Cloud or Hosted versus On-Premises?

Cloud refers to the delivery of any service from a Cloud platform i.e. Not a platform on the client’s premises, it resides “in the Cloud”. Commonly such services reside in large DataCentres although more and more small / bespoke “DataCentres” are popping-up under the stairs or in the backrooms of small IT Services companies (hey, they have to start somewhere right?)

Hosted is generally used in reference to the Cloud delivery model i.e. You host it somewhere and I’ll pay you as I consume it. The theory being that the provider will bear the costs of building and supporting a solid and reliable infrastructure (somewhere) while I, the client, pay a mere pittance to enjoy the benefits of the service and the technology. Another way of viewing that is “I want to pay per-user, per-month and as my business grows or contracts I want to be paying for only what I am actually consuming”; and by the way I expect the pricing to be really sharp as you only have a single back-end infrastructure cost to be concerned with yet you’ll be selling it to multiple companies therefore my 3rd-form math tells me that this model will be cheaper for me than if I “did it myself” with my own on-premises system?

The reality could not be further from that last perspective. Delivering a Cloud Telecommunications solution necessitates the availability of real-time, on-demand bandwidth and a solid, always available back-end solution to emulate the 99.999% up-time that we enjoy with “dialtone” today. IP-Phones are mini-computers and require power, and running IP-Voice (VoIP) alongside your office computers requires segregating those two data flows so that Voice is always prioritized. There are costs implementing and supporting Computers, their Operating Systems and their endless Software Updates and Unified Communications / Telecommunications Technologies and Solutions have the same requirements hence similarly high-costs.

On-premises is simply the exact same services but delivered in the traditional “system in our offices” format. Today you can CapEx that (buy it outright as in the old-days) or you can OpEx it (lease it). Alternatively we can Host it for you (in the Cloud or on your own Premises) and you can simply consume it on a pp p/mth basis, so the solution is our problem not yours and we fully manage it. You simply add/remove users each month as fits your business.

If you are after dialtone & voicemail and there are not too many of you (3-5 per office, multiple offices are OK) then consuming Cloud Telephony is a good and effective choice. As your business grows in scale and your requirements become more sophisticated however, then Cloud Telephony Solutions quickly become price-prohibitive vs the exact same deliverables in an on-premises form-factor.

So when considering Cloud/Hosted vs On-premises, look at the functionality that you’re after; decide whether you want to own it or lease it; then do the math.

Here’s a couple of examples;

A. Dialtone + Voicemail @ $15 pp p/mth for say 5 users = $75 p/mth = $2700 over a 36-mth term (standard lease terms are 24/36/48/60 months)

B. Unified Comm’s @ $30 pp p/mth for say 20 users = $600 p/mth = $21,600 over a 36-mth term

In both cases at the end of 36-months you will need to either do the same again or move to a new solution/plan/provider, so budget to continue paying (something) forever ….

C. In both cases (A & B) the exact same deliverables in an on-premises form would be wholly paid for at the end of 36-months. Something to think about isn’t it?

Clearly, it really does pay to do the math and to understand how your business would best benefit in its use of its capital. A requirement for cash in hand might push you towards the Cloud or Hosted / pp p/mth model and you’d be right to take it. If you’re cash rich then buying outright may still find favour with your Financial Controller; and of course the option of Financing a solution introduces a Finance premium but does allow you to own the solution (and stop the monthly outgoings) at the end of the term.

About the Author

Rob Currie

Rob joined Sietec in 1997 (yes the internet existed back then, just!). He's their Group Business Manager, roving Problem-Solver and all round good guy.