Hosted vs. Premises - It's Not Black and White

[mchotiner]

There’s been a lot of “Hosted vs. Premises” debate in the blogosphere in the last few weeks, and a particularly spirited debate over at focus.com (“Why wouldn’t a Small to Mid-Size Business Always Go With a Hosted Phone Solution?”), with some fantastic insights from friends-of-BroadSoft Alteva, Broadcore, and SimpleSignal on why their hosted business is booming.

But – sometimes these discussion threads tend to have diminishing returns. You see people digging in their heels on either the ‘pro-hosted’ or ‘pro-premises’ positions.

I outline my thoughts on this below and at BroadSoft's blog, Broadband Ignite (www.broadbandignite.com). I'm interested in what others have to say on this topic.

This kind of black-and-white mindset, I think, misses three interesting trends in our industry.

First, we’re seeing a convergence of hosted and premises solutions in the SIP Trunking space, where service providers complement premises systems with network-hosted applications. Service providers who offer only ‘plain connectivity’ trunking have a serious customer churn risk – with today’s ease of portability, voice-only SIP trunks are quickly becoming a commodity. But service providers that “UC-Enable” their SIP Trunks – CBeyond boasts an average of seven UC apps per customer, and an enviously low churn rate – are able to lock in and monetize their SIP trunking base.

Second, it’s telling that a lot of the historically premises-oriented vendors have been leading the charge into hosted UC. Whether it’s Cisco and Webex Connect, Microsoft’s Hosted Messaging & Collaboration, or Lotus Live – I think the rapid move towards hosted apps from these companies is a clarion call that the hosted UC space is absolutely the real thing.

But at the same time, these teams aren’t abandoning premises solutions either. Microsoft’s “Power of Choice” message has been particularly accurate here, I think. Customers are going to be able to consume apps from enterprise-hosted apps, service-provider hosted apps, or Microsoft-hosted apps – there’s not just one correct answer.

Third, we’re seeing a rise in “virtual overlay services”, where UC apps are provided “in the cloud” independent of the actual end user phones. Google Voice is probably the most famous of these, but certainly service providers around the world have been providing (and monetizing) “Virtual Front Office”-type apps with BroadWorks for years. These apps are demonstrating that there’s a business for hosted UC services that complement, not replace premises systems.

So – “Hosted vs. Premises” doesn’t represent the debate very well, and could actually lead to people missing out on some huge market opportunities.