Cloud or Premise – Which One Is Right For You?

By Stephen Leaden
7 Feb 2019

We at BCStrategies have been closely watching the UC UCaaS and Contact Center (CC) CCaaS markets evolving. More and more enterprises are considering the cloud as an alternative to a premise-based solution in our consulting practice. In fact, every RFP that we are now issuing includes a cloud alternative, and some are considering cloud only.

Cloud Growth, Reasons to Consider the Cloud

So what are the reasons for this market move?

  • A Move To OPEX Models A move to OPEX models is becoming more of the “norm.” Subscription-based services such as Office 365 and Salesforce are just two examples of how the cloud has become a more accepted channel. Organizations in general are more accepting of a cloud-based model than they were just 24-36 months ago.
  • UC and CC Are Complex Unified Communications and Contact Centers are especially complex, and most CIOs I have spoken with consider real-time communications a “headache” and are less familiar with the real-time critical nature of Communications over other technologies and applications they are responsible for. Real-time communications is a different model than most software applications, and has shorter thresholds when anomalies or outages show up.
    I have heard from many sources that “voice is just another application on the network,” yet it is the most sensitized to network fluctuations and anomalies and is the first to be identified by the organization with issues. The more a CIO can “simplify” and delegate their UC, CC, and data infrastructure, the better in some cases.
  • Faster Ramp Up Periods – Because the cloud data center model is already built by the provider, the ability to implement a cloud solution quickly typically provides the advantage of a faster ramp-up period compared with a premises-based solution. In addition, a cloud solution can expand quickly among endpoints and applications. Note that additional time is needed for a private cloud solution (dedicated servers) when required.
  • Complexity of Projects Are Increasing – With trending in UC and CC towards newer technologies such as AI, IoT integration, blockchain, 5G, third party APIs, and CPaaS, among others, the market continues to grow and the caring for such new complexities and integrations increases. The omni-channel experience in Contact Center is also front and center (voice, web chat, video chat, email/faxing, and social media integration) which would require additional attention and professional services to advise and integrate such.
  • Updates and Upgrades in the Cloud are Done “Seamlessly” – Most software upgrades and updates that are required in any UC or CC solution are performed behind the scenes without any user intervention in the cloud model. There's also a reliability factor expected from the provider to perform such. In my experience, most of these upgrades are done seamlessly, but on occasion we have seen outages or marginalization of services after an update/upgrade.
    Change control windows that are announced by the vendor are also no choice scenarios for the customer. Any organization taking on a cloud solution will need to work with the provider’s change control windows announced.
  • Cloud Costs Going “Down” – In our consulting practice, we are seeing a slow but steady decline in the monthly cost for a UC end point in the cloud. Where cloud costs were double that of a premise-based solution just a few years ago (using a seven-year TCO model), that variance has shrunk to 40-50% above premise. Long distance and SIP trunking are typically now included in the UCaaS model as well.
  • In Some Cases, Less Staff is Needed Depending upon the complexity of the project, in some cases moving to the cloud can be in the form of an outsourced model and therefore some staffing can be reduced. This will depend on the vertical and the complexity of the customer environment.

In the next few years, UC and CC will grow significantly, including both premise and cloud. According to Grand View Research, UC and UCaaS will grow to a $143.5B industry by 2024. Even more significant is Contact Center (CC premise and CCaaS), growing to $481B by 2024, according to Global Industry Analysts.

The UC Cloud is currently 6% of the total market share. New end points being “sold” in the cloud are expected to exceed end points on premise in the next three years.  

Premise Solutions, and Reasons to Consider Premise

With all that said, why would an organization stay with a premise-based solution? There are several key reasons:

