Siemens (Finally) Launches a Cloud UC Service
Siemens Enterprise Communications has launched a new cloud communications solution. Leveraging SIP, open standards and its highly scalable softswitch-based OpenScape suite, it is looking to provide partners and customers with more flexible deployment options. The cloud solution includes virtualized, multi-tenant versions of Siemens’ OpenScape Voice, OpenScape UC and OpenScape Web Collaboration software, hosted in four geo-redundant data centers. The service features top-notch availability, survivability, governance and data privacy features, including:
- Highest availability, TIA-942 class data center, voice redundancy, secure endpoints
- Edge survivability option, local trunking, IPSec VPN, local firewalls, SBC and media server
- Multi-tier role-based access management, automated management and provisioning, application-level data center protection
- End-to-end encryption in the cloud, local country data storage, multitenant capability, data protection audits
Cloud-based voice and UC services will be available only through partners, who will handle customer needs assessment, CPE installation, billing, 1st and 2nd level tech support and ongoing equipment maintenance. The service will be first launched in the U.S., Germany and the Netherlands. Initial partners include Black Box in the U.S., mr.net and Telefonbau Schneider in Germany, and Televersal, ICT Trends Group and onecentral in the Netherlands.
The cloud solution is considered optimal for organizations with about 350 to 1,000 users, with a need for highly packaged, tightly integrated solutions. Users can choose from a variety of features and capabilities grouped in Base Packs and Booster Packs. The estimated end-user list pricing ranges between $5 and $30 per seat per month, based on required functionality.
What I like about this announcement:
Siemens has finally launched a cloud solution – something it started exploring about two years ago by demonstrating a proof of concept with Amazon’s EC infrastructure. With the incredible (I think, almost unreasonable) amount of hype surrounding cloud technologies and the cloud business model, it was about time for Siemens to finally bring this effort to fruition. I have to agree that there is a group of customers out there that would indeed appreciate the opportunity to outsource its communications infrastructure to avoid CAPEX, focus on core competencies or gain access to superior technologies and expertise. This customer segment would remain out of reach for Siemens, unless it finds an appropriate role for itself in the hosted/cloud-based communications marketplace.
It should be noted that Siemens has had a multi-tenant voice platform for years and some service providers such as Postrack and Engage have been using it to deliver services to end users just like others use BroadSoft’s or Metaswitch’s platforms. Other vendors such as Alcatel-Lucent, Cisco and Mitel have also deployed multi-tenant communication managers with service provider partners.
The new approach has significant advantages, however. It gives Siemens continued control over the platform and its capabilities. But more importantly, it empowers partners that cannot or do not wish to manage their own data centers to deliver services using Siemens’ feature-rich and highly scalable platform. Siemens allows partners to use its brand, co-market or white label their cloud services. This is an opportunity for them to gain differentiation as well as new recurring revenue streams. This model provides a fast and economical entry point for small MSPs and VARs to become hosted service providers. It is noteworthy that Siemens announces the new solution along with six partners already lined up.
Issues that Siemens will need to address:
Siemens is not alone in this market. Other telephony vendors are experimenting with new delivery models as well. For example, Mitel offers the Mitel Anywhere service, which it sells directly to business customers. Now it is exploring opportunities with data center providers such as Host.net and Hosting.com, which can host the platform on behalf of small MSPs and VARs. Siemens and other vendors will need to find ways to differentiate or be fast to market with the right partnerships while the market is still nascent and untapped.
More importantly, this new delivery model is still unproven and it is not clear how all market participants in the value chain will reposition themselves for competition in the evolving marketplace. Will the MSPs and VARs be successful in penetrating the CPE customer base? Will the vendors be able to successfully manage their channels to ensure customer satisfaction and optimal benefits from the cloud services? How will carriers be involved to ensure proper bandwidth and QoS management – critical elements for real-time communications services delivered over the WAN? Who will manage the carrier relationship? How will the hosted IP PBX and UC solutions be aligned with SIP trunking and IP VPN services to provide superior benefits to multi-site organizations?
XO Taps into Cloud Communications
Today, XO Communications launched the XO Enterprise Cloud Communications services. XO Enterprise Cloud Communications integrates a wide range of IP telephony features, local and long distance calling, enterprise-wide HD voice and video, network services, and IP phone sets in a communications as a service, per-user pricing model. Features of XO Enterprise Cloud Communications include:
- IP Telephony and unified communications applications
- Free local and site-to-site calling within the enterprise
- Long distance calling plans
- Enterprise-wide HD voice and HD video
- Choices of IP phone sets from Cisco and Polycom
- Web portal for managing service for each location and employees
- Quality of Service monitoring
- MPLS IP-VPN network services
- Robust Service Level Agreements for all services
- Business continuity capabilities
XO is looking to target businesses of 50 to 1,000 seats per enterprise, primarily in the education, healthcare, professional services and retail verticals.
