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Cost savings, agility drive adoption of cloud telephony services

With cloud telephony, small companies see savings, while larger companies see mounting costs over a long lifecycle. But cloud agility is still appealing.

Cloud IP telephony (IPT) services are both maturing and broadening in availability.

Today's offerings provide a mix of software as a service (SaaS) services -- from a fixed set of features for a low monthly fee to custom hosted services that allow companies to migrate their existing on-premises platforms to cloud telephony with little or no impact on end-user configurations.

As a result, cloud IPT adoption is rapidly growing. This year, nearly 25% of companies will deploy cloud telephony platforms, according to Nemertes Research benchmark data, up from 17.5% in 2014 and just 4.5% in 2012. The benchmark data was gathered from approximately 180 companies.

Drivers for cloud IPT vary. For almost 44% of companies that are deploying cloud telephony services, cost reduction is the primary driver. IT leaders say deploying a cloud service is often cheaper, primarily in capital costs, than an on-premises platform. Additional cost savings come from buyers being able to purchase what they initially need and scale it up or down as needed, rather than invest upfront in a large platform to meet not just current demand, but also anticipated future growth.

Not everyone moving to the cloud is saving money. Nemertes TCO data shows that for many organizations, especially mid- to large-sized companies with more than 2,500 employees, cloud telephony services can actually cost more to operate over a five-year lifecycle than on-premises platforms. Even the potentially higher cost of cloud IPT doesn't stop cloud deployments; 29% of those businesses going to the cloud said their primary driver is to improve agility, leveraging the ability of cloud platforms to deliver rapid upgrades to meet ever-changing end-user requirements. Another 5% said cloud helps them become more strategic, moving employees out of roles that involve administering systems and into roles where they directly interface with lines of business to better align IT and business strategies.

Despite cloud growth, 60% of benchmark participants said they aren't yet ready to migrate to a hosted service provider. Cost is the biggest obstacle. Not only can cloud platforms be more expensive to operate, as previously noted, but existing on-premises platforms may still require depreciation.

The second biggest roadblock to cloud is security concerns. Many companies, especially those in regulated industries, are still not yet ready or able to take advantage of cloud telephony services due to restrictions on their ability to store data in a third-party provider's network or because unique requirements like call recording or call encryption are not yet supported by cloud providers in a cost-effective manner.

Cloud IPT adoption also varies by organizational size. Roughly one-third of small companies -- those with fewer than 250 employees -- currently use cloud telephony services, while just 12.5% of those businesses with more than 2,500 employees do so. However, momentum is growing, especially in mid-sized organizations -- those with 250 to 2,500 employees -- where 33% are either evaluating or planning to deploy cloud IPT in the next few years.

Those organizations evaluating cloud IPT services must carefully calculate costs, and determine if increased agility, flexibility and the opportunity to shift IT resources into a more strategic role will outweigh potentially higher costs and increased security concerns.

About the author:
Irwin Lazar is vice president and service director at Nemertes Research.

Some key drivers and obstacles of cloud telephony adoption, which can vary by organizational size

Drivers:

  • Cost reduction
  • Improved agility and scalability for current demand and future growth
  • Rapid upgrades to meet end-user needs
  • Better alignment of personnel roles and IT and business strategies
  • Recent widening of service features

Obstacles:

  • Long-term costs for some companies
  • Security concerns
  • Existing on-premises platforms require depreciation

Source: Nemertes Research benchmark data

Next Steps

Research some top cloud-based telephony and UC providers.

Cloud telephony benefits include full features and low costs.

Is cloud telephony a hit or miss for businesses?

This was last published in April 2015

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