Is Hosted VoIP Right for You? 6 Must-Ask Questions

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Is Hosted VoIP Right for You? 6 Must-Ask QuestionsWe outline six questions you must ask when deciding whether to

move your telephony system to a hosted VoIP provider, including

questions about reliability, branch survivability, E911 capability

and whether you’re looking for additional collaboration services.

We also outline how to price a hosted VoIP option.

By Michael Finneran

R e p o r t s . I n f o r m a t i o nWe e k . c om M a r c h 2 0 1 3 $ 9 9

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CONT

ENTS

TABLE OF

3 Author’s Bio

4 Executive Summary

5 The Future of Voice Is in the Cloud

5 Figure 1: Use of Hosted Telephony Services

6 Can the Provider Meet Reliability

Requirements?

6 Figure 2: Top Communication Methods

7 How Will You Ensure Branch Survivability?

7 Are You Prepared for E911 Availability

8 Figure 3: Use of Unified Communications

9 Is Your LAN Ready for Voice?

9 Figure 4: Top Network Concern

10 What Are Hybrid Options?

10 Do You Want Voice or UC&C?

11 Understanding the Cost

11 Figure 5: Barriers to Unified

Communications Adoption

12 Pricing Out Hosted VoIP Services

12 Other Cost Elements

13 Decision Point

14 Related Reports

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ABOUT US

InformationWeek Reports’ analysts arm business technology decision-makers with real-world perspective based on qualitativeand quantitative research, business and technology assessment andplanning tools, and adoption best practices gleaned from experience.

OUR STAFFLorna Garey, content director; [email protected] Vallis, managing editor, research; [email protected] Chodak, copy chief; [email protected] DeFilippo, associate art director; [email protected]

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I s H o s t e d V o I P R i g h t f o r Yo u ? 6 M u s t - A s k Q u e s t i o n s

Michael Finneran is an independent consultant and industry analyst specializing in wireless tech-nologies, mobile unified communications and fixed-mobile convergence. He has more than 30 yearsin the networking field and is the author of Voice Over Wireless LANs: The Complete Guide (Elsevier,2008). His expertise spans the full range of wireless technologies, including Wi-Fi, 3G/4G cellular,WiMAX and RFID. In the consulting area, Michael has provided assistance to carriers, equipment vendors, end users

and investment firms in the United States and overseas. He has appeared at hundreds of trade showsand industry conferences, including Enterprise Connect (formerly VoiceCon) and Interop; he nowserves as the program chair for wireless and mobility at Enterprise Connect. Michael is also a prolificwriter; for 23 years he wrote the Networking Intelligence column for Business Communications Re-view. He now contributes on wireless and mobility to numerous publications.As an educator, he has conducted more than 2,000 seminars on networking topics globally, includ-

ing the graduate telecommunications program at Pace University and programs at the Center for theStudy of Data Processing at Washington University in St. Louis. His programs are now offered throughTelecom+UC Training. A longtime member of the Society of Telecommunications Consultants,Michael holds a master’s degree in marketing and management information systems from the J.L.Kellogg Graduate School of Management at Northwestern University.

Michael Finneran InformationWeek Reports

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Hosted VoIPmay appeal to companies that don’t want to invest scarce resources in operating their own internal telephony system. However, given the primary role of voicecommunications for business, companies have to ensure that a provider’s service willmeet day-to-day needs and provide excellent reliability.Voice is a primary tool for enterprise communications both internally and with

customers and prospects, so a cloud service has to support both internal and externalcalling functions. Also, even though the “call control” function might be in the cloud, theend points and possibly other hardware will still be on premises, with voice packets running over your existing data infrastructure — that means your network has to be upto snuff. Finally, users expect voice services to be reliable, fast and consistent, and busi-nesses must support capabilities such as E911 access.This report lays out six questions that companies must ask and answer before they

migrate to a hosted VoIP provider. It also provides insight into how to calculate the cost of a hosted service and whether potential customers will want to add collaboration capabilities to the voice service.

