“Build versus buy” or “own versus rent” remains a key framework for sourcing any capability a firm requires. That basic analysis of total cost of ownership arguably explains why smaller firms often rent rather than own, or why very-large firms often own rather than rent.
Some 20 years ago, some of us would have argued that hosted voice (now we call it unified communications) sold “as a service” would displace most use of business phone systems. Adoption has been far slower than some of us expected back in 2000.
To be sure, a shift in demand has happened, but not as rapidly or completely as once expected. Total cost of ownership explains some of the “resistance.” Since feature parity for premises systems and hosted services has generally come to exist (that was not generally the case 20 years ago), total cost of ownership comes into play.
The other variable is that the value of related services once separate from basic business phone service (conferencing, unified communications) now are all considered part of a single unified communications market.
Keep in mind that hosted voice services have been commercially available since the early years of the 21st century, though arguably not commercially viable for business use until perhaps 2005 or 2006.
And that is where cost of ownership becomes a key argument for continuing to own business voice systems, rather than buying it “as a service.”
In a 100-user situation, the total cost of ownership over a five-year period favors a premises deployment over either private cloud or public cloud, according to TTx varies:
On-premise UC: $220-$240 per user per year
Public cloud UCaaS: $360-$480 per user per year
Private cloud UCaaS: $250-$350 per user per year
That includes upfront capital investment and recurring costs. A rough estimate of the cost per user for the first year for each system would be:
On-premise UC: $70,000-$90,0000 for hardware/infrastructure, software licenses, endpoints, and installation/deployment support.
Public cloud solution: In a 100 user environment, in most cases the upfront costs are $0.
Private cloud solution: Highly variable but declining
The recurring cost per user per year for each system might be:
On-premise UC: $120 to $145 per user, per year for ongoing maintenance, cost of upgrades and public network access.
Public cloud UCaaS: Between $360 to $480 per user per year which includes the license cost per month and included deployment support. (This assumes an average of $30-$40 per user for licenses which includes renting the endpoints)
Private cloud UCaaS: $250 – $350 per user per year for financing and 3rd party maintenance
Of course, much hinges on volume. For smaller entities, hosted arguably provides lower TCO, especially when the customer wants a fully-featured platform. The tradeoffs and TCO are harder when mobility is a viable solution, when the customer does not require advanced features, and when the customer is willing to keep a premises system longer than five years.
Any TCO analysis can be shifted when considering “soft costs” contract lock in, supplier instability, software upgrade and maintenance fees or situations where the number of supported users changes dynamically and often, for example.
The same sort of analysis also applies to use of cloud computing (public or private) versus enterprise owned infrastructures. Generally speaking, volume tends to favor TCO of owned platforms. Episodic or dynamic variations in demand tend to favor cloud computing. Low volume favors cloud solutions, largely because of savings on capex.
And some argue the soft costs or value tip TCO one way or the other. License cost also can tip an analysis over a 10-year period as well.
The point is that “as a service” solutions often make great sense. But so do “owned platform” choices.
Needs to support dynamic and frequent shifts in demand can make a difference. But incorrect forecasting of demand also can lead to under-used resources, as when users overestimate the magnitude of cloud resources they require.
And even when the “cost of compute or storage” TCO is understood, there might be other less-quantifiable business values deemed important, such as ability to interwork with business partner systems, apps and use cases.
In other words, neither “cloud” nor “owned” computing or voice infrastructure “always” is the best choice.
No comments:
Post a Comment