May 9, 2012

Check out Cloud Providers' Business Models

There's no single way to deliver cloud communications services, and the specific business model a given provider uses could make that provider more or less appropriate for your particular needs. A 2011 Webtorials survey of cloud communication providers, for example,  showed that the provider's business model can have significant implications for the various cloud services important to enterprises such as service-level agreements (SLAs), security, privacy and availability.

For example, while most cloud communication providers use the Internet to provide access to their services, a few bundle Multiprotocol Label Switching (MPLS) access into their services. Their users will get better voice quality because MPLS supports a quality-of-service (QoS) level not available over the Internet.

Primary Available Models

The five business models now in use by cloud service providers are as follows:

  • Vertically integrated provider - This is a holistic cloud service where the provider owns the hardware and software, has the staff that implements and maintains the service and is responsible for all aspects of the service (SLAs, security, privacy and availability) except Internet access. Because the provider writes the software for its service, special features and functions can be custom-designed to meet the enterprise's requirements.

  • Pure cloud service - The converse of the vertically integrated provider, this type of service can be located on cloud-based servers that run provider-owned software licensed from a third-party software vendor. Amazon Elastic Compute Cloud (EC2) platform is an example of an existing cloud-based business service that can be used as an implementation platform. EC2 is a Web service that provides resizable compute capacity in the cloud. Software modifications must be implemented by the third party.
SLAs, security, privacy and availability are supported by the cloud platform rather than directly by the service provider. If the cloud platform has a problem, as EC2 did twice in 2011, the service can fail, and the service provider must wait for the cloud platform to return to operation before the service can resume.

  • Alternate pure cloud service - In this model, a communication software vendor's product (for example, call-center software) operates on the cloud provider's platform. The software vendor can customize features and functions for the enterprise, but relies on the cloud platform operator to handle issues with SLAs, security, privacy and availability. Amazon EC2, cited above as an example of pure cloud service, can support this model as well.

  • Third-party implementation - A third party installs licensed communication software in the cloud (e.g., on the EC2 platform) and sells the service directly. Custom feature and function modifications are unlikely to be offered with this model. SLAs, security, privacy and availability issues are the platform provider's problems.

  • Resold services - In this model, the reseller itself owns nothing but simply resells cloud services from one or more wholesale providers. The reseller might use the cloud provider's name when offering the service or might create a private-label service. In either case, the reseller is only passing through a service. Customized features and functions are likely not supported, and the reseller has no control over the service's SLAs, security, privacy and availability.

The Fewer Middlemen, the Better

The business model a provider chooses can have a huge influence on the SLAs and acceptable use policies (AUPs) an enterprise will encounter. Contracts or service agreements are likely to be biased in the provider's favor if the platform is not part of its own operation but comes from a third party such as EC2. The more direct control and knowledge the provider has of the service (as in the vertically integrated model), the easier it will be for the provider to enforce SLAs and effectively troubleshoot problems.

Furthermore, the stability of the service can be in jeopardy if the service provider business model is not successful. What if the cloud provider goes out of business or decides to terminate certain features or functions? What if the service provider fails to pay the cloud platform bill, leaving enterprise information such as voice mails, e-mails, user profiles and dial plans inaccessible? Such scenarios have already occurred with some wholesale as well as retail providers. Just in case, the enterprise should always have a backup plan (possibly an alternative cloud provider) in place.


1 Comment

Most studies indicate that the average phone system lasts 8-12 years. As an independent consultant, we have found that enterprises of all sizes lack the internal expertise to satisfactorily vet multiple providers within a variety of the business models provided, especially when they only do it once every 8-12 years. Add in the various components of unified communications (UC) and it becomes an even more daunting task. It is a big investment that touches the entire organization every day which increasingly impacts overall company strategy, including, but not limited to: productivity, effectiveness, customer satisfaction, staffing, metrics, business continuity, etc. Due diligence could include evaluating a dozen different solutions to find comfort with the "what if's".

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