Cloud Voice – Value Beyond Cost Savings

“Cloud is not about technology but rather about a business model.” That statement boldly stands out to me in this No Jitter article The Cloud Revolution: Dropping Voice Prices Will Deliver Big Impact. Absolutely. We agree fully. While No Jitter is focused on enterprise consumed communications and UC, this is a truth that applies to the way service providers deploy, manage and monetize their VoIP and UCaaS offerings.

We’ve been saying that service providers are asking for a change in the business model in addition to getting access to the latest and greatest technology. They need the marriage of elastic technology and elastic business model. Hence the rise of the new way to deliver VoIP and UC: the cloud Voice platform (Alianza and other companies have brought this solution to market).

Expanding on this focus of cloud as powerful business model, the author, Phil Edholm, argues that the big costs savings for cloud VoIP and UC have not yet arrived and are still largely similar to an on-premises deployment over the life of the VoIP solution. He argues that cloud-based UC costs should be significantly lower than they are today to be breakthrough.

While we are confident the total cost of ownership of cloud sourcing service provider VoIP is lower than rebuilding a service provider’s network using NFV/telco software solutions, there is significant value in adopting cloud even if the cloud cost is roughly the same as an on-premises solution. With the cloud, the business model is still strikingly different and there are six major improvements over the old school way of deploying VoIP:

1) Reduced risk – with a SaaS approach, VoIP is success-based; this means costs are variable and in-line with revenue (as opposed to fixed in the old way of doing it); there isn’t CAPEX to amortize nor a fixed OPEX from the maintenance fees and operations staff.

2) Strategic focus – CAPEX and operational resources can be focused on higher priority growth initiatives, including making big bets and embracing other transformative technologies.

3) Continual innovation – with cloud deployments service providers can evolve in an agile fashion as they get access to the latest and greatest feature set delivered in a non-disruptive, easy to consume manner. See my earlier blog post SaaS – Freedom from Product Release Tyranny for more on this topic.

4) Easier to manage – done right the cloud masks complexity and abstracts the management of individual boxes or software functions into a single and simple management interface. While sometimes hard to measure the total cost of managing a voice networks, this simplification reduces total cost of ownership and removes error prone, manual processes that ultimately add cost and time to service delivery.

5) Extensible – the modern cloud approach is also all about being extensible and allowing communications to plug into different systems for end-user communications (e.g., adding VoIP to Google Apps, CRM systems, etc.)

6) Greener – a service provider can be more environmentally friendly as power and cooling requirements (and associated costs) are eliminated in the service provider data center and more efficiently run in a shared space in the cloud

So there is great value if costs are the same. However, the bottom line is that the cloud-based approach is about lower TCO: no CAPEX, lower and variable OPEX, plus other soft cost savings from automation, integration and ease of use. We see cost savings of up to 50% compared to legacy white label or softswitch models. And it will be lower and more agile than NFV on-premises approaches (psst, the cloud voice platform is hosted NFV for VoIP). And the cloud will need to be more cost effective as the voice revenue per seat comes under pressure from market forces.

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