An Update on Hosted VoIP and UC Services

19 Sep 2013

Last year, Dave Michels and I set out to identify and profile several hosted VoIP/UC services targeted at small businesses - particularly, under 50 users. I recently revisited this exercise, interviewing and meeting with several of the leading hosted vendors aimed at SMBs. It was not an exhausted study, and only a small handful of the many, many vendors were included. I'll be adding more vendors over the next few months, so please don't be upset with me if your company was omitted.

As you all know, the hosted voice business is hot - hotter than a NYC sidewalk in July. There are many service providers in this space, and the number keeps growing - it is well over 100 at this time. We're expecting to see a big uptake in hosted communication services, with a great amount of the interest coming from SMBs, but also from larger companies. While cost is usually the main reason companies start investigating hosted solutions, there are a host (pun intended) of other benefits of hosted UC services.

Hosted voice offers companies communication solutions with robust features, with no or minimal capital outlays. Hosted services can also give customers predictable operating costs based on their monthly service fees. Companies that have expensive and/or obsolete communications on-premise equipment are quickly turning to hosted solutions to avoid not only upfront capital outlays, but the hassle of managing and maintaining the equipment. Typical IT tasks, including maintenance, management (including moves, adds and changes) are handled by the hosting provider, taking the burden off of the company's IT department. Hosted providers can turn up new locations and users as needed, without impacting the company's IT staff.

Primarily, UC hosted services can be much simpler for organizations than premise-based solutions, which can be somewhat complex. Premise-based telephony systems require special facilities, servers, ongoing maintenance and upgrades, and capacity planning associated with both the circuits and servers. Add in other applications, like web conferencing, it adds even more to the complexity. And of course companies need the personnel to manage and maintain these systems.

With a hosted solution, the service can be available quickly and easily, without having to install and implement servers. Users can have a hosted UC solution up and working in hours, rather than months. There are little or no capital expenditures, except for the phones in most cases. Companies only pay for the services needed for the end users on the system, and can scale up or down as needed, paying only for what you need at the time. Additionally, redundancy and disaster recovery plans are typically included in the base monthly service. Hosted offerings are particularly attractive to SMBs that may not have a large or dedicated IT staff. Hosted providers can turn up new locations and users as needed, without impacting the company's IT staff.

IMHO, the most compelling argument in favor of hosted services is the flexibility and ability to stay current with technology and upgrades. Companies don't have to upgrade to the next release each time something comes out, and they automatically get the latest versions. This saves lots of time and money in terms of upgrading to the latest and greatest versions of software when needed. Hosted services can also give customers predictable operating costs based on their monthly service fees.

The biggest complaint about hosted solutions is the loss of control, as the hosted provider generally makes the changes and is responsible for managing the solution. Customization is more difficult in a hosted environment, as most hosted services provide a fixed set of capabilities that are not customized for each individual customer. Some of the hosted vendors have ways to customize their solutions, but not all can do this.

Another downside to hosted services is that they generally offer fairly basic features and functionality, and may not offer all of the functions that their premise-based counterparts offer. This may be a challenge for companies that require specific bells and whistles that the hosted provider does not offer, but for most companies, especially SMBs, the functionality provided meets their general needs. Also, more comprehensive functionality is evolving and hosted solutions will include capabilities that are comparable to premise-based enterprise solutions.

Additionally, while many people believe that hosted services cost less than premise-based solutions, this is not generally the case. Depending on which study you read, hosted services become less cost-effective after three-to-five years, at which time premise-based solutions have a lower total cost of ownership.

There are obviously pros and cons for hosted and premise-based solutions - there is no "one right solution," and each company needs to look at its specific needs and business goals.

Almost very vendor has gotten into the game recently, and SMBs have a large choice of hosted providers - telcos and carriers, traditional equipment vendors, and new service providers focusing on hosted and cloud offerings. Almost all of the voice/UC equipment vendors have introduced cloud offerings in the past couple years. Some of these vendors offer the hosted service to customers themselves (and/or in conjunction with channel partners), some work with service provider partners, and some do both. The other group that is gaining a great deal of traction is hosted voice providers, of which there are many.