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EXECUTIVE

SUM

MAR

Y

Table of Contents

March 2013 5

More and more CIOs no longer see the ben-efits of “owning” a telephone system andlook to the cloud to get them out of thephone business. A recent survey by Webtori-als (underwritten by IP communications com-pany Sonus Networks) found that 71% of enterprise voice systems are on premises ver-sus 29% using a full or partial cloud approach.However, 57% of respondents see all or partof their voice services moving to the cloud inthe future.What early adopters are finding, however, is

that there’s a lot more involved in movingvoice to the cloud than there is with other ap-plications. In a typical migration to a cloudservice, such as software-as-a-service, custom -ers can off-load much of the ongoing opera-tional burden of running an application, in-cluding maintaining hardware and software,to the provider. That’s partly the case with hosted voice over

IP. One of the major advantages of movingvoice to the cloud is that it relieves the cus-

tomer of the requirement to perform periodicsoftware upgrades; those upgrades may ad-dress performance or stability problems andmay incorporate new features as well. Thoseupgrades are not only costly but also takevaluable IT time to complete. Part of the

hosted package is that the service provideragrees to perform those upgrades in a timelyfashion. However, while some services will be oper-

ated by the provider, there’s still a substantialamount of premises equipment, including

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Do you use hosted telephony services?

57% 30%

13%

Use of Hosted Telephony Services

Base: 176 respondents at organizations deploying or planning to deploy unified communicationsData: InformationWeek 2013 State of Unified Communications Survey of 260 business technology professionals, February 2013

R6520313/19

1Yes, exclusively

Yes; we use a blend of hosted services and on-premises systems

No

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The Future of Voice Is in the Cloud

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Figure 1

March 2013 6

network gear and IP phones, that the cus-tomer must maintain.Before your organization decides to move

all or part of your voice services to the cloud,you must weigh the risks and the benefits ofthis move, calculate the factors that will affectyour total cost of ownership and take ade-quate care in planning the transition frompremises to cloud service. We’ll look at six ma-jor questions you must ask and answer be-fore making the move, and also review howto price out a hosted VoIP offering.

1. Can the Provider Meet Reliability Requirements?Business users have grown up with the

expectation of high reliability in their business(and home) voice services, particularly forwired phones. (We all know cellular servicecan be a little shaky and may disappear entirely when you need it most.) In the InformationWeek 2013 Unified Communica-tions Survey, voice was ranked as the secondmost used communication method, just behind email. Therefore, the first question you

should ask potential hosted VoIP providers ishow they intend to ensure service continuity.Your list of expectations should include mir-

rored data centers, geographically dispersed

and housed in hardened facilities. This is essential to ensure that failure of the primarycontrol point has no impact on in-progressconnections, the ability for users to make and

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What are the top methods by which your employees communicate with your customers, suppliers and partners?

Top Communication Methods

Emai

l

Voice

(pho

ne)

In-p

erso

n vi

sit to

cust

omer

’s sit

e

In-p

erso

n vi

sit to

com

pany

’s sit

e (e

.g.,

reta

il st

ore)

Vide

ocon

fere

ncin

g (ro

om sy

stem

)

Inst

ant m

essa

ging

Cont

act c

ente

r (in

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d or

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d ca

ll ce

nter

)

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ic so

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edia

(Fac

eboo

k, Tw

itter

, etc

.)

Vide

ocon

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g (d

eskt

op)

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men

t rep

osito

ry (e

.g.,

Shar

ePoi

nt)

In-h

ouse

socia

l med

ia sy

stem

Othe

r

Note: Three responses allowedBase: 176 respondents at organizations deploying or planning to deploy unified communicationsData: InformationWeek 2013 State of Unified Communications Survey of 260 business technology professionals, February 2013

R6520313/16

93%

86%

35%

16%

15%

13%

9%

6% 5% 4% 2% 1% 1%

FAST FACT

57%of respondents to a

survey by Webtorials see

all or part of their voice

services moving to the

cloud in the future.

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Figure 2

March 2013 7

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receive calls, or other system capabilities suchas voice mail and interactive voice responsesystems.Most providers offer mirrored data centers,

but don’t forget geographic diversity; regionaldisasters such as Superstorm Sandy demon-strate just how essential it is to have significantphysical distance between facilities.

2. How Will You Ensure Branch Survivability?When looking at hosted VoIP, another

consideration is local access. The local accessconnection (also known as the local loop) isthe primary point of failure in virtually all net-works. The local connection is your site’s linkto the world; regardless of how many redun-dant data centers the service provider hasprovisioned, if that local connection goes,you’re disconnected from all of them.The first level of protection to consider is

mechanisms to increase the reliability of localaccess. Most network managers will havebeen through service outages and be familiarwith regular challenges like wet snow on

overhead wires, but what can you do about it?Plenty — but it may cost you. The most obvi-ous is to look for Sonet-based local access op-tions from your local exchange carrier or pos-sibly a competitive local exchange carrier, ifone is available. With Sonet, customer sites areconnected on rings to the serving central of-fice. If one side of the ring is cut, the servicefails over to the other side in 50 millisecondsor less.Another backup option to consider is your

Internet service. Hosted VoIP services typicallydepend on an MPLS-based connection to theservice provider, so that quality of service, orQoS, can be ensured for the voice traffic. If thatMPLS path fails, you may be able to route yourvoice traffic over a VPN connection throughyour Internet access to the service provider.You will want to have your Internet serviceseparate from your MPLS provider, ideallyover a separate physical access path. Youshould test to see how the quality holds upover that backup path. If you’re dealing witha small remote office, you can also considercellular data service as a backup option.

