Hosted PBX: How to Beat the Total Cost of Ownership Argument

Hosted VoIP

Hosted PBX: How to Beat the Total Cost of Ownership Argument

By TMCnet Special Guest
Micah Singer, CEO with VoIP Logic??
  |  December 04, 2014

The consumer as-a-service revolution – cloud, platform-aaS, software-aaS, desktop-aaS, unified Communications-aas, or whatever – is moving toward a cost-structure problem. 

End users of software, hardware, and applications as services are required to pay a steady amount each month or each year, replacing the capital cost and support cost model. The emerging problem is to justify to a business that paying this higher total cost of ownership for what they feel is essentially the same service they had previously is worth it.

VoIP Logic (News - Alert) is a platform-as-a-service provider, but our clients are exclusively service providers that see total cost of ownership benefits in working with us through both capital and operational savings. They benefit from the integrated platform but also from engineering expertise, a 24/7 technical assistance center, access to advanced monitoring tools, and no onerous facility commitments, etc. For business customers, this is the standard, so making everything as-a-service is not a new concept.

So, how do voice service providers show value to businesses to compel them to switch to a recurring cost model? Across our more than 30 service provider partners we see an interesting range of value propositions that are generally based on the targeted end customer’s business profile. Understanding and using these value propositions can create compelling arguments in the as-a-service sale to businesses that might be concerned by higher TCO.

Service as a Service

This is the non-technology sale, and it usually starts with SIP trunking. Everyone understands that you have to pay for usage. The applicable customers are all businesses that are perfectly happy with their existing technology. They either need to save money on call origination and termination or need to go with a low performing hosted PBX (News - Alert) system to overcome an end-of-life issue on their current phone system. These users see the cost as consistent between the old and new systems. Before, they paid monthly for usage; now, they will still pay monthly for usage.

Feature Overload

This is the technology sale to the non-technology company. Usually there are just a few features in the hosted PBX technology package that allow the business to justify a small incremental cost for the technology beyond usage costs. The features above and beyond legacy PBX might be voicemail to email, soft-key configuration (cool phones), easy management of user features via a web portal, or easy management of group features like hunt groups or auto attendants. Currently, this is the method a majority of our SPPs use to sell. Before, the functionality was primitive; now, for a few extra dollars a month, they will see substantially improved technology.

Feature Customization

This is the technology sale to the technology-savvy company. We have a number of SPPs targeting these businesses that have an existing wish list of what they need to integrate.  Frankly, they are the most fun because they push the envelope and force us and our SPPs to continually work on new interoperations between systems. WebRTC is a prime example of a growing standard that allows service providers to design impressive and customized telephony applications. Of course, unless you are iteratively selling the features once customized they are not so cost effective. Before, their telephony infrastructure stood alone; now, it will be integrated with other business systems, offering improvements in productivity and a wow factor. 

Technology Bundling

As winners emerge in the cloud services market (like, Google (News - Alert) Apps, etc.), it makes sense to bundle them together into packages. Service providers gain a lot by bundling – higher revenue per user on more aggressive pricing, stickier business customers consuming more technology from them, and a stronger total cost of ownership argument. If businesses bring their own technology you have to hope that integrations are already built – otherwise you are back in the previous feature customization category. Fortunately, most of the innovation in hosted PBX is occurring through software applications that integrate communications into other IT services. VoIP Logic is starting to see SPPs take baby steps in this direction by using middleware integration applications like gUnify to merge hosted PBX into a larger IT ecosystem. Before, their service provider offered hosted PBX; now, their service provider are competing for more of their IT spend.

In the competitive battles for business customers there is a still a significant ground game for hosted PBX service providers and technology purveyors to streamline technical integration and commercial deal-making so that service providers can easily customize and bundle. The network effect of the cloud and as-a-service models can justify the total cost of ownership argument. APIs are prevalent, SDKs are more accessible, app stores with great technology from small development shops are everywhere, deployment is becoming easier, and WebRTC has further reduced the effort and cost on voice/video app development. Now it is incumbent upon service providers to understand the specific sweet spot of each individual business customer and deliver the right value-adding solution.

Edited by Maurice Nagle