What I like about the new offering:
XO has been tremendously successful with its XO IP Flex (also available with a VPN feature), XO SIP and XO Enterprise SIP offerings. The new offering nicely rounds up its SIP/cloud portfolio adding hosted PBX functionality for businesses choosing to outsource their voice communications infrastructure. Leveraging its SIP expertise, intimate knowledge of the BroadSoft platform and MPLS capabilities, XO will be able to deliver a highly reliable cloud-based voice service with managed bandwidth and QoS and carrier-grade SLAs. The option to include phone set costs in monthly recurring charges is likely to appeal to businesses concerned about the upfront costs of replacing existing phone instruments. XO has broad geographic reach and therefore the ability to address the needs of larger, multi-site customers migrating to hosted services. A web portal will allow customers to monitor and manage their cloud services.
XO appears to be a late-comer to the hosted telephony space. Several dozens of service providers have launched hosted IP telephony in the U.S. over the past eight years. However, its cautious approach may prove more successful as it has had the time to master SIP and develop the right capabilities for its target audience. Also, larger businesses are only now beginning to fully understand and appreciate the benefits of hosted/cloud communications which creates more favorable conditions for the delayed launch. Furthermore, XO is looking to position this new offering with a TCO improvement value, rather than the more traditional value proposition of inexpensive long distance or in-house staff replacement of early hosted offerings targeted at smaller businesses of less than 50 users.
Points to be addressed by XO:
Service providers that have been offering hosted voice for some years now are already looking to enhance their solutions with other communications and collaboration application such as conferencing, contact center, messaging, presence and collaboration. XO has contact center capabilities, as well as OCS, Exchange and SharePoint integrations on its roadmap, but immediate comparisons may tip the scales in favor of a competitor. I need to point out that not everyone (in fact, maybe few) larger businesses are looking to immediately outsource their entire communications infrastructure from voice to messaging from a third party. However, the sooner XO announces the ability to deliver a more complete UC package, the greater its competitive advantage is going to be. Also, service providers are increasingly looking to integrate communications with business applications (CRM being the typical low-hanging fruit) based on customer demand, which is something XO will need to explore in the future.
XO claims it has the tools and partnerships in place to manage this service all the way to the desktop. In fact, it offers on-premises probe, usage, network and support services. Hopefully, it handles this aspect properly, because many a service provider have failed associating cloud and hosted with a complete hands-off approach as far as the customer premises are concerned. But a reliable hosted communications service, especially when larger businesses are involved, requires a significant involvement in customer LAN, WAN and CPE upfront assessment and ongoing management.
Communications on the Premises or in the Cloud: How do you Make the Choice?
As promised, I continue to share my thoughts on the dichotomy of hosted/cloud communications and premises-based infrastructure. Eventually, I will have to deal with the differentiation (if any) between cloud and hosted, but for now, I am not yet sure where to draw the line. Although some tend to believe that these are two completely different animals, I believe the two have one major element in common: businesses adopting hosted or cloud communications should be willing to outsource all or most of their communications infrastructure and infrastructure management from a third party. Therefore, in discussing the potential for cloud communications, it seems imperative that we look at how the market has evolved over the past decade and what have been some of the factors determining customers’ choice for hosted or premises-based communications.
Historically, businesses around the world have favored premises-based implementations. The U.S. and Canada boast some of the highest adoption rates for hosted telephony, and yet the segment represents around 15 percent of installed business lines in those markets. Several factors have contributed to this uneven distribution and will continue to play a role in the future; the move to IP telephony and UC will, however, change the nature of these factors and their impact on communications investment decisions.
a) Supply-Side Factors
Functionality: Historically, hosted services have offered more limited functionality compared with premises-based solutions. Although TDM Centrex supports most key PBX features, such as abbreviated dialing, call forward, call park, call transfer, DID, DOD and music-on-hold, businesses are frequently drawn to PBXs for their superior functionality. With the advent of hosted IP telephony, however, more comprehensive service bundles (including messaging, presence, conferencing and other applications) are making the hosted offerings more appealing than alternative premises-based solutions.
Contract Terms: Centrex and other hosted services deliver greater flexibility, especially in terms of capacity adjustments at times of downsizing or rapid growth. Centrex contracts typically last two years, allowing customers to more frequently change solutions or providers based on new requirements.