Even if you have separate MPLS and Internetcarriers, there’s still a chance that all optionsto connect to the service provider might getsevered, especially in a natural disaster. If youwant to have a plan in place to address thisrisk, look to provision a gateway device ateach site with some number of separate ana-log or PRI connections directly to the localtelco central office. Those links will be able tocarry some portion of your outbound calling.What about inbound calls? Look at the ser -

vice provider’s ability to reroute incomingcalls to those backup facilities or possibly tousers’ cell phones or other network locations.

3. Are You Prepared for E911 Availability?Before VoIP became widespread, each

business was directly wired to a specific centraloffice of a telephone company, and an entireinfrastructure was in place to service 911 callsand ensure that 911 operators would have thecorrect location information of the caller.In a hosted VoIP environment, the call

control function for your telephone systemcould be located several states away. It’s criti-

State of Unified Communications

Many UC projects are stuck inneutral: Only 38% have deployed,up just two points from our 2011survey, and 31% of these respon-dents have rolled UC out to lessthan 10% of their user bases.Here’s how to get out of the rut.

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March 2013 8

cally important that emergency calls berouted correctly and the location informationbe accurate. This isn’t just a nice-to-have fea-

ture. Business owners are legally responsibleto ensure that 911 calls dialed from the busi-ness are routed to the correct public safety

answering point or 911 center with the cor-rect location information attached. There areroughly 6,100 public safety answering points

in the United States today. The requirements for location accu-

racy vary widely by state, so whileproviding the building’s street ad-dress may be adequate in some ar-eas, others may require the floor orarea where the 911 call is originating.The most up-to-date information onstate E911 requirements is availablefrom NENA, the National EmergencyNumber Association. These critical details have to be

worked out with the serviceprovider and will be more challeng-ing if you are supporting sites in different states. One option is tosimply maintain a few analog accesslines at each site and ensure that all911 calls are routed over them. Inany case, E911 should be broughtup early in conversations withprospective providers.

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To what degree are the following UC elements in use at your organization? Please use a scale of 1 to 5, where 1 is “no use,” 3 is “moderate use” and 5 is “universally used.”

Use of Unified Communications

Note: Mean average ratingsBase: 176 respondents at organizations deploying or planning to deploy unified communicationsData: InformationWeek 2013 State of Unified Communications Survey of 260 business technology professionals, February 2013

R6520313/17

R

Tele

phon

y

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ctor

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ting

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ns (i

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ktop

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Figure 3

4. Is Your LAN Ready for Voice?Even though the call control or “telephony

server” function is moved to the cloud, a lotof the telephony infrastructure is still going tobe on your premises. That would include all ofthe IP station equipment (that is, telephones),IP attendant consoles, branch survivabilityand analog station gateways (that is, devicesto support analog phones, fax machines andmodems). All of those devices will be con-nected over your wired LAN infrastructure.Typically one of the biggest costs in the con-

version from a conventional TDM PBX to aVoIP service are switch and router upgrades.Four network requirements we typically lookfor in IP voice are no shared media LANs (nohubs); Power over Ethernet switches that arerun with an uninterrupted power source sothe phones continue to operate during acommercial power failure; QoS capability onthe LAN to ensure high-quality voice serviceregardless of the volume of data traffic on thenetwork; and a separate virtual LAN for voice.Also, IP phones require Cat5 cable or better,

and while you will likely have that to all of your

desktops, you might be installing numerousruns to waiting rooms, wall phones and otherlocations where you have a telephone but no

computer today. Also, you’ll typically want toput low-cost analog phones, rather than ex-pensive IP phones, in public areas. The analog

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What is the most pressing concern you have regarding your network’s ability to provide the appropriate quality of service to UC applications?

Top Network Concern

Base: 176 respondents in February 2013 and 201 in September 2011 at organizations deploying or planning to deploy unified communicationsData: InformationWeek State of Unified Communications Survey of business technology professionals

R6520313/11

R

2013 2012

Agin

g in

frast

ruct

ure

(rout

ers/

switc

hes)

Lack

of W

AN b

andw

idth

Netw

ork

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ver a

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25%

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19%

25%

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%

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2%

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phones will be connected through gateways.Even though you are going IP, you may be

amazed by how many analog devices you’llneed to support; also be very careful to look

at the maximum rangebetween those analogdevices and the gate-way, as you may needto distribute thosegateways throughoutthe facility rather thanhousing them all in thedata center.The service provider

will typically want to certify your LAN infra-structure to confirm that it’s capable of sup-porting high-quality voice, but there may beprofessional services fees involved, so besure to ask about that up front.

