we had gone to market with these products and services before to the SMB community and have done extremely well in offering them, and they go extremely well together.”

“The one thing we’re not doing here is building a nationwide network,” says Fardone. “There’s plenty of network out there right now. We’re using other network providers and we have some agreements on our own. We want to be really good in delivering these services with an extremely high level of quality, with quality defined in terms of network performance as well as customer communication, service and satisfaction.”

“Our first area of competitive differentiation is that there’s a core group of 15 of us in this company who have worked together for 15 to 20 years,” says Fardone. “We have experience in these markets. Secondly, we are unique in our breadth and depth of products. If you ask me who our competition is, my patent answer is that it’s sort of everyone: CLECs, ISPs, MSPs, VARs, interconnects, security companies, and then in a sense no one is our competition, because no one really offers everything that we do. Our third area of competitive differentiation is our quality of service. Many companies talk about service level agreements and QoS, and it’s a fuzzy, nebulous type of thing. We actually illustrate to customers what we can do, with tangible SLAs, performance and customer satisfaction.”

Man in the Middle

VoIP Logic (News - Alert) is a major global provider of VoIP Managed Services and Solutions. The company enables telecom service providers worldwide to build and manage customized, flexible and scalable IP telephony rollouts. From VoIP Managed Services to its Cortex middleware system, VoIP Logic provides a huge set of on-demand solutions for service providers looking to use VoIP technology. Leveraging partnerships with global systems providers, including Acme Packet, Covergence (News - Alert), Sylantro, Iperia, Cisco, Highdeal, IVR and NexTone, VoIP Logic gives its wholesale customer base a comprehensive set of systems and solutions to satisfy the customized needs of any size VoIP launch.

Perhaps the biggest challenge for service providers initiating a VoIP launch is to have control, flexibility and visibility over their systems and technologies. Cortex, VoIP Logic’s integration middleware, enables service providers to provision and monitor service offerings on best-of-breed systems and provides their end-users with a single point of self-care. Cortex strives to be an easy-to-use, software-based services creation environment in which providers can provision new users and design their requirements such as billing, CDRs, voicemail, DID management systems, etc., for a VoIP rollout, and then deploy the offering with minimal delay and expense.

Cortex serves as a secure, unified system management portal from which all the components of a multi-system VoIP rollout can be controlled, and visible to all levels of an enterprise. In addition, Cortex empowers wholesale carriers’ technical support professionals to remotely monitor and service customer sites with a scalable, secure, customizable solution that leverages client existing best-practices and ensures maximum system uptime and bottom-line cost savings.

Micah Singer (News - Alert), CEO of VoIP Logic, says, “We are a success story in a market where there have been failures, and that is in providing VoIP deployments for service providers. We sit in the middle and integrate with many best-of-breed APIs and that is extrapolated to APIs that we push out to many people who then provision on their own systems or on common hosted managed systems. That being said, we get really involved in the deployments of a number of service providers. We’re seeing more and more service providers that are enterprise-focused, and there are larger and larger deployments of what you could call hosted PBX systems. Interestingly, what they all have in common is that they use managed networks, generally MPLS, such as Global Crossing (News - Alert)’s MPLS network. That’s the key. Many times people are not using an IP PBX, or sometimes there’s an IAD [Integrated Access Device] or larger device, and multiple locations are involved, and it’s always managed. For the user such a environment should have the uptime reliability that approaches the PSTN and that’s really the key — what is the kind of network that has been chosen by your service provider?”

“The largest hosted PBX I’ve seen deployed is just under 450 seats,” says Singer. “That’s big. One of our customers has one deployed that’s MPLS-based, it covers about 90 percent of their employees in six locations. They were really interested in disaster recovery plans. Our message is that, for many of these companies that would normally opt for a hosted system based on Asterisk (News - Alert) or who otherwise buy their systems with a little too much cost awareness, they can make stability and consistency go further by employing managed services. They can get access to better systems for the same price. But the truth is, it’s all about the quality and capabilities of the network.”

“All of the cable operators in the U.S. are offering VoIP as ‘digital voice’,” says Singer. “The difference between them and, say, Vonage (News - Alert), is just the type of network.”

