As attendees of a telecom trade show can tell, hosted service offerings have proliferated dramatically over the last couple of years. The declining economy is making expensive premise-based solutions an increasingly tough sell. To make product lines more affordable vendors are rolling out hosted or managed offerings. Since SMBs with tight budgets appear to be a natural market, competition is heating up. The term “on-demand communications” is now a common phrase.
The value compared to CPE is obvious. Hosted services have minimal upfront costs and require no expensive gear. There’s no need for internal technical resources, maintenance or floor space and installation is easy. It offers more innovation as it is regularly upgraded with the latest features, future-proofing a company from ending up with outdated technology while supporting growth, contraction, facility changes and corporate reorganizations.
It is much less traumatic to change vendors or solutions, easy to budget and offers increasingly more choices. Outsourcing operations such as webhosting is becoming accepted but many vendors are running into objections including perceptions that QoS is lower and support is worse, with helpdesk response taking longer. Another common concern is having security under third-party control, giving the impression that it’s not as tight.
Since hardware costs keep coming down CPE, although still expensive, is more affordable. Management is reluctant to change something that’s stable and isn’t broken. They don’t want to be pioneers and some decision-makers fear outsourcing will lead to job cuts.
Hosted VoIP solutions face their own set of objections as crackling and dropped calls quickly turn off users. Calling the phone company for support has always been a huge negative and no VoIP system can realistically claim five-nines reliability. Furthermore, the failure of Centrex is still a major stigma for managed services.
Vendors have plenty of work remaining to create a positive image of the model. This is especially true of those trying to become providers and facing the challenge of creating support infrastructure. The hosted solutions trend is expected to continue but there will eventually be a shake-out. In the long run those consistently delivering the best customer experience will be the survivors.
Contact the author at david.grigg@phonefusion.com.
© 2008 Telecom Reseller. All Rights Reserved.