Marketing and Awareness: The advent of IP telephony has further boosted PBX penetration as PBX vendors have been faster to market with advanced IP telephony platforms and have marketed them more aggressively than hosted services providers. Incumbent service providers have been slow to upgrade their communications infrastructure to VoIP and have only cautiously pursued IP communications offerings for fear of cannibalizing their existing Centrex and other legacy services. Service providers are, however, becoming more confident in marketing their next-generation services as they ramp up their cloud architectures and IP communications capabilities.
b) Demand-Side Factors
Security: Historically, telecom managers have considered multi-tenant, outsourced platforms to be less secure than premises-based systems, and IP telephony has raised even more concerns in that area. As security technologies rapidly improve for hosted solutions, we expect this concern to dissipate.
Control: Similarly, concerns about control continue to favor PBX implementations, in spite of the fact that advanced, hosted IP telephony offerings provide in-house staff with greater control than traditional Centrex services. For example, graphical management interfaces allow IT/telecom managers to perform moves, adds, and changes (MACs) quickly and conveniently without having to contact the service provider or pay for a technician to visit the site. These interfaces also allow managers to configure some features and settings on the go, based on user needs.
Businesses also tend to believe that they have greater flexibility and control over features and capabilities with a premises-based solution, since they can purchase or develop those internally as the need arises. In reality, the increasing complexity of communications architectures favors an outsourced solution, since a service provider is motivated to more rapidly upgrade and enhance the service offering.
TCO Analysis: The most compelling factor in choosing hosted or premises-based communications is the total cost of ownership (TCO) for the two scenarios. Of course, TCO varies widely, depending on a company’s existing infrastructure, number of sites, number of users (total and per site), specific application requirements, and available telecom staff.
For enterprises with a few larger sites, a premises-based solution typically offers a better TCO over a longer period of time. To a large degree, that’s because businesses often extend the life of their communications solutions well beyond the amortization period, at which point the asset has no book value – and therefore, no associated cost. Furthermore, with only a break-fix maintenance contract in place, support costs can also be reduced. Of course, this approach involves a significant amount of risk and can prove quite costly if an outdated solution begins to malfunction on a regular or system-wide basis.
Alternatively, Centrex and hosted IP telephony have been adopted by businesses that choose not to maintain in-house support staff and instead outsource their communications. Staff reductions, therefore, result in immediate and ongoing cost savings for these customers. It should be noted that TDM Centrex scenarios may involve some additional costs if a technician needs to be dispatched to the site on occasion; however, hosted IP telephony eliminates this cost burden as well due to more flexible network monitoring and management solutions.
Further, hosted services, and especially hosted IP telephony, provide significant TCO benefits to small branches and small sites within large organizations. Businesses choose hosted services for their remote locations in order to lower the costs of adding incremental capacity and to deliver uniform capabilities across geographically dispersed users.
Communications on the Premises or in the Cloud: How do You Make the Choice?
This is the first post in a series of commentaries on the dichotomy of premises-based versus hosted/cloud communications.
Economic Realities Mandate a New Approach to Communications Investments
The global recession caused a lot of fear and uncertainty in all business sectors worldwide. As revenues declined, business customers had to curtail their spending, including communications and IT investments, in order to limit their losses. As a result of these actions, such businesses have not been able to benefit from recent advancements in UC, mobility, videoconferencing, and other next-generation communications technologies. Many customers are still holding onto outdated communications platforms that may still meet basic needs but can offer little in terms of productivity enhancement, greater customer satisfaction or competitive differentiation.
In the meantime, the competitive landscape in all industry sectors is constantly changing. The financially strong market participants are able to move ahead by re-enforcing their competitive advantage through technology investments and more aggressive marketing. The others should not wait until the economy reaches its peak again since, by then, it will be even more difficult to catch up with the market leaders. In fact, turbulent waters create favorable conditions for the more nimble and resourceful participants to advance more rapidly. As communications vendors and service providers struggle with the consequences of the recession, businesses can use their temporary weakness to negotiate better deals on pricing, features, and services.
Overall, the recent recession brought forward the need for a new approach to communications investments, also mandated by other economic realities such as the rapid technological evolution and the acceleration of business processes. It demonstrated that business customers should seek to deploy their next-generation communications infrastructure with the following factors in mind:
Flexibility: At times of crises, businesses recognize the value of greater flexibility in terms of access to resources, including communications capabilities. One of the biggest challenges during a recession is the need to downsize, which results in a lot of unused communications capacity in the case of premises-based implementations. Hosted services, on the other hand, offer businesses the possibility to discontinue lines and services as capacity needs change. Further, workforce reduction frequently impacts IT and telecom personnel as well, rendering the business unable to properly manage its infrastructure and avoid downtime, proactively update and upgrade capabilities, and so on. Alternatively, in a managed or hosted services scenario, a third party is compelled to provide adequate capabilities as part of its contractual obligation regardless of economic circumstances.
