Traditional Phone System or Cloud Telephony: Which is Right for Your Business?

What is Cloud Telephony?

You have undoubtedly heard of Cloud Computing. Cloud Computing is defined as “Internet-based sharing of technological resources, software and digital information”. This emerging field functions on a pay-per-use model, helping to dramatically reduce total cost of ownership.

Cloud services are growing at an astounding rate. A recent IDC study estimates revenues from cloud innovation to reach $1.1 trillion per year by 2015. The three main areas where the cloud will provide services for small and medium-sized businesses (SMBs) are computing, storage and telephony.
Cloud Telephony is simply telecom applications delivered under the ‘cloud’ model. With this model, SMBs have access to the same cloud benefits as large enterprises . In the telephony arena, cloud services provide SMBs advanced capabilities previously only available to Fortune 500-sized enterprises, such as disaster recovery, distributed call centers, economical teleworking and much more.

Cloud Telephony Technologies

Newer telecom technologies such as unified communications, mobility and presence management are natural fits for cloud based telephony. Here are some examples of Cloud Telephony applications:

  • Hosted PBX: Voice services for business delivered over your internet connection. You own your phones, but everything else ( PBX phone system, voice mail, trunking) is located up in the cloud.
  • SIP Trunking: Voice circuits delivered to your location over your internet connection. These circuits can connect directly to a modern IPPBX or to an older phone system (via IAD) using T1/PRI or analog trunks.
  • Virtual Call Center: Flexible call centers with agents located anywhere.
  • Hosted Fax Service: Send and receive faxes anywhere / anytime without using a fax machine.

So how do you determine if Cloud Telephony is right for your business?

  • Are you looking for lower capital expenses or lower TCO?

    • A traditional phone system has higher up-front costs in the form of capital expense. You buy the phone system, the phones, pay for installation and maintenance contracts.
    • A cloud solution is much less costly up-front. There is no phone system to buy. You will have to buy phones, but often the cost of the phones can be built into the monthly fee.
    • The traditional phone system may have lower TCO. The trick here is to include a realistic lifetime and look at what it will cost to upgrade that system at the end of that lifetime.
    • The cloud solution has an indefinite lifetime and lower upgrade costs. The core system is continually upgraded by the service provider. There is no direct cost to you, other than what is built into your monthly fee. Phones will likely need to be upgraded at some point. You will have to determine this for yourself. The nice thing is that you can replace phones on a rolling schedule to avoid a large capital outlay in any given year.
  • How detailed are your call handling requirements?

    • Traditional phone systems excel at handling complex call-handling scenarios. These phone systems have evolved over many years from analog phone systems to digital phone systems to VoIP phone systems. The feature sets have grown with the systems and are typically very extensive and robust.
    • A traditional phone system can be tailored to your specific call handling requirements by your vendor. They can do one-offs, work-arounds and special programming to give you exactly what you want.
    • A cloud solution is more generic. The feature set will typically be less extensive and less flexible. The service provider is unlikely to customize the features to fit your needs, as their motivation is to settle on those features that satisfy most customers.
    • Many phone system owners complain that they never use any of the advanced features of their phone system. If this describes you, a cloud solution may work well for you.
  • Are you a single location or multiple locations networked together?

    • In a cloud solution, adding a new location just requires an Internet connection and a phone.
    • In a traditional phone system, a new location may require a cabinet and substantial costs. This situation is better with VoIP phone systems, but it is still an issue.
  • Do you have/need remote teleworkers or road warriors?

    • Again, cloud solutions excel at flexibility with location and mobility. Take your phone with you. Use it wherever you have Internet connectivity. Use it from home. Use it on the road.
    • VoIP phone systems are getting much more capable in this area. Remote phones are possible but may require VPN connection to the IPPBX.
    • Both cloud providers and IPPBXs are becoming more mobile friendly, allowing the use of your cell phone as your terminal device.
  • What do you need in a phone?

    • Do you love your phone with lots of dedicated buttons that do fancy things when you press them? Love that display that shows you the information your manufacturer decided was best for you? Then you may have a hard time transitioning to a cloud solution.
    • Telephones used in a cloud solution will typically have a limited feature set, fewer (if any) programmable keys, and more generic information in the display. These things are getting better, but still lag behind the flash and glitz of the proprietary phones on a traditional phone system.
    • Again, if you feel like you never really use the features of your fancy proprietary phone, a cloud solution may be your best bet.
  • Do you need to connect other voice-related peripherals?

    • Do you have an IVR (Interactive Voice Response) system, FAX server, specialized voice mail system or voice recorder that connects to your phone lines? It is likely that there is a cloud solution to replace that functionality, but you may not want to change those peripherals right now.
  • What are your FAX requirements?

    • Do you Have to have a physical FAX machine? The arguments for this are becoming weaker. Even the requirement to send signed documents. Those documents can be scanned. Think about your real requirements for FAX. If you think you can live without the physical machines, a cloud solution will likely work for you
    • If you absolutely must have those physical FAX machines, this also requires phone lines for those machines which lessens the attractiveness and cost-effectiveness of a cloud telephony solution.
    • If you are having a hard time parting with your FAX machines, this comic (a couple of years old now) may be relevant:

Fax Machine Timeline

  • Do you have analog devices that need to interface with your phone system?

    • Yes, believe it or not, there are still businesses out there (like ours!) that use modems on a daily basis. Also, there are still lots of analog credit card machines, postage machines, etc. out there. Modems can be made to work on a VoIP circuit, but it’s dicey. Best advice – keep those analog devices on discrete analog lines.
    • Again, each analog line you need lessens the attractiveness and cost-effectiveness of a cloud telephony solution.
  • What are your existing contract commitments?

    • This is a really important one. And one that people often forget to check. What long-term contracts did you sign with your existing telephone carrier? Do you have T1s or PRIs on long term contracts with costly termination liabilities? If so, you may just have to sit back and cool your heels for a while until those contracts get closer to termination.
    • The thing to remember in this transitional time is not to sign any new long-term contracts for old technology services. You will likely end up regretting your decision sooner rather than later.

What are your plans with regard to Cloud Telephony? Are you already there? Thinking about it? Opposed to it? Share your thoughts in the comments.

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