This is chapter 7 of the series: How to Buy a Phone System for Your Business.
If you want to read chapter 6, you can find that here: Call Centers and Their Role in a Business Phone System
Vendor selection is extremely critical to a successful deployment. Great system, poor implementation, will leave your users frustrated.
This holds true for either the hosted, or premises-based solution. Will the company you are purchasing from offer you, at a minimum, the following?
- Proper sales analysis.
- Do they understand the product, or are they relying heavily on the manufacturer to answer their questions?
See a demo of the product you are purchasing – always. No exceptions.
- And when seeing a demo of the product, see the demo not at the manufacturer’s facility, you should go to the vendor’s site. Meet their service folks.
- Does the vendor offer wiring? Do they do their wiring themselves, or do they subcontract that service out?
- Does the vendor do the installation themselves? Or do they subcontract that service out? If they subcontract that service out, then to whom? You should also interview that company as well.
- Do they have a proper deployment plan in place? That plan should include pre-installation, testing of equipment with PRI facilities well beforehand, and end-user training.
- Does the company offer post installation training services?
Oh. Did I forget to mention? See a demo of the product you are purchasing – always. No exceptions.
Make sure that the demo is not just a PowerPoint presentation. It should be a hands-on demo. See the administrative screens. Design a call center queue. Change the automated attendant greeting. Do a complete system backup. Add a new user.
Vendor & Product Selection When Choosing a Vendor
Introduction to the different system types
You are now getting a better sense of some of the features you might be looking for, together with the applications, and what your goal might be in replacing your existing equipment. Let’s review some of the options in terms of what kind (not brand) of system you can look at. Essentially, there are two:
- Premises-based system with circuit switched or SIP trunks
- Hosted IP PBX
Premises-based equipment with circuit switched or SIP trunks / lines:
A premises-based system means that the phone system resides at your site (the customer site). The brain of the equipment actually resides at your location. You own the hardware, and all of the phones. A premises-based solution can be VoIP enabled, circuit-switched enabled (TDM), or a combination of the two, and support both the traditional TDM (circuit-switched) sets, and VoIP based sets. ( Read: Role of a TDM circuit switch in a business phone system)
A circuit switch system can have the following scenarios:
– Circuit switch system with TDM sets
– Circuit switch system with TDM / IP-based sets (mix)
– Circuit switch system with circuit switch lines (analog or PRI)
– Circuit switch system with SIP trunks
– Circuit switch system with a combination of all of the above
With regards to circuit-switched systems, I have personal experience selling a few manufacturers brands of products – I have sold Avaya’s Legend, Magix, IP Office, Communications Manager (Definity) phone systems, and Nortel’s Norstar, Business Communications Manager and Option 11 phone systems.
Nortel’s Norstar (1987 to 2005) is probably one of the best, if not the best, most reliable, legacy (older) phone system ever made (you can clearly see my bias here). The Norstar really lead the way in reliability and the small business feature set. Although Nortel hasn’t really retired the Norstar yet, they haven’t done any development on that product for quite some time – it has been effectively discontinued.
With regards to a premises-based system, find a vendor who sells products like the Avaya IP Office product. Of all products on the market at the Small Medium Business (SMB) level, I believe that this is, by far, the best product available in the SMB market.
The IP Office will grow from three to 360 sets, and supports an extensive feature set. Some of the more common features built into the product include:
- Unified Messaging
- 64-part conference bridge
- Outbound 64-party conference call
- Instant replay on conference bridge
- Silent call recording on an ad hoc basis
- Silent call recording inbound and / or outbound on a set-by-set basis
- Full Duplex speaker phones
- Mobile Twinning – twin your desk set with your cell phone
- Call Center with an unlimited number of queues
Hosted VoIP PBX (not Hosted Digital PBX)
The Hosted VoIP concept should not be confused with the Hosted Digital PBX (which is / was called Digital Centrex and has been available since the mid 80s. These are very different technologies.
Hosted VoIP means that the service bureau / provider is hosting the phone system. All of your business’ phone lines terminate at the service bureau’s offices. Then, all of the VoIP phones are terminated to the service bureau’s site by means of a data network connection. Every handset is an IP-based handset all talking back to the phone system, which is outside of your offices.
Many of the traditional phone system issues still need to be addressed in this scenario as well:
- Call center issues
- Switches (the phones still need to get connected to a switch of some sort)
I am going to highlight some of the questions that you should ask yourself and your provider about the hosted solution.
