Point-CounterPoint: Hosted Voice vs. CPE

This post is part of a Point-CounterPoint open debate with fellow telecom blogger Dave Michels. In this new series, we both take extreme positions on a given topic. In combination these two opposed views are designed to provide a more complete perspective of the issue. To read a different perspective on this topic, click here.

Let me get this right out into the open…it seems to me simply insane for a small company buy a PBX. Buying a PBX takes precious capital for something that is often not a strategic asset in the life of the business. It’s at best “a necessary evil.”

We’re a small business, around sixty staff in total. Most of them live out their days in our corporate HQ in Cambridge, UK. But the “we” that I’m describing here is actually the dozen of us who earn our keep in the North American operation.

In the UK they enjoy the services of a rather traditional Alcatel PBX. While only six years old, it’s a digital dinosaur. Proprietary. Aged. Limited. Expensive.

The US operation is a very different operation. We’re everywhere, which is to say that we’re not all neatly in cubicles at a single location. We have small offices on each coast, and a handful of home offices. All are inter-connected using a hosted IP-PBX service.

As opposed to spending thousands on a PBX for our largest office we spent a very modest sum acquiring SIP handsets for everyone. Beyond this we pay only for the services that we use on an ongoing basis.

Our hosted PBX meant no CPE except the phones themselves, so our CAPEX was effectively zero. Our Opex is actually less than we had been paying to an executive suites office building to rent a portion of their elderly PBX.

In fact, the cost of the initial rollout was so low that we undertook the project clandestinely. By the time HQ noticed it was all up and running, proving it’s worth by saving us money and helping us to communicate better.

With none of the traditional issues of vendor lock-in, we opted for good quality SIP phones, focusing on a high-quality user experience. We also provide soft phones and SIP/DECT cordless phones where users require mobility solutions.

Cheap phones are a truly strange form of torture to inflict upon your staff. So is leaving them bound to their desks.

PBX hardware is itself a curious thing and suffers from raging featuritis. I can recall a list of PBX features that was literally thousands of items long. That’s an absurdity. Faced with such complexity small companies often must rely upon a reseller or VAR and hope against hope that they take the time to understand your operation.

There’s little merit to a dazzling list of features if they cannot be accessed to impact the operation of our business.

Small businesses typically need only the simplest of core capabilities from a PBX. This is something that hosted PBX service providers know all too well. They build their service offerings to suit their target market. The KISS principle plays a big role here.

Our chosen provider offers the features that we really need, like four digit dialing between extensions/sites, VM, IVR menus and on demand conferencing. They even offer private IM and presence indication. All these services are integrated into easy to use web-based administration & user portals.

As our provider continues to evolve their service offering we reap the benefits. For example, we now have very high-quality HDVoice (G.722) calling between offices, and even on our conference bridge. Again, no capex incurred. Sweet!

There are different sorts of hosted PBX services. Some bundle their service with hardware and even connectivity to deliver a one-vendor solution where all aspects of the service is under their control.

Other providers may take a more open approach, providing the service and hardware but letting you procure your own bandwidth to each location. Still others let you “Bring Your Own” hardware and bandwidth, providing only the service as their part of the solutions.

We settled upon such a BYO provider as the best match for both our needs and budget. They didn’t want to sell us hardware or nor trunks…just the core telephony service. This suits us fine since we are a few people at multiple locations, using various different types of network connectivity.

We save money in many ways. In the past we’ve paid hundreds of dollars for two weeks of analog phone service in a trade show booth at the Las Vegas convention center. Now we just add a SIP phone on the local internet connection. In fact, it doesn’t matter if the convention is in Las Vegas, Toronto, Santiago or Mexico City.

We also have the flexibility to instantly scale our installation up or down. In effect, adding or removing phones & DIDs we’re constantly “right-sizing” our telecom solution fit the economics of the moment. We pay only for what we use every month, with no long term commitments.

With offices in California, Houston & Miami we’ve suffered many natural disasters. Our hosted PBX provides enhanced business continuity. If California slides into the ocean* a traditional PBX in our Burbank office would simply die under water. Our hosted service allows us to easily set up shop anywhere we have a decent broadband connection.

Further, if we had one centrally located PBX I’d need to worry about having redundant trunk lines from different carriers. Using a hosted service that becomes their worry. It’s an area that needs to be considered when auditioning providers.

In implementing a hosted PBX the issues that you must handle directly are a little more mundane, yet still important. Does your chosen service provider support E911? Do you require/have a strategy for dealing with loss of IP connectivity at each location?

Do you provide a UPS for core network components, including POE to power phones? We do, even in home offices. It’s inexpensive and makes a lot of sense.

There was a time when the sight of a PBX in a local wiring closet meant I was in control of my own destiny. Now it’s just a burden that I don’t need. Our ITSP is a partner in the operation of our business. As we grow, they grow. As we succeed, they succeed.

A PBX is a budget-busting, power-sucking, noise & heat-spewing headache that I simply don’t need.

Disclaimer: the authors are intentionally taking extreme positions for the benefit of the series. Their personal opinions may not mirror the opinions expressed here.

*as foretold in song, with acknowledgment and apologies to the late, great Warren Zevon

  • I agree with much of your analysis. (I even blogged my response). Mobile work force and The Cloud are pushing everything away from premise based. In addition, will every SMB have the skilled tech people on-site to handle the myriad of tasks required today? Telecom, WAN, LAN, desktop, PBX, mobile, security, etc.

    • Thanks for leaving the comment. I would like to differentiate between “hosted” and “cloud.” These are not the same thing. While some are implementing cloud based hosted voip, I know that some people regard this as avante garde at the moment. Perhaps even bleeding edge.

  • Great points –

    Like how you addressed common business needs about scalability, cost, vendor-lockin and specific business needs, including features, mobility, and sustainability in case of a natural disaster. Perhaps most exciting is the open possibilities of features for your partner ITSP to develop in the coming months/years… With customer input, of course!

    Keep us updated on the Point-Counter-Point series. — OnSIP

  • Greg

    Maybe a good topic for your blog. Discuss the differences between hosted and cloud… honestly, I am not seeing the difference.

    • In my mind hosted implies only that you don’t have the switch on your property, but it may be a very traditional switch under management by the service provider. Cloud implies something about the hardware architecture, most typically something based upon virtualization. I know that some people like http://www.rf.com and Ronald Lewis are doing voip or Asterisk in the cloud (ex Amazon EC2), but it’s a very different thing. Most hosted pbx providers are not yet cloud-based.

  • One of the key points made in this article was the following statement

    “In the UK they enjoy the services of a rather traditional Alcatel PBX. While only six years old, it’s a digital dinosaur. Proprietary. Aged. Limited. Expensive.”

    With the pace of technology moving so rapidly, premise based solutions are at a real disadvantage, as evidenced by the author calling his 6-year old system a “digital dinosaur”.

    A Hosted VoIP system provides some measure of “future proofing” because the customer benefits every time the provider rolls out a system/feature upgrade, this is not the case with a premise based system.

    Premise based solutions make sense for much larger organizations that require a high degree of customization and integration with other system within the organization. In addition, as the size of the organization increases the financial benefits of a premise based solution turn favorable.

    • Sure, scale is a major issue in determining what makes the most sense for any one installation. Scale and dispersal of staff across geography. Given the fact that all of our UK staff are located at HQ it may still make sense to replace the Alcatel PBX with a more modern on-premises PBX. At least that would permit standards based interop with the hosted installation in North America.

      Heck, we could drop a small Asterisk box at HQ with a PRI card and cross-connect the old beast to the modern world of IP & SIP.

  • I really like the format of this discussion, great job.