Tuesday, November 09, 2010

To CPE or Host–That is the Question

I have many customers asking me about virtualization, virtual desktops, and hosted solutions, but when it comes to phone systems, there is not much choice for any of these.  While this will most likely change and even reverse in the next 3 to 5 years, there is still not a big advantage to hosted solutions and most systems don’t support virtualization at this point.  There are several reasons for this and why you should be careful when looking at hosted solutions.

Control and responsibility

The biggest different between having CPE and Hosted phone systems is control and who takes responsibility for the equipment and programming upkeep.  With most hosted solutions, vendors will give web access to the programming to allow for small changes like phone assignments, user names, passwords, and workgroup assignments.  For the business that does not want to spend resources getting trained on the system, this is ideal, because any workgroup leader can make changes.  The hosted company is responsible for the server, updates, backups, and billing.  Responsibility is two-fold in a hosted environment – the vendor takes responsibility for the reliability of the server and the customer is responsible for connectivity and local equipment.  On the flip side, having CPE means you are in charge of everything, meaning if you can’t pay your bills, you still can make and receive phone calls – not so with the stinted hosted vendor.


This comes in two flavors – flexible environments and customization.  A hosted solution gives you the ability to change the number of phones very quickly or move people from one office to another without redeploying much more than a phone or gateway.  Also with most hosted solutions, you usually have access to a the full functionality of the product without any upgrades or much investment on your part.  CPE however gives you much of the same flexibility, but only after some up-front purchase.  You can still move people around, re-deploy phones to other office, and grow or shrink your system as needs arise, but you usually get the added feature of customizing your system more than the vendor would allow in a shared environment.  Imagine if a vendor allowed customization of the server for 100 customers.  Next update to the system software would mean testing it against each of those 100 customized environments before deploying to the server farms hosting the applications.  Now extend that to 1000’s of customers and you can see why most hosted vendors only give you limited control and access to the server software.  If your company has not changed much in 5 years and you were happy with your old key system, then hosted might be your preference, but if you see unknown growth or applications and need specialized functionality, then CPE is a must. 


Sales people with that “is is only $25 per month per phone” routine make hosted solutions sound very cost-effective.  Not bad when you have 20 phones, but if you have 100, that means $2500 a month in fees perpetually.  A lease on a similar CPE system would probably be about half that and you own the stuff in the end.  Why is it nice to write off the monthly as a business expense rather than a capital expenditure, it is usually a decision about whether the company has the up-front investment for the equipment or if the company is eligible  for a lease.  No matter what the choice, it is important to look at an overall ROI including investment, monthly recurring costs, annual maintenance, and upgrade costs.

Who to Turn To?

One other strong factor for your decision should be ongoing support and maintenance.  Are you going to have the people on staff to train new individuals or will the hosted vendor do this?  Do you have to keep up the software at the desktop or will the hosted system do this automatically?  Who is responsible for your local phones and gateways and insuring good quality on your local LAN?  If you have CPE, you know you can turn to your phone vendor for all of this.  How much do you want to invest in time and effort to keep your phone system running efficiently?

Final Word

Whether you choose hosted or CPE for your next phone system is a hard choice since any option for most companies means changing out their entire phone system, but in 3 years time when most companies have already purchased SIP gateways and industry-standard phones, switching from CPE to Hosted will be a simple and more-likely option.   Whatever your decision, make sure it is based on your company’s needs and a good ROI model, not on sweet talk from a sales guy!

Robert Wakefield-Carl, QoS Telesys


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