Key Differences Between Premise and Hosted Solutions

Hosted

Premise

Financial

Little upfront, higher monthly

Mostly upfront, usage and maintenance monthly

Features

Mostly all inclusive, some buckets

Mostly sold individually

Commitment

Month to Month

3-5 year minimum

Growth

Incremental

More complex due to processor and memory upgrades; often requires local dealer

Cost

Operating Expense

Capital Expense

Business Continuity

Hosted provider's responsibility - generally multiple data centers, etc.

Organization's responsibility - requires redundancy

Sales venue

Telephone/Web, sometimes in person

In Person, sometimes telephone

Source: COMMfusion 2013

Hosted VoIP and UC Research Findings

I recently interviewed five of the leading hosted providers for the SMB (sub-100 users) market, focusing on features/capabilities, pricing, service, and other aspects that end users should consider when making their vendor selections. The following are key observations and comparisons of the solutions:

  • The hosted providers all offered the basic calling features - unlimited local and long distance calling, automated attendant, audio conferencing, visual voicemail/unified messaging, Call forward/Call transfer/Call waiting, fax, Enhanced E911, dial by name, Caller ID, Do Not Disturb, Ring (or Blast) Group, Find Me/Follow Me, call rules and scheduling, call log reporting, call recording, music on hold, four digit dialing between locations, screen pop, and other call functions. They all offer web-based administration portals for managing user accounts, as well as basic mobile capabilities such as being able to receive calls on a mobile device while maintaining and accessing PBX features and functions, the ability to initiate calls via WiFi and 3G, and simultaneous ringing on multiple devices.

  • Where the vendors differ is in more advanced features such as contact center capabilities, advanced mobility, conferencing, desktop controls, and advanced unified communications capabilities.

  • UC capabilities are varied. Only a couple of the vendors provide online presence capabilities, and only one of the vendors provides presence integration with Outlook.

  • Target Market: All of the vendors interviewed focus on SMBs, but most have been moving upmarket and expanding to larger organizations.

  • Some of the vendors have only hosted solutions, while some (notably ShoreTel and Fonality) also offer premise and hybrid (premise and hosted) solutions.

  • Contact center features are limited (with the exception of 8x8, which acquired contact center vendor Contactual, and Fonality). Most vendors simply offer "call queuing" rather than more advanced contact center capabilities. Most are "ACD Lite" offerings. They all offer integration with Salesforce.com.

  • Pricing: Comparing pricing is extremely difficult, and there is no consistency or simple way to compare vendors' pricing, as some features are included in pricing bundles and others are sold a la carte. Customers should prepare a list of the features and functionality required for each user and try to compare apples-to-apples as best as possible. Make sure you understand what is included in the package and what else needs to be paid for (e.g., Fonality includes a hard phone in their pricing, but the others do not; some include E911 and some charge extra for it).

  • Access: The hosted providers expect the customer to use the public Internet for access, and therefore cannot guarantee end-to-end SLAs. Most providers have some tools to test the bandwidth, but because customers generally use the public Internet (or their own MPLS in some cases), the hosted providers generally do not guarantee quality of the last mile.

Vendor Overviews

The following outlines and highlights the vendor offerings in a few key areas: Unified Communications, Contact Center, and Mobility. This information is based on the responses to a vendor questionnaire and phone interviews with the vendors. The table indicates how well each vendor meets general expectations based on the features/capabilities provided, and provides a summary of information collected.

Vendor Comparison

Feature

8x8

Fonality

RingCentral

ShoreTel Sky

Vocalocity

User Features

Exceeds

Exceeds

Exceeds

Exceeds

Exceeds

Unified Communications (IM, presence, etc.)

Exceeds

Exceeds

Below

Meets

Below

Conferencing & collaboration (web, video)

Exceeds

Meets

Below

Below

Below

UC Client

Exceeds

Exceeds

Exceeds

Exceeds

Meets (new version not yet GA)

Mobility

Meets

Exceeds

Meets

Exceeds

Meets

Contact Center

Meets/Exceeds*

Exceeds

Below

Meets

Meets

CRM Integration

Exceeds

Exceeds

Meets

Exceeds

Exceeds

Source: COMMfusion 2013

Overall Key Strengths and Weaknesses

All systems are largely competitive from a basic telephony perspective. The following are some of their areas of differentiation:

8x8: 8x8 is perceived as the market leader, with a long heritage in the VoIP business. They are quickly gaining mindshare, in part because they were acknowledged in the Gartner Magic Quadrant, and Frost & Sullivan listed them as having the largest market share. 8x8 acquired Contactual, providing the company with strong multichannel contact center capabilities. However, the integration of the Contactual solution with the 8x8 service is still in progress and not yet completed. The company is focusing on going upstream and targeting larger customers. Additionally, 8x8 claims to be the only hosted PBX with FISMA certification, and is the only vendor at this time with social media integration to easily post, tweet, chat and send status to Twitter and Facebook contacts directly from the Virtual Office Online dashboard.

