Adoption rates of hosted VoIP and managed VoIP are increasing as more companies look to reduce the costs and complexities of deploying VoIP in house. Enterprises are factoring revenue growth, enhanced productivity and communication services into ROI calculations to make a business case for hosted or managed VoIP. This guide explains the differences between hosted and managed VoIP solutions and will help you decide if outsourcing VoIP is right for your organization.
Table of contents
UNDERSTANDING HOSTED AND MANAGED VOIP
- Hosted VoIP eliminates cost, complexity:
Hosted VoIP is being adopted at increasing rates as more and more companies look to avoid the excess costs and complexities of on-premise solutions.
- Managed and hosted VoIP: muddling through:
Managed and Centrex and hosted, oh my! For companies looking for an alternative to a premise-based phone system, there are plenty available, and they come in all shapes and sizes.
- Managed VoIP -- 10 tips for a smooth migration:
Migrating to managed VoIP doesn't have to be a headache. Here, Verizon Business offers 10 top tips to ensure you get what you need.
- Hosted VoIP: Take the headache and heartache out of VoIP, part 1:
No matter what size network an enterprise is running these days, large and small alike are faced with increasing technical and financial challenges.
- Hosted VoIP: Take the headache and heartache out of VoIP, part 2
Part 2 of this series investigates the QoS and security issues of the hosted VoIP model.
HOSTED VOIP: CASE STUDIES
- Hosted VoIP improves portfolio, company functionality:
Hosted VoIP helped one company improve intra-office communications and team spirit.
- VoIP software eases company's communications constraints:
Hosted VoIP solution -- converged communications as a service -- saves one company time and money and has liberated its IT staff to focus on higher-value activities.
An increasing number of businesses are adopting hosted voice services in an effort to avoid the cost and complexity of premise-based solutions, according to a recent study by Frost & Sullivan.
Businesses are also reaping the benefits of supplemental capabilities -- including unified communications, simple-to-use conferencing, and find me/follow me. The study recorded hosted Voice over Internet Protocol (VoIP) services revenues at $372.6 million in 2005, with estimates reaching to $14.6 billion in 2012.
"Small businesses that account for the majority of the end users are likely to continue driving hosted IP telephony deployments," Frost & Sullivan senior analyst Lynda Starr said. "Medium and large businesses' interests in hosted IP telephony and VoIP access service are also likely to increase."
Decreasing hardware prices, improved voice quality resulting from advances in codecs, and tight service level agreements (SLAs) have fueled the drive toward hosted services. Hosted services allow businesses with limited budgets and staff to balance the cost of a more efficient communication system with a level of available productivity. They also offer customers the immediate benefit of upgrades that otherwise would not be considered a practical expense for another 10 years.
The Frost & Sullivan study also found that most companies with a premise-based system already in place are seriously considering a hybrid solution as they migrate to hosted IP telephony, allowing them to continue using existing systems for a number of years.
"As these two systems can coexist," Starr said, "service providers are likely to offer end-user enterprises a hybrid solution of both premise-based and hosted solutions, enabling customers to phase in a hosted solution with a trunking service and existing legacy equipment."
Enticing businesses to switch to partial or complete hosted service will be VoIP service providers' biggest challenge. Hurdles include offering customers a unique set of features that are not available over circuit-switched offerings and a pricing model that offers adequate return on investment to the customer.
Starr concluded that end users of VoIP found the rapid growth potential for the hosted services reassuring when beginning a migration from outdated Y2K-era systems. She added that small and midsized businesses in particular stood to gain a more professional phone appearance.
Managed and Centrex and hosted, oh my! For companies looking for an alternative to a premise-based phone system, there are plenty available, and they come in all shapes and sizes. Hosted voice, IP Centrex, managed IP PBXs and network-based voice service are all viable alternatives to the do-it-yourself model. But these terms are often used interchangeably -- incorrectly in most cases -- causing confusion among the buying community as to which product to use in what situation. A clearer understanding of exactly what's available will help you at least ask the proper questions to distinguish between the services.
