The pros and cons of hosted PBX

As the recession cuts into revenue for firms in most, if not all, industries, some vendors are claiming their hosted private branch exchanges can help companies save money.

ZIP TeleCom Inc. of Toronto can provide an “average of 20 to 40 per cent savings across the board,” said Lance Hooper, the company’s chief executive officer.

That’s because ZIP provides voice over IP services for small to mid-sized companies, and firms with branch offices, who don’t want to buy hardware PBXs. ZIP’s features include auto-attendants, voicemail and a Web interface that lets administrators add and change users.

ZIP claims there has been “mass adoption” of telecom services using the “software as a service model,” and companies don’t have to replace or maintain equipment.

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“These services are nothing new,” said Matthias Machowinski, directing analyst for enterprise voice and data at Infonetics Research Inc. of Campbell, Calif. “Software as a service is a catchy term.”

But will hosted voice services cost less, in the long run, then buying hardware PBXs?

“It’s not an easy yes or no answer,” said Bill Elliott, director with Mount Albert, Ont.-based Fox Group Consulting. “It’s an in-depth economic analysis of the purchases being made and the cost of capital acquisition versus a leased service.”

Part of the economic analysis, he added, is the “ongoing maintenance and upgrading cost of PBXs.”

Hooper said ZIP Telecom keeps the hardware and software on its premises.

“We can deploy more quickly and handle capacity a lot better than when you’ve got 100 people in an organization and you have a PBX on premises,” he said. “Even if it’s an IP PBX, you have to deal with additional bandwidth and maybe more processing power. That’s all our responsibility as a hosted managed service.”

He added ZIP includes an application programming interface that lets users combine their telecom service with Web applications.

“That’s not something you can do easily with a shrink-wrapped PBX that lives on premises.”

Another hosted PBX service on the market is Easy Office Phone, from Burlington, Ont.-based Enhanced VoIP Communications Inc.

Though most of its customers are small, one firm in Milton, Ont. with 900 employees is using the service, said Adam Simpson, Enhanced VoIP’s chief executive officer.

He declined to name his large client because he had not previously asked for permission to identify it to the media. But he did say the customer is using the Asterisk open source PBX software.

“We’re not providing the PBX for them,” Simpson said. “We’re just providing the interconnection to the telecommunications network” using session initiated protocol (SIP).

He added open source PBX software is not for everyone, especially administrators with little experience using the products.

“We’ve had some customers using Asterisk and they had a terrible time keeping it up and running,” he said. “You’re basically running a software system that is very complicated and you have no support for it.”

But most of his customers have 10 or fewer employees, Simpson said. One has four locations and is able to distribute its six lines among the branches.

“Instead of paying for three to four lines at each location they have six lines for four locations,” he said. “They cut the number of lines by half because they can share lines between locations.”

Other customers have hardware PBXs that are nearly obsolete, and they don’t want to buy new gear.

“The benefit of a hardware PBX, especially for large companies, is they have complete control over their own systems, he said. “They choose when to upgrade it, they choose how it’s going to be configured. Sometimes the hardware PBX has features that we don’t have,” such as call centre recording.

“But for smaller businesses, especially if you’re in the five to 15 (employee) range, I don’t see how a hardware PBX provides them any benefit,” Simpson added.

Hosted VoIP providers have at least 10 per cent of the market, Machowinski said, though they command a larger portion – up to 25 per cent – of the small to mid-sized telecom market.

“It might make a lot of sense for companies growing rapidly,” he said, otherwise “they would have to buy new equipment every couple of years.”

Machowinski advises companies looking for hosted services to consider the reliability of the connection from their company to the host.

“If your Internet connection goes out, you’re not going to be talking to anybody,” he said. “You’ll be passing notes or yelling across the office floor.”

Simpson said with Easy Office, the auto-attendant will still take voicemails for companies who lose their Internet connection, and the company can set up “find me-follow me” rules that can route calls to workers’ home and cell phones.

ZIP Telecom offers a dedicated connection to its data centre, which does not depend on the public Internet, for “as low as” $50 a month.

“If you’re a financial services firm and your phones are the lifeblood of your business, even with that additional cost, for that extra connection, it’s still cheaper and we’d give you the same reliability as a copper wire that Bell supplies.”

Elliot advises some companies to have copper lines from an incumbent carrier in case they lose their Internet connection.

“We have all come to expect as users that carrier grade service that we’re getting from the Bells and Teluses of the world, “ he said. “In a hosted service environment if the service is coming to you on Internet feeds there’s lots of things that can get in the way of Internet services.”

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