I am reiterating this once again so that you consider the importance of these issues:
– Who owns the hosted solution? How stable and reliable is the owner? (You need to ask this question. If your business is highly dependent on your phone system, and if being down for more than a couple of hours could be potentially devastating, then you should know how financially stable the owner and the company is that you are buying this service from). After all, the viability of your company is dependent on the viability of the hosted provider.
– If the hosted provider goes bankrupt, then what happens to your telephone numbers and how long will it take to gain control of those numbers? What is that process? And does it mean that you would be down until you can gain control of those numbers again?
– What is the back-end technology that the hosted solution is based on? And how long is that company going to use that back-end technology for?
– How much of the administration can you do yourself? Does the company charge for service related work? If so, how much? And, how long does it take to get a service call completed?
– Who does the installation of the phones, routers etc.? Is this subcontracted? And if so, then to who?
– If you are not happy with the hosted solution, what is your best-case alternative to take the phones that you have now purchased and take them to another supplier? Alternatively, if the hosted provider goes out of business, where can you take those phones? For example, every hosted provider has their own set that they work with. Therefore, let’s say that you have just purchased Cisco phones. If you have thirty phones and have just spent $9,000 on handsets, if the hosted organization goes out of business, what do you do with those phones? Can you take them to another supplier? If so, WHO? If the answer is: “You can install a Cisco phone system”, then investigate that option.
– How over prescribed is the hosted provider with regards to trunking? Remember, you are sharing your phone system with many other companies. And all of the lines that you will use to dial out on are the same trunks as all of the other companies that are sharing the same resource. So, the question is, how many total sets are on their switch compared to the total number of lines available for dial out?
Ask the questions. At least you will be better educated.
Let’s recap what we have covered.
We have looked at and explained what Voice over IP is.
- We have covered some of the common features that you will want to look at when buying a phone system.
- We have covered reliability and the importance of asking the right questions of your reseller or provider.
- In addition, we have looked at the two options available in terms of systems – premises-based, and hosted.
Now we will look at some of the pros and cons and compare a premises vs. a hosted solution and compare them looking at the following: Cost, future expansion, control, flexibility, range of features, and implementation.
It is obvious from the outset that the initial and setup costs for a hosted solution will be lower than for an on-premises solution. However, it isn’t necessarily so clear where long-term operating costs end up taking the overall cost equation. The variables that come into play include the lifetime of the equipment, how rapidly technological change will outdate existing equipment, and the ease-of-use and flexibility of the solution in question.
Let’s use a typical example of twenty-five phones for the purpose of this analysis.
Pros: Lower setup cost, no maintenance costs.
Cons: Potentially higher ongoing service provider costs.
The hosted solution still requires that you purchase, lease, rent, or sign a long term contract for all of the phone sets. Therefore, for example, if you have twenty-five phones at your location, you still need to purchase the twenty-five handsets. You also need to purchase the monthly subscription fee for those handsets, as well as a dedicated point to point from the Hosted IP / PBX provider location.
25 phones = $300 X 25 = $7,500
Set-up fee = $1,200 (one time)
Total equipment costs = $8,500
Fee per user for all services = $25 (average) X 25 users = $625
Monthly fee for T1 services into your building = $350 / month (this might not be needed where a direct fiber link is available from the hosted location direct into your location). Total monthly costs = $975 / month
Pros: Potentially lower ongoing costs, no risk of fee increases.
Cons: Higher setup costs, unknown long-term maintenance costs.
Phone system for:
25 phones, including phones, installation, phone system cabinet = $15,500
Total equipment costs = $15,500
PRI service from carrier = 23 channels = $580 / month to $630 /month
Total monthly costs = $580 / month
So, although the purchase price of the premises-based equipment is approximately $7,000 more than the hosted, the monthly charges are approximately $400 higher for the hosted than for the premises-based.
Cost Analysis (25 phones)
On-Premises vs. Hosted
One time equipment & installation (on premise) = $15,500
One time equipment & installation (hosted) = $8,500
Monthly costs (on premise) = $580
Monthly costs (hosted) = $975
The potential for future expansion is more a matter of control and time-frame than of locking yourself into some kind of limitation. All solutions leave you room for expansion and growth, and all will incur higher costs along with growth at a rate that should reduce your overall per-seat cost, but will still mean a higher total bill. All have the potential for allowing big jumps in future expansion. The difference is that with a hosted solution you eliminate some of the risk and difficulty, but at the cost of a potentially longer turnaround time and possibly losing some flexibility.
For example, with the hosted option you purchase your phone sets. You need to hope that the service provider provides the necessary software upgrades required for the solution.