Fonality has a feature-rich service, with more UC and contact center capabilities than most competitors, and is considered a leading value provider, offering a full-featured service at a reasonable price. The UC client Heads Up Display (HUD) supports more features than most web alternatives, and the mobile capabilities are more comprehensive than most. Fonality does a great job of integrating the phone itself into its solution, and is the only vendor to include the phone as part of the service. Fonality is one of two vendors that can offer premise-based, hosted, and hybrid solutions, and is the only company that offers the same software applications, features, functionality, and user experience across deployment models.

RingCentral: RingCentral is the low-cost provider with simple packages and bundles, as well as strong name recognition and a large installed base. The all-inclusive pricing and packaging (with the exception of phones) makes buying simple and keep costs down. The company has focused on basic VoIP and has limited UC functionality, and no real contact center offerings. The company was first to market with several innovations, including having complete capabilities on smartphones, and business SMS. They focus on very small businesses, but like 8x8, are beginning to target larger customers. RingCentral works with several well-known partners that resell its service, including AT&T and GoDaddy.

ShoreTel: ShoreTel acquired hosted provider M5 in 2012, and now offers the ShoreTel Sky hosted service. ShoreTel Sky has strong UC and mobile capabilities, and differentiates itself based on its focus on workflow and business process, rather than basic UC functionality such as just click to call. With the exception of Fonality, ShoreTel is the only company that can offer premises, hosted, and hybrid solutions. While M5 has a long history in hosted services, this is a new area for ShoreTel, which will be focusing its energy on aligning its services and capabilities, as well as its go-to-market efforts. A lot of effort will be going in to combining the premise-based and hosted offerings.

Vocalocity: Vocalocity is very focused on reliability and redundancy, but is behind the curve in terms of features and functionality, including IM and other UC capabilities. The company is currently enhancing its mobile capabilities and will release a next-gen mobile app, as well as a new UC client. Rather than selling through the company website or partners as most of its competitors, Vocalocity has direct sales people that focus on working with the customers to address their specific needs, and claims to have a very low churn rate because of this.

Vendor Overviews

The following are brief overviews of the vendors' hosted offerings, with a focus on their UC capabilities (note that Fonality and ShoreTel both offer premise and hybrid solutions, which are not included here). All of the vendors listed here offer their services over internally-developed platforms, as opposed to using Broadsoft or a similar platform.

8x8

8x8 is a public company that did three acquisitions in the past three years to expand and enhance its technology and intellectual property. 8x8 targets both micro businesses (1-25 seats) and midmarket customers (25-500 seats), although its focus recently is more on the midmarket. The company has been moving upmarket and targeting larger accounts in the 1,000-employee range. 8x8 acquired Contactual, a cloud-based contact vendor in order to provide a cloud-based contact center solution.

Services include:

  • 8x8 Virtual Office - cloud-based hosted PBX and unified communications (UC) solution

  • 8x8 Virtual Office Pro - cloud-based hosted PBX, unified communications (UC), videoconferencing, online meeting and collaboration, call recording and Internet fax solution

  • 8x8 Virtual Contact Center - full-featured hosted call center software solution

  • 8x8 Virtual Room - device agnostic multi-point cloud video solution

8x8 offers IM and presence, as well as "one button" to escalate an IM session into a web conference. The UC desktop client is all web based, with no plug in required. The online dashboard, 8x8 Virtual Office Online, lets subscribers manage their features and functions remotely through a web portal.

8x8 Virtual Office Pro is 8x8's web-based UC bundle, providing Virtual Office business phone service plus online meetings, Internet faxing, video chat, and call recording, and it works on the iPhone and iPod Touch. 8x8 is the only vendor to offer social media integration, enabling users to post, tweet, chat and send status to Twitter and Facebook contacts directly from the Virtual Office Online dashboard.