When considering an outsourced service, there are four basic product categories. Hosted IP PBX, managed IP PBXs, network-based services and IP Centrex. The basic premise of all of these services is that a third party manages everything and provides a "service" to the organization -- but they do differ. The main benefit of an outsourced service is that much of the risk is transferred to the service provider, but the customer does lose direct control of the solution.
Managed IP PBX
This is where the traditional IP PBX is on premise. The enterprise could choose to manage the products itself but chooses to outsource the management to a third party. It's important to note that not all managed services are created equal. They range from simple moves, adds and changes up to fully outsourced management of the entire lifecycle of VoIP. Most VoIP services today are managed services and are offered by most telcos and systems integrators, and even by many vendors such as Avaya and NEC Unified Solutions.
Hosted IP PBX
A hosted IP PBX is no different from any other hosted application, such as email. Instead of the IP PBX being located on the customer premise, it is located in the vendor's hosting center. The IP PBX is exactly the same one that would be purchased and placed on premise, meaning that the company is buying "hosted Cisco" or "hosted Avaya," so it interoperates with the premise-based equipment. Some companies "host" the IP PBX themselves by placing the IP PBX in their own data center, and then every branch office picks up the call control from there. A few companies I've talked to have put the primary IP PBX in their own data center and the backup in a third-party hosting center. The systems integrators and VARs are the primary deliverers of hosted IP PBXs. An interesting option for Avaya customers is Avaya's On-Demand voice service, delivered in partnership with Savvis.
The term "IP Centrex" is an overused tag used to describe anything where the call control is located in the network instead of the branch. There are many carrier services that carry the Centrex name, but most of them are actually much more than an IP version of a traditional Centrex service. A true IP Centrex service has an IP gateway placed in front of a traditional Class 5 switch, with the service delivered over IP, but the basic service is still a traditional Centrex service. The growth potential of this type of service is limited because many of the advanced unified communications features cannot be delivered this way. Also, in the U.S., Centrex services haven't been overly popular; IP enabling it makes it a little easier to deliver, but the stigma of Centrex still applies to it. As far as I know, there are no major carriers that offer an IP-enabled Centrex service. A few rural ILECs do, but the growth in cloud-based voice services is in a true network-based service, highlighted below.
A network-based service is similar to a hosted IP PBX but with a couple of differences. First, the infrastructure -- known as a softswitch -- which provides the call control, is located in the telco network, not a hosting center. The softswitch is designed to be a multi-tenant product, meaning that it can house the calling capabilities of multiple customers, whereas a hosted IP PBX is deployed on a per-customer basis. The softswitch has been positioned as the IP equivalent of an old Class 5 switch, but a softswitch is more of an application server that's capable of serving up applications other than just voice. Any service built from a softswitch is capable of delivering many of the unified communications applications as well. One mistake many carriers have made is branding their softswitch-based services as "IP Centrex" services. For example, Verizon's Hosted IP Centrex service is actually a network-based service built on Broadsoft infrastructure and is much more than just a basic Centrex service. AT&T's Voice DNA and Vonage's phone service (consumer) are also examples of this. Organizations considering a cloud-based service should do the due diligence to understand exactly how the service is delivered and the long-term roadmap of the service. The downside to these services is that the infrastructure that provides the service needs to adhere to industry standards, meaning that the features are limited to ones that have made their way through the standards bodies. Most premise-based IP PBXs from vendors such as Cisco and Avaya also adhere to standards, but they add on extra features through proprietary extensions to the standard. In many cases, the standards-based features available should be sufficient for many organizations, but companies considering this type of service should keep this in mind. As time marches on and the standards mature, the gap between proprietary features and standards-based features will close.
The main theme behind a hosted, IP Centrex, and network-based voice service is that the call control is somewhere "in the cloud," and all that's needed on the customer premise are IP phones and a router for the data services. Telecommuter phones and PC-based softphones can also interoperate with these services.
Even though the industry has done a great job creating confusion among all the available VoIP services, I do think they're a good alternative to organizations that want to offload much of the up-front expense of buying the equipment and the ongoing operational costs associated with managing the equipment. If you're considering a service, though, keep a few things in mind.
Understand the architecture behind the service
Many of the services have been branded with names that don't accurately describe them. For example, a name like "Hosted IP Centrex" service doesn't really describe whether it's a true hosted service, Centrex service or network-based service.
