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Some important things to know about UCaaS TCO

Recent research from Nemertes shows that cloud-based unified communications is more cost-effective than ever before. A recap of the key stats


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As the cloud matures, we’re getting a clearer picture of its adoption over the longer term. Some new data from Nemertes Research sheds a very interesting – perhaps even surprising – light on the true cost of cloud deployment.

Nemertes looked at the total cost of ownership (TCO) for cloud-based IP telephony (IPT) and unified communications and collaboration (UCC) vs. the on-premise versions. Data was collected from 26 IT leaders in the U.S. and Canada during the first quarter of this year. TCO was calculated based primarily on three types of costs: capital, implementation and operational.

Here are the key findings, courtesy of a webinar presented by Robin Gareiss, president and founding partner of Nemertes:

Cloud adoption has jumped: Nearly a third of those surveyed have moved to cloud-based IPT. “It used to always be that [this] slice of the pie was about four to six per cent for so many years and wasn’t really going anywhere. Well, now you can see about 30 per cent of organizations are actually already using cloud IP telephony,” Gareiss said.

The same increase was seen in cloud-based UCC, with about 26 per using it now and another 25 per cent planning to adopt it “for 2017 or later.”

Cloud is cheaper than on-prem: In the first year after deployment, average annual TCO for on-premises IPT was $724 per unit, much lower than the $476 for the cloud version. It was the same in year one for UCC, with an average TCO of $733 for on-prem compared with $535 for cloud UCC.

Or is it?: This is where the data may defy some people’s expectations. The Nemertes figures suggest cloud is cheaper than on-premises when it comes to deploying IPT and UCC… but only in year one. In the second year following initial deployment, TCO for cloud-based IPT and UCC actually gets more expensive. Cloud UCC costs in year two averaged $437 per year vs. just $224 for on-prem UCC; cloud IPT cost about $350 a year in year two, higher than the average of $275 for on-prem IPT during the same period.

If you’re a bit shocked, you’re not the only one. As Gareiss puts it, “it really kind of baffled me when I first looked at it.”

After interviewing the survey subjects in-depth, however, she got a clearer picture of why costs for cloud-based IPT and UCC are generally higher than for the on-premises versions after the first year. In a nutshell, more traditional on-premises deployments are pretty much considered to be done-and-dusted after the initial implementation, with minimal effort put into training staff on the new solution beyond those first few months.

About a year after that on-prem deployment, Gareiss said, C-suite execs often say, “only 15 per cent of our employees are using this (solution)? Why are we spending all this money on licensing?”

Determined to avoid the same awkward conversation over cloud-based deployments, managers are spending more money – even two years after initial implementation – “to make sure that the people who are rolling out these technologies actually get employees to use them,” Gareiss explained.

“IT leaders don’t want to fail with (cloud). They want it to be successful. Therefore they are devoting a lot of resources to training and getting the word out and making sure they have good utilization of it.”

In other words, if only 10 or 15 per cent of your staff end up using that on-prem solution that was cheaper to deploy, was it really worth it? Instead of looking only at the dollars and cents you can save in the first year, maybe a cloud solution with higher levels of staff usage and engagement makes more sense in the long run.

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