In a high-growth market such as hosted VoIP services, time to market combined with the ability to rapidly add new customers and scale the business are key requirements of success. Service providers need to establish a technology and business infrastructure that will allow them to quickly add new customers and drive new revenue, while simultaneously lowering cost and improving margins.
To achieve this, service providers must choose between building their own in-house infrastructure or buying a ready-to-go service delivery platform to deliver VoIP and other IP services. This article will address the pros and cons of each approach and examine current technologies that can help providers deliver hosted VoIP services profitably and with the speed and reliability needed to attract and retain customers.
The ï¿½Buy Versus Buildï¿½ Dilemma
Service providers planning to offer hosted VoIP face a fundamental choice ï¿½ whether to build their own system for provisioning and managing their services, or to buy a commercial ready-to-go solution. Often, the ï¿½buildï¿½ option appears attractive on the surface, offering what may appear to be lower cost, more customization to the companyï¿½s specific business processes, or lower risk. However, the benefits of building almost always turn out to be an illusion.
This ï¿½build versus buyï¿½ dilemma is not unique to the hosted VoIP services space. Other industries have faced the same challenge. One example is the enterprise resource planning (ERP) market. Before the emergence of companies such as SAP (News - Alert) and Oracle (News - Alert), an organizationï¿½s only solution was to internally build customized software to streamline its critical business processes. But as more enterprises began to adopt similar technologies, the industry created standards and commercial software developers began to emerge with pre-packaged solutions.
The hosted services market is clearly following the same evolution. In the marketï¿½s early days, service providers looked to their internal IT departments to deliver customized solutions for provisioning, billing, and managing services. Given the current competitive pressure and the economics of a maturing market, such in-house solutions are becoming more expensive to maintain. Moreover, in-house solutions are often built to meet a very specific set of requirements, and as such lack some key features that a commercial solution would have, such as reseller enablement or extensibility of new services.
Software development companies are able to provide more efficient solutions because their development costs are amortized over hundreds of customers ï¿½ not just one. In addition, software developers may have fifty or more employees that develop and test technology solutions, while a companyï¿½s internal IT department rarely has more than five or ten people dedicated to similar functions.
The Benefits of Using a Commercial Solution
The benefits to providers of buying a commercial software solution for delivering VoIP services include:
ï¿½ Increased Flexibility: Commercially developed software offers a richer set of options and capabilities than custom software, which usually has only the features that a business believes it needs today.
ï¿½ Lower Cost of Maintenance: Software developers continually update their solutions to ensure they work with the latest technology platform. With custom software, a provider will need to spend money and time performing necessary updates. This includes tracking of all software version changes and upgrades of vendors served by the hosting software. This is an ongoing investment stream by an internal IT team who takes on the challenge of developing an internal solution.
ï¿½ Lower Capital Expenditure: Often underestimated, the true costs involved in developing custom software can be enormous, requiring months of project planning, designing, and development using valuable resources. And, as noted above, even after completed, it requires ongoing maintenance and support. Equally important to consider is the ï¿½opportunity costï¿½ ï¿½ that is, the value of opportunities forgone because of the length of time to market. A commercial solution is not as capital- and resource-intensive, and guarantees quicker time to market.
ï¿½ Greater Extensibility: The best software solutions are architected for expandability, making it easy to add new services. Custom software is rarely architected for expandability, making it difficult to add to without disrupting business processes and customer experiences.
ï¿½ Faster Time-to-Market: A turnkey software solution enables providers to get services to market in days or weeks. Typical custom software requires months to define and develop, and often takes additional months to refine. It also lacks the learning curve benefits of other customers that are incorporated into commercial products.
ï¿½ Lower Business Risk: By making it faster and cheaper to launch new services, a commercial solution can help lower the risks involved with testing the market. Rather than spending months and hundreds of thousands of dollars to bring a new service to market only to find that there is no demand for it, providers who use a commercial solution can provision a new service quickly, and if it fails, withdraw it without suffering enormous financial consequences.
Another risk inherent with custom-built software is that it is typically only understood by one or two people in an organization. If they leave the company, the software can become very difficult to maintain or even use at all if there is insufficient training/documentation. Commercial solutions eliminate that risk.
What to Look for in a Commercial Service Delivery Solution
Once a provider makes the strategic decision to buy rather than build, he then faces another choice ï¿½ deciding which off-the-shelf solution to buy. There are an increasing number of commercial service delivery offerings on the market today, but few of them are capable of truly addressing all the technological and operational challenges associated with delivering VoIP services.
The best commercial service delivery solutions meet the following key criteria:
Multiple Service Support
Margins and profits are driven by delivering many services to a given customer and doing so requires a robust service delivery platform. The service delivery infrastructure should be able to integrate with the growing number of applications, services, and technologies. The platform must give providers the ability to quickly bundle and combine VoIP with additional applications and services, to be able to easily bundle a variety of services so that they are provisioned at the same time and accessible via a single Web management interface.
Hosted providers can reach more customers and maximize revenue per server by providing volume-based discounts to resellers. By selling through channels, providers can also dramatically reduce the costs of customer acquisition, since that responsibility shifts to the reseller.
To compete in the crowded market, hosted providers must offer resellers solutions that are easy to deploy and support, and provide value-added tools and services such as easy-to-use partner portals, marketing tools, private labeling options, intuitive customer control panels, and complete delegation of administration.
Customer expectations of service and support quality are higher than ever before. Key among these expectations is that they gain full administrative control of their services. Providers should invest in a solution that enables delegated administration ï¿½ that is, a solution that provides customers with automated self-help and self-management options. Research has shown that customers are more satisfied when they can help themselves. Self-help capabilities also help service providers reduce their operational costs and increase their margins.
Hosted providers must choose their service delivery infrastructure with an eye towards future revenue streams. An infrastructure for delivering hosted VoIP services must be capable of integrating other applications and transforming them into fully hosted services. This allows the rapid bundling and rollout of new services while decreasing the overall cost of service delivery. By guaranteeing their ability to launch any new service or application, hosted providers are effectively future-proofing their revenues. IT
Francois Depayras is marketing director at Ensim Corporation, a leading provider of service enablement and automation software for hosted IP and application services.
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