Even if you're a predominantly do-it-yourself IT organization, consider a hybrid environment where the hosted services are used for some of the smaller branches and telecommuters. This will probably scale much more easily for you as you move more locations over to VoIP.
VoIP migration can take a lot out of a company. It takes massive amounts of time and piles of money. From the largest enterprises to the smallest SMBs, managed VoIP has become a reality. Many companies just don't have the time to do it themselves. They need to hire a service provider to oversee the transition to VoIP and ensure high reliability and performance. But even with managed VoIP, there are things companies need to know before selecting their partners and deciding who will manage their mission-critical voice applications.
According to Laurie Shook, Verizon Business' director of managed IP telephony, said companies need to start focusing on the quality of a voice deployment and who best suits its needs, instead of trying to do it themselves.
"Companies need to realize there is too much at risk to try to do it yourself," she said. "Businesses aren't used to thinking of their telephone systems as an IT system."
Companies labor under two major misconceptions when considering a provider for managed VoIP service, Shook said. They often underestimate the degree of readiness in the existing WAN to accommodate VoIP, and they underestimate the complexity of managing VoIP when it's on the same backbone as data.
Some vendors run a VoIP readiness assessment based on a pass-fail analysis, while others offer a more comprehensive analysis and make recommendations. Research has shown that roughly 85% of customers looking for a managed VoIP service require some sort of WAN upgrade to accommodate IP telephony, Shook said.
"There's no more problems with IP [systems] over TDM [systems]," she said, "but when you do have a problem [with IP], it's a lot harder to figure out where that problem is."
There are 10 things a company should look out for when considering a migration to managed VoIP, according to Shook. And though these steps can help a smooth migration, she said, they are certainly not a cure-all.
According to Shook, Verizon Business suggests that companies should:
- Evaluate service provider and system integrator capabilities in terms of breadth of services and flexibility of offerings.
- Ensure that the vendor is financially stable and committed to the business over the long haul.
- Determine whether resources are available when and where they are required.
- Look for a service provider that will build upon the existing investment in hardware and software.
- Identify the scope and scale of service provider responsibility.
- Tour the company's network management facility and meet the people who will monitor the network.
- Ask about employee and site certifications.
- Select a service provider with built-in system redundancy.
- Obtain fully documented service resolution procedures.
- Consider vendors that are committed to continued investment in network operations and systems integration.
Companies really need to put managed providers under fire before signing on the dotted line, Shook said. It essentially comes down to "who you are able to have a trusting relationship with," she said. "Can the vendor meet your needs?"
In some cases, vendors offer help with implementation but not future management, Shook said. Companies also have to consider whether they want a centralized solution that will be managed separately and must also figure out how much of their existing infrastructure they want to reuse.
Most importantly, however, companies need to pay attention to the SLAs offered by service providers, she said. The wording of the SLA can determine whether refunds are related to repair time or response time, and some service providers aren't clear which they offer until the issue arises.
According to Jim DeMerlis, vice president of managed services for Verizon Business, these 10 tips are not necessarily set in stone; rather, they are guidelines to ensure a smooth migration with as few surprises as possible.
"These suggestions are not a silver bullet for success," DeMerlis said. "Organizations must devote the time and resources necessary to develop a comprehensive IPT migration strategy. Incorporating these tips into the due diligence process will help ensure a smooth transition."
Hosted and managed telephony solutions offer a great litany of benefits as compared with premise-based solutions which are costlier and require more responsibility for network maintenance. It is often possible to create umbrella solutions that combine both hosted and premise components, and allows the customer to maintain their own network instead of outsourcing that responsibility.
No matter what size network an enterprise is running these days, large and small alike are faced with increasing technical and financial challenges. These include dealing with a myriad of networking components, never ending security issues, the unquenchable demand for new network services -- such as Voice over Internet Protocol (VoIP) and IP television -- as well as balancing this demand with the ongoing pressure to reduce capital and operating expenses. Increasingly, enterprise CIO's are deciding to outsource the operation, support and maintenance of their enterprise network to a third-party. The driving force behind this shift is new market innovations, such as the convergence of voice and data, which makes network operations more complex.
