Examine the case, “do the math” and presto, the answer is Cloud PBX is better, if indeed Cloud PBX is all you have in the toolbox. My goal here, is to examine a typical BC/ROI analysis and poke at it a bit to see if it holds together.
A typical Cloud PBX business case will stack up like this:
So, if we construct the case it may look like this: (Assume 30 users, 3-years)
NOTE: This is clearly a one-sided view, but it is one that many of the Cloud crowd would have you believe.
Category | Premise PBX | Cloud PBX | Comments |
1. Purchase cost | $25,000.00 | $0 | The case assumes you already have SIP phones, cables, network & PoE |
2. Installation services | $1,500.00 | $0 | The case assumes you install and program the phones on your own |
3. Monthly hosting fees | $0 | $750 | $25/phone per month |
4. Service provider contract | $500.00/month | Included | Case assumes you are still using PRI and haven’t deployed SIP trunks or switched to a bundled IP offering |
5. Long-distance charges | $450.00/month | Included | Case assumes you are still paying LD charges and haven’t changed to a plan |
6. Annual cost of maintenance/support | $3000.00 | Included | Case assumes that over the life of the contract you will have zero phone maintenance or support charges |
TOTAL 3-YEAR COST | $69,700.00 | $27,000 | This is not a balanced comparison |
Monthly Cost Comparison | $1,930.00 | $750.00 | It’s a no-brainer |
Digging a little deeper we can evaluate the core assumptions which have tilted the case, namely:
So, let us reconstruct the case for 30 users, 3-years;
Category | Premise PBX | Cloud PBX | Comments |
1. Purchase cost | $22,000 | $5,000 | Reuse 50% of your phones for Premise PBX |
2. Installation services | $1,500 | $2,500 plus $500 |
Cloud PBX PoE switches, 10 cable drops, 10 hours of your time at $50.00 loaded labor rate |
3. Monthly hosting fees | $0 | $750 | $25/phone per month |
4. Service provider contract | $180/month | Included | Premise PBX – deploy SIP Trunks |
5. Long-distance charges | Included | Included | Premise PBX – deploy SIP Trunks |
6. Annual cost of maintenance/support | $3000 | $1,750 | 20 hours of your time at $50.00 loaded labor rate, 3 phones |
TOTAL 3-YEAR COST | $32,980 | $36,750 | A more balanced perspective |
Monthly Cost Comparison | $916 | $1,021 | It is now a CAPEX/OPEX decision |
As you can see, the comparison is much closer when “doing the math” includes all those underlying assumptions and devilish details. This becomes much more of a CAPEX/OPEX discussion which appeals for the need to look at the Total Cost of Ownership (TCO) over the period of expected use.
So, as a fan of math, you can go a few steps further:
1. What if the Premise PBX has a life expectancy of 5 years?Here are the answers:
1. 5-year TCO comparison:All of this to prove what? That the winner is YOU, providing you consider all factors, cost is just one and it is typically used to persuade you to “go Cloud”. Your time to manage and maintain your own system needs to be factored into your decision – something most Cloud PBX providers ignore or completely gloss over. Feature functionality and mobility/access can be achieved on either side. If you are leaning towards Cloud, remember that Security and Reliability all depend on the strength and stability of your network and your network provider’s service record. I believe Customer service is better when you have a direct relationship with a real technician - not a call center person reading through a scripted problem isolation/resolution algorithm. If you choose Cloud you need to realize that every phone call is traversing the IP network to your Cloud system – even for extension to extension dialing. Consider this; paging a floor in your office will result in numerous calls over your network – all at once. It is well understood that 90% of voice over IP call issues are network issues. Many VoIP problems are of the annoying variety and go unreported (like a bad cell phone connection); but still they can have an adverse effect on your business, or even the Customer perception of your business.
Of course, this comparison has focused almost exclusively on the hard dollar aspects. Businesses should also be looking at other important considerations including productivity, growth and Customer satisfaction – considering these three as important Customer considerations in choosing a solution and a vendor should necessarily weigh in the decision; however, bringing those factors into the light is not part of a business case discussion. Typically, financial people are looking for hard dollar rationale and the soft dollar gains (like worker productivity) are acknowledged, but not included in their calculations.
Remember telephones provide human to human connections, they support and cultivate relationships. Don’t get caught up in a decision that may cause unforeseen difficulties down the road only to find that going down a different path is akin to starting over - potentially with the added pain of paying to exit a no-longer-desired contract.
The freedom to choose either and more importantly, the flexibility to deploy a blended option incorporating the best of both models. Premise with a fail-over to Cloud, a Cloud PBX supporting circuit-switched analog and/or digital phones on the premise (try finding that option in the Cloud space). Digital phones that support all the functionality of IP phones (presence, mobile twinning, web-based softphone shared extensions and more). These are choices worth having available to you, don’t get distracted by all that turbulence generated by the Cloud Crowd.
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