  • CIOs Can Better Control Their Own Environment – CIOs can better control their own environment and their own network by retaining ownership of all their critical components, including UC and CC.  
  • Cloud Solutions are an All-In-One, All-In Approach Cloud solutions are an all in one approach, giving the “keys of your kingdom” of your real-time communications to an outside company with little to no control of their environment. In the cloud model, organizations no longer have the ability to manage vendor change control windows, upgrades, API integration, and other areas that they typically perform internally currently.
  • Moving Away from a Cloud Model or to Another Cloud Provider is not Easy (In the Event of Dissatisfaction) Cloud contracts typically are 48 to 60 months, and difficult to migrate to another vendor in the event your organization is not satisfied with the performance of that particular cloud provider. In the case of a premise solution, organizations have to stay with the manufacturer; however, they always have the choice of making changes to the vendor/VAR in the event of non-performance.
  • Premise-Based Solutions Have Been More Reliable The basic starting point for a UCaaS cloud model is redundancy, resiliency and reliability, similar to that of a premise model. UCaaS and CCaaS are also highly network dependent. For public cloud offerings, we've experienced personally the reliability of the cloud is just not quite there yet. We've had outages with our public cloud-based UC system that have ranged anywhere from one hour up to four hours in a given day. Typically they average one outage every two months. In our case, our mobile devices have actually been more reliable.
    According to downdetector.com, which monitors uptime for various cloud-based services, it was found that one of the major UCaaS providers in the first quarter of 2018 was delivering services on less than a 99.9% (three nines model), or the equivalent of 10 hours of outages annually. The baseline for an acceptable cloud model is 99.99% (or four nines, the equivalent of a one-hour outage annually). How can any CIO or CTO explain away a four or eight-hour outage? In my experience, these kinds of outages lead to “heads rolling” in an organization and people losing their jobs over outages of this magnitude, thus affecting their careers short and longer term.
  • Premise Solutions Are Less Costly As shared earlier, the seven-year TCO cost of a premise-based solution is typically one third less than that of a cloud-based solution. In my opinion, this trend of premise outpacing the cost of cloud solutions will continue. This is the single largest reason why clients have stayed with a premise-based solution to-date.

Some Recommendations

  1. If considering the cloud, consider the pros and cons above. Perform a seven-year TCO of both models and consider the additional cost of cloud solutions over a period of time, taking also into account less long distance and SIPO trunking costs.
  2. If your organization must be HIPAA- or PCI-compliant, ensure that the cloud model you are considering Is just that.
  3. If considering a cloud model, obtain some history from the vendors that you are considering in terms of overall uptime. Has their network been up to at least a 99.99% model (or better) for the last six months, one year? Understand how their network has been built in terms of redundancy and resiliency and see if that model matches your own expectations internally.
  4. If you are considering other cloud solutions such as Office 365 and Salesforce, confirm with your cloud provider (or with your premises system for that matter), to ensure that integration is available to the third-party apps that you will need to integrate.
  5. When looking to replace a legacy telephony system, consider both premise and cloud in your evaluations. There are advantages to both, and should be considered part of your evaluation.
  6. If considering a cloud solution, and if a mid-to-large enterprise, look to a private cloud solution over a shared resources public cloud solution, where redundant virtual servers and outside trunking are dedicated to your organization. Ensure that the services are geo-redundant (not just redundant). Ensure with any provider that thresholds on their server environments are well within performance criteria, managing possible anomalies or outages. This will provide you better control, and by its nature, a higher level of reliability and control.
  7. Evaluate Cloud Providers according to:
    • Multiple data centers for active/active or active/standby failover, thus maintaining UC calls “in progress” even with the loss of a data center
    • Survivable remotes for key sites
    • POTS and PRIs for failover and 911/E911 purposes
    • QoS-based network management tools for managing network availability and performance
    • SBCs at remote sites for managing security “at the edge”
    • Online visibility tools from the service provider, enabling the enterprise to see the “state of the network health” and the status of the UC cloud components at any given time
    • A QoS-based WAN with redundancy (MPLS or SD-WAN)
  8. Consider any contracts, cloud or premise, with strong SLAs for performance and non-performance purposes. This will provide you choices in the event the vendor’s solution is not quite what they promised. Most cloud contracts are a minimum of four years, and therefore such performance criteria will provide you options if you need such at any given time.
  9. Ensure your infrastructure is ready. Whether you opt for premises-based, cloud, or even a hybrid approach, your enterprise infrastructure needs to support a UC environment. These elements include Layer 1 cabling, Layer 2/3 switching and routing, QoS (including Network Assessments), data closets, WAN, security, and more.

Summary and Conclusion

Today’s cloud delivery model is a bit more mature than what was being promoted just 24-36 months ago. The reality of delivering a full UC suite in the cloud is just that – a reality. 

If your organization requires a robust UC infrastructure capable of significant growth, little capital outlay, and quick ramp up, it is time to take a look at the cloud collaboration market. With non-communications models moving towards subscription and cloud-based (i.e., Office 365 and Salesforce), considering cloud as an alternative to premise is a worthwhile exercise and possible change in your organization’s topology.

The UC cloud is here, providing a clear alternative to a premises-based solution. Premise-based solutions are also an alternative to a cloud-based solution. In my opinion, I would consider both models when looking to make a change based on end-of-support or capacity issues driving such change.