5. What Are Hybrid Options?While you may want to move voice services

to the cloud, a premises system might be thebest choice for some locations. In the Webto-rials survey we referenced above, of the 57%

of users who see the cloud in their future, 27%saw a full cloud deployment, while 30% envi-sioned a hybrid deployment. Typically we see that larger sites are more

often better (and more cost effectively)served with an on-premises approach, whilesmaller sites move to the cloud. (In this case,we describe headquarters as a large office,and local sales offices as small; everything inbetween is up for grabs.)A hybrid deployment should provide enter-

prise features such as four- or five-digit dialing between stations, so number plan design maybe part of the project. Also, you have to deter-mine if you want identical features and station sets at all sites.Many organizations cannot come up with

the budget to do the conversion in one fellswoop, so a major part of your planning mayinvolve developing a phased deploymentplan where you need to integrate a mix ofcloud, new premises-based systems andlegacy premises systems for some period oftime (often years). The key will be to have a vision of where you want to be at the end of

the process and ensure that you’re takingsteps that get you progressively closer to thatwith the least amount of wasted resources.

6. Do You Want Voice or UC&C?While many decisions are involved in adopt-

ing hosted VoIP, one of the largest is whattypes of services you want. When we talkabout “hosted VoIP,” we’re essentially talkingabout providing a “telephone system” thathappens to use IP rather than traditional TDMtechnology.However, the use of IP as the underlying

transport method allows for the deploymentof unified communications and collaboration.UC&C integrates all the user’s real-time (voiceand video), near-real-time (text) and asynchro-nous (email, voice mail and fax) communica-tions. It also provides a range of collaborationcapabilities (audio/video teleconferencing,Web meetings, screen sharing and so on).UC&C wraps all these services into a single in-

terface that’s accessible from any of the user’sdevices, including desktops, laptops, tabletsand smartphones. While a UC&C system can al-

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The service provider will typically want

to certify your LAN infrastructure to

confirm that it’s capable of supporting

high-quality voice, but there may be

professional services fees involved, so

be sure to ask about that up front.

March 2013 11

low a user to place voice calls from a client ona PC and route them to a desk phone, UC&Cusers can forgo the desk phone entirely and

use a softphone client on a PC and a headset.In considering cloud-based providers, one

factor to look at are providers that allow the

flexibility to provide UC&C only to those userswho require it and to provide basic IP voiceservices to those who do not.

InformationWeek’s 2013 State of UnifiedCommunications Survey found that a littlemore than a third of respondents had UC ca-pabilities deployed, and only 35% of thosehad deployed those capabilities to more than50% of their users.

Understanding the CostsAs we know, money is one factor that influ-

ences any network decision, and the big ques-tion is how the cost of a hosted system willcompare with a premises-based option. At the2012 Enterprise Connect conference, consult-ants Dave Stein of Stein Technology ConsultingGroup, Marty Parker of UniComm Consulting,and E. Brent Kelly of Constellation Research rana mock RFP session where they invited vendorsto bid on a 2,000-seat UC deployment with anew IP PBX (Stein), one without a new PBX(Parker) and a cloud-based system (Kelly).The exercise used an exhaustive 60-plus-

page RFP with requirements for telephony,

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What are the top barriers to full adoption of your deployed unified communications system?

Barriers to Unified Communications Adoption

Note: Three responses allowedBase: 176 respondents in February 2013 and 201 in September 2011 at organizations deploying or planning to deploy unified communicationsData: InformationWeek State of Unified Communications Survey of business technology professionals

R6520313/7

R

2013 2012

End

user

bas

e is

not t

rain

ed to

use

the

tech

nolo

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Criti

cal b

usin

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atio

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C ap

plica

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ess d

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ify in

vest

men

t in

full

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appl

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akin

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plem

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nal

IT st

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User

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We

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our

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adop

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or im

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42%

39%

32%

26%

31%

26% 29

%21

%

26%

23%

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8%

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Figure 5

March 2013 12

unified messaging, contact center, UC&C andmobility. In an article on NoJitter they jointly authored after the event, they compared thetotal cost of ownership for each of the threeoptions over five years.When they plotted the average cost of the 24

systems they reviewed, they found that whilea cloud-based system had an almost 25% costadvantage over a premises system in year one,they were essentially equal in year two, and byyear five the average premises-based systemwas almost a third cheaper than the averagecloud offering. The overlay option was cheaperthan the other two across the board.The authors went to great lengths to equal-

ize differences in the proposals, includingmaking “reasonable estimates for staffingcosts given that there is a clear difference between the human resource costs requiredto operate and maintain on-premises solu-tions versus hosted offerings.”