The term "hosted VoIP" means a number of different things to different people. One key data point is that the "who" of hosting should be transparent to the end user. It can be a service provider or a third-party offering the hosted solution. The hosting can be offered in a completely separate facility sometimes called a global network operations center (GNOC) or can be offered directly on the carriers' or their customers premises. One key point is that whoever is providing the hosting actually owns the equipment and this in turn significantly reduces the amount of CAPEX for the enterprise. Enterprises will ultimately choose the optimized hosted solution based upon their own network needs, core technical competencies and capabilities as well as desired services.
While the hosting infrastructure architecture can be designed in a variety of ways technically, one of the parts of the decision process is who should perform the hosting. Obviously an enterprise needs to carefully select a trusted partner. Just as any outsourcing decision, handing over an important function of network operation needs to be a well-thought out process. Enterprises need to take into consideration the performance record of their partner, their partner's commitment to new services development and deployment, as well as their customer support and business continuity and disaster recovery plans.
For many enterprise CIO's – especially those involved with large enterprises – outsourcing on a scale this big might be considered a loss of control and a decision that could compromise overall quality. However, as technologies such as VoIP continue to evolve to new and even more challenging applications, it may be easier for enterprises to keep up by using a third-party provider.
New technology introduces complicated technical issues and VoIP specifically has two very relevant concerns that need to be addressed immediately -- security and quality of service (QoS). Both of them can be addressed in the network, however since both continue to evolve on a sometimes-weekly basis, they can become very cumbersome issues. This makes it quite difficult for an IT organization that is already over tasked with regular network issues to identify and resolve without significant investment.
The industry often chooses to focus on the positive features of VoIP — shared IT infrastructure, and plug-and-play adaptability. While these key elements take advantage of the flexibility of IP, they are also what make it more susceptible to possible outside attack. Unlike a traditional circuit based telephone network., a VoIP network is vulnerable to the typical IP infrastructure issues, including interference from denial of service (DOS) attacks, viruses and wo,prms. These attacks can lead to the major outages that sometimes occur with data networks – taking the network down for hours or even days.
There are also a variety of attacks that specifically target VoIP networks. A couple of recent examples include spam over IP telephony (SPIT) and malicious transmission of obscenities. All of these issues are things that would be a huge problem inside a corporate network – especially when they can lead to the disruption of phone service.
In today's fast-paced global business world many workers spend hours on conference calls and reaching out to customer and colleagues by phone. The ability to pick up a desk phone and have it work almost 100 percent of the time is taken for granted. However, with a VoIP network there are not the same guarantees. Because they are vulnerable to outside influence, these disruptions can magnify some of the other common deficiencies with VoIP – latency, dropped calls or distortion. Since voice communications is one of the most reliable and personal ways to conduct business most companies do not tolerate downtime on a voice network or unintelligible calls the same way they might with a data network or a mobile phone.
The good news is that VoIP has been around for a number of years, so some of its major risks are well understood. The industry is constantly developing best practices and tools and techniques for protecting and controlling VoIP networks. For instance, the International Organization for Standardization offers ISO 17799, which provides recommendations for information security management, also provides a common basis for developing organizational security standards. Similarly, the International Telecommunications Union's X.805 standard, pioneered by Bell Labs, defines security architecture for systems providing end-to-end communications. And NRIC, the Network Reliability and Interoperability Council, provides best practices guidance in a number of areas that relate to VoIP operations.
While the tools to deal with security concerns and VoIP exist, the time it takes to implement them may be the harder part of the equation. Because the industry is constantly evolving, security issues may pull away hours and hours of resource time from already strapped IT staffs.
Even the creation of a best practices model for an individual company is a laborious process. Typically these includes both and internal review that involved detailed -- users, administrators, managers and other employees -- as well as the more traditional security equipment assessments to show potential technical security gaps. A well-devised security plan must be able to include these unforeseeable risks and minimise them – however finding the time can be the trickiest part. In a hosted environment much of this work, especially keeping current with new types of attacks and solutions, will already be addressed.
