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May 2010 | Volume 13 / Number 5
The Channel Perspective

Software-Based Communications for the SMB: On-Premises Solutions May Deliver Greater ROI than Hosted

Hosted IP communications solutions have the potential to deliver significant value when compared to on-premises, appliance-based solutions. As a business grows to a certain size, an upfront capital expenditure and a lifetime of ongoing maintenance and upgrade costs for hardware-centric systems can be more expensive than a simple, neat recurring monthly service fee with all the bells and whistles rolled in.

But the tables turn when we compare hosted to software-based solutions. Software-based IP communications inherently alleviate many of the challenges associated with the traditional, hardware-centric approach. While it may not be the choice for all SMBs, some organizations will find that software-based communication delivers far greater value and cost efficiency over hosted solutions.

While hosted solutions have the potential to reduce capital expenditures, they don’t eliminate them. Hosted solutions still come with up-front costs for IP phones and service-access hardware. These costs can be significant, depending on SMB’s specific organizational business goals and requirements. What’s more, hosted solutions tend to have higher, ongoing service provider costs. Software-based solutions can reduce both initial and ongoing costs and provide significant value over hosted models. Some software solutions available today will waive the up-front cost of gateways and terminals for direct-finance customers. This further reduces the cash outlay SMBs pay with hosted solutions. It also eliminates the investment risks associated with owning equipment in a rapidly changing technology environment. SMBs pay a predetermined, monthly payment with a financed software-based IP solution. This alleviates the risk of fee increases and higher ongoing costs from a hosted service provider. It also enables them to completely refresh their technology at the end of the contract.

Software-based solutions require minimal hardware, simplifying management and significantly reducing burden on SMBs IT and network staff. As software, the solution is downloaded onto the network and managed just like any other application. The ideal software-based solution integrates the IP PBX (News - Alert) and other applications like voicemail, auto attendant, unified messaging and conferencing solutions, which further reduces the need to manage and integrate additional equipment. Centralized management and administration allows SMBs to support easily an increasingly remote, disparate workforce. What’s more, since software-based solutions are abstracted from the network, there is no need to coordinate upgrades to network IOS, routers, switches and firmware to do an upgrade or introduce new features. It’s all automatic.

Software-based solutions that leverage Web services further reduce costs and simplify management. By fully integrating call and network functionality, companies can expose communication functions to any number of business applications and deliver even greater value.

Software-based solutions also address SMB concerns of redundancy with hosted solutions. As a softswitch, some software-based communications solutions can automatically load balance across multiple servers. As a company grows and needs to add a location, it simply adds another server, providing geographic redundancy. This type of auto load balancing not only increases system resources but provides full redundancy, fault tolerance and failover without additional cost.

In addition to simplifying cost, management and redundancy, on-premises software-based communications solutions give SMBs back the following advantages they might have given up by going with a hosted solution:

  • control of every detail of the network, including cost and complexity;
  • mobility, conferencing, collaboration and business-process integration as a basic, on-premises offering;
  • innovation beyond hosted offerings to get the solution that best matches business needs;
  • data security and integrity;
  • and compliance with privacy laws and regulations

SMBs have leveraged hosted solutions in the past because no viable alternative was available. Software-based IP communications are gaining strength – even among the SMB segment – providing the benefits of a premises-based, IP solution while foregoing the challenges associated with more traditional models. In making the choice between a hosted and on-premises software-based solution, SMBs should weigh the cost and value of each to determine which variable (IT staff, existing infrastructure, future business direction, etc.) delivers the most ROI for their given organization. IT

Larry Levenberg is vice president and general manager of national channels at NEC (News - Alert) Corp. of America (

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