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Total cost of ownership is an important factor for making technology buying decisions, but it isn't a helpful metric to compare on-premises and cloud-based unified communications.
Any form of premises-based technology is asset-based by nature -- usually Capex -- where the hardware is owned by the business and has a lifecycle based on amortization costs. This creates a clearly defined and well-established set of metrics to determine TCO.
At face value, TCO is helpful for accounting purposes, but the real value is for comparing bids from vendors selling similar products. Sometimes, TCO is the primary criterion for selecting a winning bid, but it's also useful as a tiebreaker when other criteria are, more or less, equal across the bidders.
The TCO comparison becomes irrelevant with unified communications as a service (UCaaS), since the technology is subscription-based rather than asset-based. There's nothing to own with UCaaS, aside from some relatively inexpensive IP phones and peripherals. As such, organizations must consider two key takeaways.
1. Don't use TCO to compare on-premises UC vs. UCaaS
UC is Capex, and UCaaS is Opex. So, their value is based on different metrics and cost factors. While the technologies have some common elements, they're not enough to make a meaningful comparison. TCO is a concept from the hardware world, and it simply isn't applicable to software running in the cloud.
2. Compare competing UCaaS offerings
UCaaS follows the consumption-based SaaS model. While both on-premises and cloud-based versions of UC provide comparable utility to end users, UCaaS is part of a bigger transition as IT increasingly moves operations to the cloud. Once that shift is underway, there's no need to compare between these two forms.
For businesses trying to decide which deployment model is best for UC, TCO won't provide the answer. In cases where UCaaS will be the plan going forward, the more important metrics will be among UCaaS offerings, where all the cost factors can more easily be compared on a like-for-like basis.
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