A Whale of a Service

In terms of premise-based managed services, Whaleback Systems (News - Alert)’ CrystalBlue Voice Service for SMBs is totally premises-based and software-driven. The idea is to give businesses the simplicity of a network-based hosted service with the reliability and advanced features of an on-premises PBX. Whaleback’s unlimited nationwide flat-rate calling package makes such advanced technology affordable for companies that need between 5 and 1,500 phone stations. The CrystalBlue Voice Service includes a separate “voice only” broadband connection inclusive in the monthly price, and the entire service is monitored and maintained 24x7.

Mark Galvin (News - Alert), President and CEO of Whaleback Systems, says, “I have some pretty strong opinions on this. We founded the company just over three years ago. We had been building Class 5 central office IP-based phone switching gear that we sold into the cable industry with over four or five million lines deployed into the field with Comcast (News - Alert) and Charter and others. The beauty of starting this company is, first, the time frame. Not only do we have the background of IP experience and VPN security, but we had the ability to take the experiences of those vendors who came before us pitching hosted PBX and IP Centrex and take things a step beyond that. I also strongly believe in the standards world of IP telephony. For any operation that’s bigger than a SOHO market, you can’t build functionality for the mass market based on a centralized compute resource in the network and sell it to the masses as an in-the-network hosted feature server. The reasons range from CPU resource allocations to the way you implement features in a very processing-intensive messaging SIP environment. You can’t get the features such as busy lamp fields or group paging functions. They aren’t implementable with current centralized compute resources. They can’t feed the masses.”

“These were the specific technical issues on the feature side that drove us to say that there’s an absolute requirement for a premise-based compute resource that actually implements the bulk of the features,” says Galvin. “So when we took our ‘clean sheet of paper’ in 2004 and started defining what Whaleback would do, we had the ‘learnings’ of those who came before us, and the first thing we did was to place a standard Pentium computer on the customer’s premise. That also gave us a better security aspect. Effectively that same compute resource at the customer premise becomes a voice application-aware firewall. It guarantees that rogue SIP hackers can’t turn your telephones into little time bombs throughout your business. All of these super-intelligent phones sitting on people’s desks, some of which have computing power exceeding that of laptops of just five years ago, can communicate completely unfettered on and off your LAN into the WAN to talk directly to a feature server or talk directly to other people’s phones in other businesses. It’s an interesting peer-to-peer concept but it’s a security nightmare. So it’s critical to have that premise-based device to provide an application-aware point of security.”

“Don’t get me wrong, I like SIP,” says Galvin. “Everybody develops endpoints to a common standard. It gets you about 80 to 90 percent ‘there’ with a mass-producible product. As a development company, we didn’t have to design phones. We evaluated three or four different phone makers such as Grandstream, snom, and Polycom (News - Alert), and for our customer’s benefit we could ride a cost curve that can only be done thanks to standardization and reduction of ‘vendor-lock’. In our partnership with Polycom, we’ve seen Polycom handsets over a two-and-a-half-year period go from a cheapest price of $250, our cost, to less than $100. That’s the value of SIP to me. It does cause issues, however, because it is a very inefficient protocol, because humans are supposed to be able to read it. It’s based on ASCII text messaging. In the cell phone world, mobile communications use a changed version of SIP where they’ve squeezed out the human-readable aspect of it. They use the same message formats but they’ve gotten rid of the text coding. It now looks more like ISDN binary-level messaging, and it requires less bandwidth and computation.”

“In any case, having a CPE-based compute resource gives us a point of telemetry which really isolates any potential problems occurring between LAN issues existing between the phone and the local switch and any WAN issues that can occur between the local on-premises switch and what’s happening deep in the network,” says Galvin. “That becomes extremely important in cases where you’re dealing with imperfect IP networks, and the bulk of them are imperfect, and so you can isolate issues or route around them. This is another reason why pure hosting has been fairly unsuccessful.”

The range of hosted and managed services for organizations of all sizes has become truly astounding. It’s time to sit down and think hard about whether a provider can give you the communications features you need for less expense than what you’re now paying for in-house. IT

Richard “Zippy” Grigonis is Executive Editor of TMC (News - Alert)’s IP Communications Group.


The following companies were mentioned in this article:

CosmoCom (

Evolve IP (

GlobalTouch Telecom (

Packet 8 (

Siemens (

VoIPLogic (

Whaleback Systems (


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