Deploying UC Apps: CPE or Cloud?

The advent of unified communications (UC) resurrects the question, "Should enterprises install their own customer premise equipment (CPE) or use outside services such as the cloud?" The answer depends not only on security, staffing and economics, but also on which approach is most effective at introducing enterprise users to the UC menu of features.

The most common approach to implementing enhanced communication functions has been through the use of an IP-based PBX on the enterprise's premises. Some enterprises have opted to subscribe to Centrex services (a form of telephony outsourcing) instead of owning and operating a PBX. But Centrex's feature list has been modest and not UC-specific.

Two Ways to Go

Two possible solutions are available to the enterprise for supporting UC:

  • A complete system purchased by the enterprise and located in its data center(s)
  • A remote service accessible through a private network or the Internet. Such a service can be called "hosted PBX," "virtual PBX," "hosted UC" or "communications as a service" (CaaS) in the cloud.

The first approach - buying, installing and maintaining a UC system - has a high first-year cost. This is mainly for software licenses, which may include bundled features that the enterprise does not necessarily want or need. However, if the UC system vendor offers per-feature licensing, the cost is typically much higher than when the bundled software package is purchased.

On the other hand, cloud-based/hosted UC services can be subscribed to on a feature-by-feature basis thereby avoiding a large license fee for unused features and giving the enterprise greater flexibility about which features it offers to which users. So far, most enterprises have implemented a few UC features and are monitoring their use to determine their benefits and associated return on investment (ROI).

IT and communication budget restraints can make a new on-premises UC solution too expensive. In fact, many enterprises prefer to avoid any new capital costs, making a cloud solution with little or no capital expenditure more attractive. The table compares cost and other traits of on-premises and cloud solutions.

Considering the Tradeoffs

The on-premises solution has potentially better security and does not require an Internet connection. The cloud service solution is probably cheaper and requires less staff time, but needs greater Internet bandwidth and poses more security issues. The two solutions are equal in terms of the number of physical phones needed and LAN operation requirements and expenses.

There is a booming market in cloud-based communication services, with more than 200 providers in the U.S. alone. The majority of these providers focus on VoIP and PBX services for small to medium-sized enterprises. However, the time has come for most enterprises to at least entertain the use of cloud-based UC services so they can determine whether there are cost or other benefits they might be missing.

Premises v. Cloud: Comparison Factors


On-Premises System

Cloud Service


Real Estate Costs

System located at enterprise data center(s).

No data center real estate required except for network connection equipment to remote system.

Cloud service is cheaper.

Power and Cooling Costs

Responsibility of the enterprise.

Cost included in service fee except for on-prem network connection equipment.

Cloud service is cheaper.

Phone Costs

New IP phones and softphone licenses might be required.

New IP phones and softphone licenses might be required.

Solution costs are equal.

LAN Costs

Existing LAN(s) must carry voice and signaling traffic.

Existing LAN(s) must carry voice and signaling traffic.

Solution costs are equal.

PSTN Connections

Located at enterprise.

Located at provider.

Cloud solution controls PSTN access. If Internet failure occurs, no phone calls will be operational.

Internet Connections

Internet connections for remote teleworkers  necessary when IP phones or softphones are deployed.

Internet connections for remote teleworkers and a data center Internet connection to access the cloud server needed.

Cloud has higher network cost because all calls must pass through Internet.


Traffic remains within enterprise network except at teleworker locations, which will require firewalls.

Traffic traverses an external private network or the Internet. This increases security concerns, particularly for regulated enterprises.

Cloud solution poses greater security risk.

Disaster Recovery


At least two enterprise data centers with power and cooling backup are required.

Built into the service.  WAN connections present possible reliability issue.

Slight advantage to the cloud.


Part-time IT staff for data center operation and some administrative staff needed.

Only part-time enterprise WAN staff and some administrative staff needed.

Lower staffing requirement for cloud solution.

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1 Comment



There really is no such thing as a single "UC System!"

Instead, there are "UC-enabled" applications, which can be communication applications or automated business applications. There are hosted/cloud alternatives for each UC-enabled application, so there can be "hybrid" combinations. When evaluating the cloud alternatives, they can be done on an application by application basis.

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