Both a downloadable and web page Mac and Windows UC client are offered. The new UC desktop client is all web based, with no plug in required. In March 2013, the company introduced a new Virtual Office Desktop softphone application for its Virtual Office business VoIP and Virtual Office Pro unified communications solutions. Virtual Office Desktop provides all the same functionality of the Virtual Office Online browser application in a native Windows and Mac application.

8x8's branded mobile solution supports iOS and Android, enabling "Anything that can be done on 8x8's IP phones to be done on iOS and Android," including setting up meetings, conferences, call recording, fax, etc., through dedicated apps.

Contact center capabilities include 8x8 Call Queuing (an option for 8x8 Virtual Office Pro customers), providing up to 20 callers per queue, up to 6 queues per PBX, secondary queue extension group for each queue, and a voicemail box for each queue. 8x8 also offers a hosted call center service based on Contactual's service that integrates voice, email, web-chat, and desktop collaboration. This works with 8x8 Virtual Office VoIP phone service and adds features such as CTI, real-time monitoring and reporting, agent hot desking, Salesforce and Netsuite CRM integration, and more.

Fonality

Fonality delivers VoIP and UC business communication solutions to small and mid-sized businesses, with a specific focused on businesses with 10-250 users. Fonality focuses on delivering solutions that enable SMB's to deliver excellent customer service by helping them communicate better with employees and customers across all communication channels, making them more effective and efficient.

Fonality delivers an all-in-one software solution containing enterprise communication features such as presence, IM chat, email, conferencing, and desktop/screen sharing. In addition, it offers advanced micro-contact center features such as skills based routing, contact center queue management, real-time performance reporting, and management tools such as barge, monitor, and whisper.

Fonality's cloud-hosted services are packaged as Fonality Connect and Fonality Connect +. Both are bundled solutions that include phones, advanced calling and routing features, and a unified communications client for chat and drop-and-drag call management. Connect + adds two virtual extensions, a secure virtual conference bridge, additional group mailboxes, advanced Call Center features, CRM Integration, with full access to Heads Up Display (HUD), Fonality's UC application. In addition, Fonality offers the same features and functionality as its on-premise solutions, PBXtra and trixboxPro, which are typically sold through the channel.

All users receive the desktop UC client called HUD (Heads-up Display), which works on Mac, Windows, Linux, and connects the users' phones, desktop and important business applications into a single interface. Users can send IM's, view employee's presence status, access drag and drop call management features and call control capabilities, and can set their status (online, away, DND, and "custom away"). Users can view someone's contact card and click on an icon to send an email, IM/chat, or an SMS. HUD integrates with public IM services such as Google, Jabber, and other XMPP chat protocols.

UC features include screen pop, including CRM screen pop, find me/follow me (based on specific users, location, status and call states, time/date options); call screening options, simultaneous ring, and 1-touch forwarding between mobile and desk phone. HUD also provides visual access to virtual conference rooms to let users enter a conference or drag and drop someone into a conference room, and see who's in a conference room.

All VoIP and UC features of HUD are also available in HUDmobile, giving users access to the same user experience and features as the desktop version of HUD. HUDmobile is available for iPhone and Android devices, enabling users to work from any location and still be connected to the office.

RingCentral

RingCentral provides service in the USA, Canada, and United Kingdom, offering local, long distance, and international services (countries served, etc.). The service targets SOHO, SMB, and SME customers. Customers are primarily companies with under 50 users, but RingCentral has been moving upmarket for the past two years. They have customers with hundreds of employees, up to the 1000 mark, and the company notes, "It's more about the need than size, such as businesses without call centers, such as restaurant franchisees."

In addition to all of the basic functions, the RingCentral cloud-based Business Phone System offers unlimited virtual extensions, integrated Internet fax with dedicated number, call queues, softphone, customizable answering rules, and advanced call forwarding. Custom greetings and rules can be created based on Business/After hours, vacation or weekend rules, as well as by caller, customer, or phone number.

UC capabilities include screen pop, find me/follow me, real-time text-to-speech messaging, 1-touch forwarding between mobile and desk phone, and the ability to flip a live call from one device to another. The UC desktop client, the Call Controller, can act as a softphone (for Mac and PC), letting users manage calls, faxes, and their account from their PC, screen calls with visual caller ID, respond to callers with text-to-speech messages in real-time (e.g.; "I'll call you in 5 minutes"), listen to messages or interrupt callers while the message is being left, initiate conference calls with up to 10 people, record calls, and send and receive faxes. IM and presence capabilities are not provided.

