April 24, 2012

UC: Should You Choose a License, Subscription or Hybrid?

IT organizations are asking themselves whether they should buy a traditional software license for UC applications or subscribe to hosted or cloud UC services. The bottom-line question here is whether it is better to invest in or to expense UC services. And wouldn't it be nice if UC apps were offered like iTunes?

These are valid and viable questions. As there are both pros and cons to each approach, in most cases, the answers will be dictated by the enterprise's cash flow and budget considerations.

Enterprise Frustration

Enterprises that aren't yet ready to embrace all of UC's features or have some departments that would benefit more than others from UC have been frustrated with the one-size-fits-all box approach. They can't deliver UC features on an "a la carte" or user-by-user basis, at least not initially, and they're paying for functions they don't need. In one case, an enterprise wanted to use Microsoft Lync with a Cisco platform but discovered duplicate functionality. It had to purchase both software packages and then disable features in one. This is just one example of the old "pay twice, use once" model.

To better enable services for just those who need them, UC product companies are acquiring cloud-service companies; for example, PBX/UC maker ShoreTel acquired M5 in February. Or they will provide their own cloud services.

Since the publication of Webtorials' 2011 Ultimate Guide to VoIP and UC Services report, many cloud communication providers have expanded their services to encompass more UC functions and features. There have also been several acquisitions and mergers among the cloud communication companies themselves, creating larger and more financially viable entities.
This move to the cloud is disruptive and will undoubtedly influence UC subscription services, bringing about new cloud pricing models that will let enterprises select those - and only those - UC components they require.

A relevant example of cost differences from the applications world compares several e-mail and productivity application solutions. Microsoft Exchange, a "box" purchase, would cost a 5,000-person company $28.22 per user per month. Google's equivalent service, including e-mail, calendar and productivity applications plus technical support, would come in at about $8, and Microsoft's own Office 365 service would cost about $6.

Upending the Software Pricing Model

UCTN0423-QUOTE.jpgThe reason for the drastic differences is that cloud computing offers a whole new pricing model for access to software applications. The cloud offers more of a utility computing pricing model: one that is analogous to how consumers pay for electricity, gas and water. We pay based on consumption and draw from a shared power infrastructure and water source rather than everyone having their own.

All sorts of applications, including traditional PBX features and functions, are now being offered as cloud services or soon will be. At least 210 cloud service companies offer UC and other communication services in the U.S. (as shown in the Webtorials 2011 Ultimate Guide to VoIP and UC Services). Forrester Research finds that 31 percent of companies are already getting some software delivered as a service. Gartner expects the cloud services market to grow about 18.9 percent annually.

The cloud pricing model breaks down software into smaller units that are less expensive than the whole for the enterprise. This is attractive to IT and will serve to stimulate demand. That's why UC will grow faster and more pervasively under the subscription pricing model than if the box approach remained the only method for implementing UC.

In the end, UC software vendors will likely develop a hybrid approach, offering both pricing models. This will allow enterprises to start with the subscription approach and shift to a box purchase if financial conditions dictate.

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In addition to cash flow and and budget considerations, we have helped companies pinpoint other reasons for choosing license, subscription or hybrid solutions for UC. Those reasons include, but are not limited to: number of locations, geographically dispersed locations, size of IT staff, skillsets of IT staff, emphasis on business continuity and desire to have equipment on site.

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