The second major issue that is also commonly overlooked or minimized in the zealous race to move to a VoIP network is QoS. While QoS has long been discussed in data circles, when an IP network is carrying voice traffic it becomes an even more critical element. Just as planning is a key aspect to controlling the potential security issues; planning and network design are the foundation to building a VoIP network that delivers upon quality expectations. A good network design methodology includes prioritisation, traffic engineering, a plan to handle voice in a converged network and a restoration process.
In addition administrators must put a call admission control (CAC) process in place. CAC allows the customers to properly design the network to carry the traffic load even at the busiest times while still meeting QoS objectives. This complex process can be managed, for the most part by using one of the following methods: per call bandwidth reservation, local measurement based management, path-based management and link-based management. A network needs to carefully consider each choice, because the wrong one can have a direct impact on total voice quality.
In a traditional circuit based network voice is given a dedicated bandwidth allotment so the quality is assured. In a packet environment a customer must either predict voice quality in a new VoIP deployment or assess voice quality in an existing network to ensure end user satisfaction. Both scenarios can be managed by using a well-designed modelling process. One way to accomplish this is to combine both subjective testing with objective testing models. The subjective category includes the e-model scale of user satisfaction categories (ITU G.109) that set definitive end values and give a Mean Opinion Score (MOS). The objective components then measures network impairments such as delays, packet loss and echo, and computes a total score. In the case of a brand-new network these models are then combined with a network performance prediction tool (NPPT) that takes into account network information, VoIP traffic demand patterns and a network performance prediction algorithm to deliver a VoIP voice quality prediction report.
In the case of an existing network the e-model testing is still used for a voice auality assessment portion, but it is combined with other assessment tools such as network discovery, network performance measurement, delay asessment plan, delay assessment and root-cause analysis to deliver a VoIP voice quality assessment report.
While the industry has a number of different approaches to QoS it is clear that voice quality is key to the ultimate success of a VoIP deployment. The planning and traffic prediction make or break the deployment. The use of a hosted environment where detailed planning was built into the network design and will continue to be upgraded and monitored as new technology emerges may make a significant difference in overall performance.
Given today's competitive operating environments, the benefits of the hosted model provide some compelling reasons to consider it as a viable option. These may include lower overall operating expenses, ability to provide enhanced security, improved network performance and ability to quickly rollout new services such as VoIP. This approach allows enterprises to focus on their own core network competencies and re-deploy staff to areas that make the most use of their expertise.
As VoIP and a wide variety of other broadband communications applications including unified messaging, security and mobile extension applications that can extend the functionality of the office phone system to a mobile environment, continue to emerge on the scene, the network landscape is dramatically changing. The continuous push to add new technology is tipping the scales in what was once a closely guarded possession for organizations -- network operation. When customers combine the cost-effectiveness and the ability to immediately offer new services the decision to outsource is becoming clearer every day to both the network operator and enterprise CIO.
"Americans feel they have certain inalienable rights," said Quentin Krengel, president and CEO of Krengel Technology Inc. -- "including the right to a dial tone."
As a beta-tester for MailStreet's recently added hosted VoIP feature, Krengel has enough experience to say with certainty that he wants a dial tone to be a right. As founder and CEO of an online marketing and software development firm, Krengel knows what he wants from his communications services and isn't afraid to ask for it.
Yet with a growing business, the need to rely on continuous connectivity became an issue, and eventually the situation came to a head when Krengel Technology experienced a three-day service outage with Vonage. By the third day, when patience was exhausted and weak assistance from customer service had run its course, Krengel began a search for a new communications provider. Two or three days after the outage fiasco, Krengel Technology began a fruitful partnership with Apptix's MailStreet.
Apptix offers three levels of service, with MailStreet catering primarily to what is termed the "ultra-small" business market -- one to 20 employees -- and offering a cost-conscious solution. Covering all the basics of enterprise-class email, unified communications, hosted Exchange and hosted PBX services, Apptix's various service levels launched their latest feature, Apptix Voice -- a hosted VoIP solution -- on March 19, in response to a demand among businesses of all sizes. Amir Hudda, CEO, said, "Combined with our hosted email and collaboration solutions, Apptix Voice extends our vision of delivering reliable, enterprise-class business communications solutions to the SMB [small and midsized business] market."