Speed to Market: As tough economic conditions force businesses to tighten their purses, they find themselves unable to quickly react to market opportunities. R&D activities slow down, marketing and sales staff shortages leave the door open for competitors to steal customers away, and communications infrastructure inefficiencies prevent overwhelmed employees from effectively collaborating internally and communicating with customers and partners. However, businesses that chose to leverage advanced communications to compensate for workforce reduction and macro-economic challenges are better able to maintain internal productivity and customer satisfaction levels. Outsourced communications and IT resources are more effective in providing access to required capabilities faster, with minimal or no initial cash outlay, and with the ability to adjust capacity on demand.
Risk Mitigation/ Risk Sharing: Businesses tend to become particularly risk-averse during an economic downturn. While suspending or postponing new communications investments help conserve cash, this is not a viable long-term strategy as obsolete technology cannot support evolving businesses processes and needs. A more sustainable approach would involve sharing the risk with a trusted partner. In a premises-based implementation, more flexible leasing and managed services offerings could help alleviate some concerns over excessive financial exposure. A hosted offering can, however, completely transfer the risk to a third party by eliminating most CAPEX and delivering capacity based on actual company performance and needs.
Risk mitigation is key in favorable economic conditions as well. In a booming economy, growing R&D investments drive even more accelerated technology advancements requiring more frequent upgrades and staff re-training in the case of premises-based implementations. Alternatively, the risks of technology obsolescence could be absorbed by a hosted provider in an outsourced communications scenario.
Focus on Core Competencies: Businesses and individuals are equally overwhelmed with the amount of information and expertise required to remain competitive today. Businesses are, therefore, finding they can grow more rapidly and improve their bottom line by focusing on their core competencies. As the complexity of communications technologies increases, it becomes even more compelling to partner with a trusted communications expert to ensure that the company’s infrastructure is properly deployed and efficiently managed without wasting valuable internal resources. A managed or hosted communication solution can enable customers to leverage advanced communications for a competitive advantage while focusing entirely on their core business.
Economies of Scale: As businesses grow and expand virtually through multiple remote sites and users, their communications infrastructure needs to evolve as well. Hardware-centric premises-based communications platforms are typically not very cost-effective for multiple small sites of less than 50 users. During periods of rapid growth, such solutions do not scale economically as they require new servers to be purchased, integrated and managed for additional capacity. A hosted service, on the other hand, allows a more gradual addition of incremental capacity based on the actual number of users. Also, it typically provides a uniform set of features, a common dial plan, a consistent customer interface (through a network-based auto attendant or IVR) and some other benefits to geographically dispersed organizations. Further, as businesses increasingly seek to connect with their customers, suppliers and partners, a hosted service can more effectively provide federation across disparate organizations.
Future-proofing Investments: The recession along with the accelerating pace of technology evolution are driving the need to future-proof investments in communications and IT infrastructure. Businesses need to ensure that their services and solutions are flexible and based on open standards so they can be integrated with other applications and platforms at deployment or in the future. Since SIP is becoming the de-facto industry standard, SIP-based, SOA platforms and SIP-based services offer a significant amount of flexibility and investment protection. Such solutions integrate with a wide range of endpoints and other SIP-based applications. Another important factor in future-proofing the communications infrastructure is to ensure greater redundancy and disaster recovery capabilities. Frequently, a hosted, SIP-based service can provide all these capabilities more economically than a premises-based platform.
Communications on the Premises or in the Cloud: How do you Make the Choice?
In my 10 years as a Frost & Sullivan analyst, hosted IP telephony has always been one of my most favorite coverage areas. I believe in the value of outsourcing core communications capabilities for certain types of organizations and users. I also believe that IP technologies have dramatically changed the value proposition of hosted voice as new hosted IP telephony offerings deliver a number of additional features and capabilities compared with TDM Centrex.
I have to admit, however, that, although I am gaining some insight into how cloud technologies can further elevate the value of outsourced, multi-tenant communications infrastructures, I have not yet reached an epiphany on that matter. In fact, I find the hype around “cloud”, particularly as it relates to real-time communications, somewhat exaggerated. Most people seem to think of the cloud as being synonymous with Skype and Google TO THE EXCLUSION of various other multi-tenant, IP-based architectures. They may be right, but in that case, I find the definition AND potential for business-grade cloud communications rather limited.
I am not currently equipped to provide a final distinction between cloud communications and hosted IP telephony, but I am working on a couple of studies with Vanessa Alvarez (check her out on Twitter) that aim to offer some good insights on specific advantages and disadvantages of both approaches as well as some perspective on the different market participants. In the process, I plan to post a series of blog articles on hosted and cloud communications drivers, challenges and trends.
I will follow up this post with a discussion of some economic realities that require a new approach to communications investments. In the meantime, I would greatly appreciate any thoughts on hosted versus premises-based as well as hosted versus cloud.