RingCentral claims to be the first hosted vendor to launch the ability to set up and manage everything from the user's iPhone, and to be able to access all of the phone system settings on their mobile device. Mobile capabilities include VoIP, Call Control, Visual Voicemail, Call Log, Fax, user setting management for iOS, Android OS, and BlackBerry. Customers can also forward calls from their RingCentral business phone system to any number/device

RingCentral doesn't really provide contact center capabilities, but offers call queues (voice only) and the ability for employees to take calls from queues and distribute them based on skills, availability, longest time on hold, etc. Integration with Salesforce.com, Box, Google Docs, and others is provided so that customers can use RingCentral to make calls from Salesforce.com, for example.

ShoreTel Sky

ShoreTel offers end-to-end IP telephony solutions including its ShoreTel Communicator and its ShoreTel Sky Cloud Offering, as well as IP telephones, communication applications, contact center functionality, mobility, and UC applications such as IM, conferencing and application sharing. The company offers a full IP telephony solution and UC suite in an all-in-one appliance architecture. ShoreTel acquired M5 in 2012, and renamed the service ShoreTel Sky.

Customers range from start-ups to enterprise clients with 5,000 or more users. The typical customer size is 43 employees. ShoreTel Sky's target market is companies with 50-500 seats. The company notes that they did a lot more business than expected in the sub-50 market, as some customers were looking for more sophisticated solutions. Starting last year, they did more business in the 500 plus area.

ShoreTel Sky Communicator is ShoreTel Sky's new unified communications tool that provides presence, instant messaging, voice and video chat, and screen sharing. Other UC capabilities include screen pop, find me/follow me, 1-touch forwarding between mobile and deskphone, and click to call. The company is focusing on workflow and business process, not just click to call, and is focusing on connecting to third party apps.

Mobile capabilities are the same as the ShoreTel premises product (based on its Agito acquisition) and there will be synchronicity between what users can do on premise and in the cloud. ShoreTel recently introduced the ShoreTel Dock for Apple iPad and iPhone, an enterprise-grade docking state that transforms iPhones and iPads into business desk phones, available for both premise and ShoreTel Sky deployments, and is the first ShoreTel Sky offer of a ShoreTel endpoint.

ShoreTel Sky's contact center offering is based on capabilities it acquired from CallFinity two years ago. The premise-based solution is more upmarket and ShoreTel is looking at how to incorporate the two together.

The company announced in June that it has developed a hybrid UC solution called ShoreTel Connect, that allows customers with on-premises UC environments to access UC applications via the cloud on a monthly basis. Testing has begun with customers and partners, and the solution is expected to be available in early 2014. Customers with ShoreTel's on-premise solution can access application such as ShoreTel Mobility, Conferencing and Contact Center via the cloud on a monthly basis.

Vocalocity

Vocalocity's main focus is North America, although it also serves some global customers. Target markets are small-to-medium sized businesses, with mostly 20 users and less.

Vocalocity's voice plan includes all of the standard functionality, including unified messaging, multiple virtual receptionists, dial-by-name directory, virtual departments, music on hold, and paperless fax.

UC features include a Dashboard to provide real-time status of all extensions within the PBX, click-to-dial integrated with Outlook and the user's web browser, Custom Tag (to identify origin of incoming calls by adding a unique tag to each published phone number), cell phone integration (to forward calls to cell phones and use PBX functions from cell phones), softphone support, Follow Me, and Call Flip to transfer calls to a cell phone. A new Vocalocity Desktop, and screen-pop software are expected to be released shortly.

Call center capabilities include call queues (voice only) and call recording for additional fees. Call queues are managed through the web-based interface and can be set up in order of agent tier, random, etc.

Vocalocity is "finishing up" its next-gen mobile app, which will provide outbound SIP dialing as well as inbound for full connectivity. Current capabilities include virtual extension, which works with all mobile phones.

Conclusion

There are clearly differences between the various vendors' offerings. While they all provide basic VoIP calling features, they differ when it comes to UC, conferencing, contact center, and mobile capabilities. It's important to determine what you are trying to accomplish and what your goals are when investigating hosted offerings - are you looking for a full featured offering, low cost, or business process integration? There are wide variances, and it's important to carefully evaluate the hosted services based on your business goals. If you haven't already looked into hosted VoIP and UC service, now is the time.