VOIP || Hosted UC

With all the hype about Unified Communications and its productivity benefits, it is imperative we remind end users of the tremendous integration challenges they are bound to face when looking to integrate a large set of disparate applications. While vendors claim they have ensured interoperability with various partners and competitors, the market is still so nascent that the hassles may very well exceed the benefits for many businesses seeking to deploy a complete unified communications solution (IM/chat+telephony+VM/UM+conferencing, etc.).

Therefore a hosted UC service seems to offer a major benefit - a service provider has already dealt with all integration challenges and can deliver a package of applications that it also continues to manage, upgrade and enhance as the technologies evolve. Add to this the flexibility of a hosted offering (the ability to drop or add users as the business downsizes or grows) and a hosted UC solution seems perfect for the current economic climate.

It is not so simple, however. In a scenario where all applications are hosted, the assumption is that the customer has no or limited premise-based infrastructure. Otherwise, the service provider and the business face the same old interoperability/integration challenge. That holds particularly true if the IM/chat/UC platform is hosted. Most UC platforms (MCS, OCS, Sametime, etc.) do not scale to multiple premise-based PBXs. Which basically makes hosted UC highly correlated with customer demand for hosted telephony.

So far, the North American hosted IP telephony service market has experienced slow growth due to multiple factors including greater customer familiarity with premise-based platforms and a large installed PBX base, fragmented competitive landscape with limited involvement of established service providers, and lack of aggressive marketing resulting in low awareness of the value of hosted IP telephony. Frost & Sullivan estimates less than one million installed hosted IP telephony lines as of the end of 2008, which is fairly insignificant compared to a total of over 100 million business telephony lines (hosted and PBX) in North America.

Over the past couple of years, equipment vendors made significant efforts to enable the integration of their premise-based platforms with other communication and business applications in complex unified communications (UC) and communication-enabled business process (CEBP) environments. These technology advancements and the respective marketing efforts have greatly popularized the benefits of premise-based IP telephony and have driven high adoption rates. Hosted IP telephony providers, on the other hand, continue to market their services primarily as cost-effective voice communications, which has limited their value proposition for business customers. Therefore, hosted IP telephony penetration remains limited to small businesses of less than 50 users.

Going forward, hosted IP telephony services will continue to offer a somewhat limited value proposition until integration with hosted or premise-based communication and business applications becomes more common across providers. In the meantime, premise-based IP telephony offerings will make a significant progress in terms of features, integration with UC platforms, CEBP, and cost-efficient branch-office integration. Combined with customers’ historical preference for premise-based solutions and familiarity with PBX vendors and their VARs, as well as with vendor and VAR creative leasing and financing programs, this trend is likely to determine a general preference for IP PBXs versus hosted IP telephony among business customers (the few that may choose to make an investment in this climate).