Pricing Out Hosted VoIP ServicesIn reviewing hosted VoIP proposals, you will

encounter a number of major cost elements:

>> Seat licenses: Seat licenses are typicallya monthly cost per user and will vary in pricebased on the term (two-year, three-year, etc.)and the range of features included (basic te-lephony, enhanced telephony, UC&C and soon). Typically there will be separate licensesfor voice mail, which can work to your advan-tage if only a small percentage of your linesactually need voice mail.>> Station equipment/softphone li-

censes: Most users will want a traditionalhandset, the price of which ranges fromaround $100 to several hundred dollars forcolor touch screen models. If your users prefer(or will settle for) a softphone client, you willstill need a seat license. There’s typically a li-cense for the softphone client, though it’sgenerally cheaper than a traditional handset.You may also need one or more attendantconsoles.>> Gateways/session border controllers

(SBCs)/survivable branch appliances: Asnoted above, gateways are needed to supportanalog devices, including low-cost analogphones in waiting areas, SBCs to support SIP

trunking services (though they may be pro-vided as part of the service within the cloud)and survivable branch appliances (along withanalog lines or PRIs to the local central office)to provide service in the event connectivity tothe service provider is lost.>> Installation charges: Typically there

will be a one-time charge for installation,though it’s usually far lower than the one-time costs involved in installing a premises-based system. The station equipment, gateways and instal-

lation charges are typically up-front costs,though in many cases the service providerwill “finance” them, and they will be reflectedin a higher monthly cost per user.

Other Cost ElementsWhile those are the main elements in the

price, there are a few other things to watchout for:>> Mobility options: Virtually all of the

services offer some type of mobility option,either the ability to simultaneously ring in-coming calls to the user’s desk and mobile

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phones, or a smartphone client that routesall inbound and outbound mobile callsthrough the VoIP system, which enables fea-tures such as showing the user’s desk num-ber on outbound calls even though the callis actually being placed from the user’s mo-bile phone. Just because these features arebeing shown in the presentation, don’t as-sume they’re free. Some may be free, whileothers may require servers or separate seatlicenses for the desk and mobile devices. Inshort, be sure to ask.>> Professional services: Service pro vid -

ers’ willingness to absorb professional ser -vices fees in order land a sale vary widely. Asnoted, providers will want to verify that theLAN infrastructure is capable of supportinghigh-quality voice, and there can be chargesfor interfacing to paging amplifiers, door en-try systems, nurse call systems and any num-ber of other specialized components you mayhave acquired over the years. The better thehandle you have on all of your “peculiar” requirements, the stronger a negotiating position you’ll be in with the vendor when it

comes time to haggle the final price.>> Automatic call distributor/enhanced

ACD: Even though a basic ACD capability maybe included with the premises-based versionof the IP PBX, that doesn’t mean it’s includedin the hosted version. Further, most systemsoffer a “basic” ACD package and an “en-hanced” version that may include things suchas skills-based routing, advanced reportingcapabilities and computer telephony integra-tion (which will typically involve professionalser vices as well). >> LAN upgrades and cable runs: If your

LAN has gone untouched for several years, beprepared for a hefty bill to bring the infra-structure up to snuff. Many of the hosted ser -vices providers also sell switches and routers,so you may benefit by packaging the VoIPservice and infrastructure upgrades. Anddon’t forget the cost of additional cable runsthat may be required.>> Removal and disposal of existing tele-

phone equipment: Last but certainly not“least,” what do you plan to do with your existing telephone equipment? In many cases

there is a secondary market for used tele-phone equipment, but it may be considerablyless than the cost of packing up and haulingoff all those equipment cabinets that havebeen decorating your telephone room allthese many years. In some cases the serviceprovider may be able to assist with disposal.

Decision PointThe telephone business is changing and

the cloud is a key part of that change. Migrat-ing your telephony system to the cloud doesnot guarantee savings, and any number offactors can have a negative impact on costand reliability.That said, many businesses have had

enough of being a telephone company andare looking at outsourcing that responsibilityto a provider that can build, staff and maintaina professionally run hosted VoIP system andrelieve companies of that ongoing headache.However, securing a good deal will meanknowing what you need, understanding thepeculiarities of your specific deployment andavoiding the traps that lay along the way.

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