PBX in the Cloud or in the Closet?

By Bryan Johns

In advance of a planned panel discussion on this topic at IT Expo in Miami next month, I decided to take a moment to formalize my thoughts on the merits of both the hosted and premises PBX deployment models.  At risk of coming off as indecisive, I am going to go ahead and say that there are arguments both for and against hosted and premises solutions that depend heavily upon customer size, needs, network infrastructure, planned use and growth forecasts.  Generally, the way in which these variables come together supplies the best determination as to which deployment model makes the most sense and why.    Let’s take a minute to look at that assumption in more detail.

First I want to say that over the course of my career I have designed, implemented and supported VoIP network solutions in both hosted and premises architectures.  I hold no specific bias one way or the other but I believe that one strategy has advantage over the other based upon attributes of the company proposing to utilize the solution and their specific needs.  In my experience, the following factors weigh most heavily in determining whether a company should consider a hosted or a premises solution:

Company size (count of end users to be supported)

Very small companies (fewer than 20 users) almost invariably find a better value in a hosted architecture than a premises deployment.  This due to the fact that the recurring monthly expense of a hosted solution in these quantities is typically digestible and (assuming the availability of quality bandwidth) they can typically be purchased without an extended contract term which leaves the door open to change providers if needed.  In a range from 20 to 50 users, the economies of a hosted solution are dictated by a combination of bandwidth cost / availability and anticipated monthly maintenance expense for telephony platform.  Above 50 users, the economies of hosted solution typically collapse and higher recurring monthly expense overshoots the potential savings in operation, maintenance and upgrades.

Number of physical facilities (count of company locations to be supported)

The count of branch facilities to be supported also plays heavily in determining the value of hosted solutions versus premises solutions.  For companies with a single facility that has 50 to 100+ users, a premises deployment will be both architecturally and financially more attractive.  For companies with up to 3 branch facilities, a premises installation in each facility linked together via SIP or IAX2 trunks provides both financial efficiency and site isolation from bandwidth or machine failures.  Above 3 branch facilities, the potential redundant expenses in each location begin to make the argument for a centralized, hosted design for purposes of ease of management / maintenance, price efficiency and disaster recovery.

Amount of daily or monthly PBX maintenance anticipated

Many companies shopping VoIP infrastructure are anticipating some ability to handle daily maintenance activities inside of their own doors.  The “point and click” simplicity of solutions such as Digium’s SwitchVox appliance puts much of the day-to-day configuration and management within the technical capabilities of the average IT guy and reduces the necessity of outside maintenance assistance.  Still, those companies that anticipate a high amount of monthly management requirements can benefit from the inclusive support provided by many hosted operations.  Essentially, where a customer can receive significant value from inclusive support in a hosted configuration, this deployment design has distinct advantages.

Condition of WAN and associated carrier contracts

One of the more compelling ROI opportunities available in a conversion to a VoIP infrastructure is powered by cost savings through disconnection of conventional TDM service connections and replacing them with public or private data connections.  However, if a company is under contract for telecommunication services, the cost to break these contracts can have a significant impact on available monthly savings.  Customers in fresh telecommunications contracts are stronger candidates for premises deployments while those who are not encumbered by contracts are typically better candidates for a potential conversion to a hosted or co-located solution where their other attributes make them a strong candidate for this design.

Up time requirements

There has been a heavy focus on business continuity and disaster recovery for all aspects of IT infrastructure in recent years.  While conventional PBX solutions have not historically provided any measurable level of redundancy, the migration of these technologies into IP network environments has raised the bar for availability in business telecommunications solutions.  If business continuity is a high priority, the advantage can go to a hosted design.  This is not to say that a premises deployment cannot be engineered for high availability, but the costs to supply this ability can slant the value proposition toward a hosted or co-located solution design.

The third option:  Hybrid or “Co-located”

There is a third, hybrid deployment design that is best described as “co-located” that supplies the efficiency and assurances of a hosted design with a financial structure more akin to a premises deployment.  This structure includes customer-owned equipment running in a data center with private network connectivity to both the customer facility and VoIP carrier networks.  A co-located design raises the bar for quality and performance on the company WAN but can be far more economical than the higher recurring expense associated with hosted solutions above the previously-mentioned economic tipping-point of 50 seats or so.  A co-located design is preferred in most instances where a hosted solution is preferred but where the user count is above 30 seats and where the customer is comfortable handling the majority of their maintenance needs in-house.

So in summary, for a company with fewer than 20 seats and with fewer than 3 facilities the advantage most frequently goes to hosted.  Between 20 and 50 seats there are a other variables that need to be considered before one can say whether a premises, hosted or co-located design is best.  Above 50 seats the advantage usually goes to a premises deployment unless the customer has more than 3 locations which slants the preference to co-located.  Please remember that the information in this article is opinion gathered from 10 years of implementing VoIP solutions and is not backed up by scientific data.  Still, I hope that it provides you insight as you consider VoIP technologies for your business.  Happy implementing!

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There Are 2 Comments

  • Tom Halpin says:

    A concise summary of the different use cases and hosting models. I’d agree with the assertions regarding business continuity and DR requirements and the advantages that hosted or co-located provide in those scenarios. We run a hosted PBX for a single office/team and they get great features & mobility (SIP clients on mobiles etc) without the upfront costs or on-site system management.

  • Very nicely articulated… thanks!

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