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The Cloud Question: Is It Cost-Effective?

Recently, the blog site of enterprise communications conference host Enterprise Connect, featured a five-year total cost of ownership (TCO) comparison of 23 vendors’ offerings for Internet Protocol-Private Branch Exchange (IP-PBX) plus Unified Communications (UC).

It compared costs of three options:  on-premises UC with new PBX (Premise-customer owned equipment), cloud-based UC/PBX (fully hosted) and Cloud UC with Customer existing PBX overlay (hybrid) - with results that may surprise you.


Even if your business isn’t planning to buy a new system this year, this side-by-side comparison is helpful in keeping track of industry trends. 

As with any cost comparison, it’s only as good as the assumptions that go into it. I give high marks to the contributors who designed the comparison’s three mock RFPs and reviewed the RFP responses from all vendors for their efforts to ensure apples-to-apples comparisons.

For example,if a solution didn't include audio or web conferencing, they added reasonable costs for procuring those capabilities separately. Power and rack space costs were added to the premises-based and overlay options, since those are included in the cloud-based options. They even included staffing estimates to account for differences in the options’ IT support needs.

The result? Three distinct costs zones based on average costs from all responding vendors for each option. 

Here’s how TCO for the three options stacked up from most to least expensive:

1.  Cloud

2.  On-Premises

3.  Overlay

The same cost relationship among the three options was clear when comparing same-vendor offerings for two or more of the options.

As the supporting article suggests, the higher cost of the cloud-based offerings likely reflects a number of factors, among them the transfer of risk to the cloud services vendor and the higher costs for vendors in the early adoption stage of cloud technology (these should come down over time).

If you're contemplating your PBX and UC needs, this information can be one helpful tool in determining what’s best for your business. An independent consultant who can help you analyze the many complex variables at play is another. For example, are the assumptions made for this comparison in alignment with your business reality? While the overlay options are less expensive over the TCO five-year period analyzed, will placing new features on your existing system really give you the functionality you are looking for? For how long? What are the tradeoffs?

If you’d like to explore these or other telecom questions, contact us today at 309.243.8100 or email We’ll be glad to help demystify your telecom needs.

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