In addition to choosing the more traditional MailStreet offerings of hosted Exchange, email and Outlook integration, Krengel also volunteered his firm of primarily home-office-based employees to beta-test the MailStreet VoIP feature. He said it was important that all the workers in his firm felt comfortable handling call conferencing, call forwarding and call transfers -- both internal and external -- so the user interface would need to be easy to use but graphically dynamic.
After initial testing among the employees, a user in the marketing department came back and confirmed the functionality of MailStreet's offering by stating, "Even a non-geek like me can use the system and understand the display easily." The firm is also testing softphones, handsets and PC integration among the three features, which share the same phone number -- another feature of MailStreet's offerings that appeals to Krengel.
Krengel acknowledged that he is a demanding user, but he knows what he wants and is also aware that the perfect communication system does not exist. But a high level of customer service -- including rapid turnaround on emails, willingness to assist on implementation of new features, and availability after hours to handle difficult situations as they arise -- has convinced Krengel that he made a wise choice in taking his firm to the next level in communications.
Hosted VoIP is getting a new spin as the telephony community begins to explore voice communications as software applications on a converged network.
"We're allergic to the word 'hosted,'" Russ Maney, vice president of marketing, said when describing Smoothstone and its view of the Voice over IP (VoIP) communications world.
Rather than following the better-known model of hosted VoIP services, Smoothstone considers itself a fully managed communications service provider. Terming its service "converged communications as a service," Smoothstone takes the approach of offering a complete solution -- covering everything from basic dial tone to automated call distribution (ACD) and videoconferencing services.
Using the Software as a Service (SaaS) model and replacing traditional telecom equipment and separate silos of legacy networks, Smoothstone makes VoIP software and services available over a network connection from an externally hosted platform. In addition, Smoothstone offers businesses the chance to converge separated data, voice and video networks into a single provider that offers these features over a private, nationwide network as a service.
Vic Elarde, IT manager at Telular Corp., said that six months with Smoothstone's complete solution liberated his staff to focus on the higher-value activities of the network rather than spending their time keeping the voice system operational.
Whenever there was a problem with the phone system, Elarde knew he would need to set aside at least a few hours to phone in the problem to his previous provider, AT&T/BellSouth, and then wait for a call back with a response -- the actual fix for the issue could take another day or two, depending on the problem. In comparison, Elarde said, "It took one call to reach Smoothstone's support versus waiting a day or two to hear back from our previous provider, or several hours on the phone before reaching a support worker."
For Telular, the cost-savings benefits of VoIP and hosted VoIP had become another incentive to find a different telephony solution. With an average bill of $30,000 per month before switching to Smoothstone, and struggling to reach a customer service rep with the other company when there was a problem, monthly costs of $12,000 to $13,000 reaffirmed Elarde's decision to switch.
As a manager who is customer service-oriented, Elarde is also thrilled with the near-weekly phone calls he receives from his Smoothstone customer service rep to check in. Telular also found that using a new hosted service helped the company avoid the cost of a forklift to VoIP -- one that might not have included the other unified features included with Smoothstone's complete solution.
Rather than allowing the site to be down for the duration of the physical move, Smoothstone enabled Telular to virtually move the site from the Chicago server to the New York office's server. Once the physical move to downtown Chicago was over and the server was back online, Smoothstone transitioned the site back onto the Chicago server -- without experiencing any downtime.
For Telular's remote and mobile workers, additional features have also improved communications capabilities. As its complete solution places all network users onto the same private network, the entire company is on the same virtual call center -- allowing workers to communicate with one another as if they were in the same physical location.
Elarde has found that Smoothstone's flexibility is invaluable to improving Telular's business -- including being able to add T1 lines as the volume handled by the call center increases, or rerouting calls to the Chicago office when the volume spikes.
With the number of benefits Elarde has seen for his IT staff and within the rest of Telular, he is confident that a converged communications system was the best path for his company to take to improve its business.
"In choosing to use a converged communications model," Elarde said, "our cost savings alone have made our company profitable."
Ask the expert: Making the decision to shift to hosted VoIP