Let’s look at some of the PROS and CONS of the solutions:
In a hosted solution, the provider shoulders all the risk, work and complexity. However, your provider may not be able to make changes as quickly as you could yourself, and may not be able to precisely match your needs.
In a premises-based IP-PBX, you have complete control and flexibility – you can even switch solutions or mix-and-match, however, every expansion increases the complexity you have to manage yourself.
Control is a tricky issue and really what is at the heart of a decision between a hosted or on-premises solution in terms of strategy. Some organizations prefer to keep control as much as possible internally, even at the risk of added cost, work and complexity. Other organizations want to outsource as much as possible to keep internal focus on the core business – even if that decision ends up costing them more. While this decision would seem to be a clear win for an on-premises solution, in fact several hosted providers do supply enough flexibility in terms of services that many organizations would be satisfied that they had enough control.
On the control side, your service provider has the actual control – you don’t. Whereas, with a premises-based system, you really do have control over every detail. An easy-to-use solution with careful management will give you a solution that matches your needs better than anything else can.
While there are differences for an organization between a hosted and on-premises solution in this regard, they are more to do with timing. Any reputable hosted solution provider will be prepared to work with you to add the features you need and require, and will also be prepared to become more flexible as market needs arise. Nevertheless, there is a disadvantage for someone using the hosted solution. It will always be a common solution for all the provider’s customers, and it will take the service provider longer to implement it than you could do yourself with an on-premises solution.
From a flexibility perspective though, the service provider may have more resources to implement a solution you could not afford to do just for yourself, however, there could be a slowness to adapt and even a reluctance to adapt for a single customer.
With a premises-based system you can do what you want with your equipment – the ultimate flexibility. On the downside, however, you may not have enough resources to do complex, expensive or difficult things, where a service provider might be able to do them for its hundreds of customers more easily.
Range of Features/Options
The same issues arise with features and options as they do with flexibility – if you own the solution, you will always have the ability to add more features and options – for a price. However, spreading the cost across thousands of customers makes it easier for a large provider to add features at a lower cost. While true, this is a smokescreen in this case. The actual individual solution matters far more in this area than specifically whether it is a hosted or an on-premises solution. Your business has a required set of features, a desired set of features, a nice-to-have set of features, and you don’t care about the rest. If the solution offers it, that will outweigh whether it is hosted or on-premises.
You should refer back to the list of features and make sure that the proposed solutions will offer the list of features you might be looking for.
This is one of the areas where hosted versus on-premises makes a huge difference. There is no doubt that a hosted IP-PBX service ought to be cheaper, easier, and possibly quicker to implement. BUT, that is not always the case.
Both solutions require that you purchase the phone sets. The hosted solution also requires that you take a careful look at your cabling infrastructure. In a hosted solution you should separate the voice and data network. This will save you a lot of headaches in the future. This clearly adds to the cost and complexity of the hosted solution. In a premises-based solution you will also need separate voice and data cabling, regardless of whether you are using IP-based, or digital circuit switched sets.
Both solutions require someone to come out to your site to implement the solution. Place the phones on people’s desks. Program the user’s buttons. Program the automated attendant. Program the switches. Train the users. Train the system administrators. Then, once all of that is done, follow up on the installation to make sure that you are happy once the installation is complete.
Therefore, implementation is just as much work on both sides.
A premises-based solution has a slight advantage in control, options, and flexibility. There is one other scenario where implementation will matter a lot – if you aren’t certain about what your future needs are likely to be, then a hosted solution starts to look more attractive. You will just have to be careful about what your contract may or may not lock you into.
By now you will have gathered that this discussion is mostly relevant in the small to medium business space – say up to a few hundred users. More than that and you should seriously consider whether you need to step up to an enterprise class on-premises PBX system with high-level support and SLAs from a reputable manufacturer. However, even in that space, hosted can be a good interim solution if you can arrange a short-term contract while you take the time to evaluate, test, and design a robust long-term on-premises solution. Just make sure that you can return your phones when you are done, and that you will get a decent credit for those sets.
For the small business market, the smaller your business, the more likely that a hosted solution is right for you, but there are exceptions. An organization that is changing rapidly, has a high turnover, or that can’t afford the evaluation and management overhead of picking a customer premises system is still going to find a hosted solution a good fit.
And in contrast, a business that needs tight control and flexibility, and for whom an integrated telephony solution is a mission critical business application, is going to want to have a solution they own and operate on their premises in order to truly deliver for its employees and customers.
This was chapter 7 of the series: How to Buy a Phone System for Your Business.
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