Hosted Telephony vs. the PBX

Andrew Cooper NEC


In a recent conversation with NEC the subject of hosted telephony compared to PBX came up for the first time in a while. Andrew Copper, Sales Director at NEC, had some interesting views on the subject which were backed up with research and an impressive set of slides.

Comms Business Magazine (CBM): How would NEC characterise the state of the CPE (Customer Premises Equipment) PBX market today?
Andrew Cooper (AC): NEC are fortunate enough to have a foot in both hosted and premises camps. We see hosted impacting on the market across the board, both small and large. The small business end is more multi-tenant and Enterprise more public cloud, but both will impact on the traditional PBX space.

However, to put this into context, according to communications analyst MZA an estimated 88% of installed base UK sub 100 users are premises based as opposed to hosted. Current media often gives the impression this could almost be the other way around!

CBM: What factors do you see holding back hosted telephony in the market?
AC: Hosted is very much on the rise of course, though the cost factor plays a part here. For businesses both small and large, monthly subscription costs per user can often appear low at face value, but can also work out more expensive within a short time frame.

Also, at enterprise level, we have come across businesses reverting back to on-premises when add-on recurring costs simply weren’t viable any more. The analogy that springs to mind here would be a TV license that once cost £10 per month. Satellite TV then emerges which adds a further £30 per month; then the sports channel, the film channel, etc. which suddenly adds up, before you know it your costs have escalated to well over £100. Good maybe for the providers but eventually end users become wise and will consider other options.

Telephony features, sometimes even basic ones, are another factor – many businesses have come to expect a number of these that aren’t always covered with hosted.

CBM: What would you say to those that believe hosted telephony is cheaper than a CPE PBX?
AC: We’ve done the comparisons of an NEC PBX vs a leading hosted solution with equivalent specifications and found the PBX was more cost effective in under 2 years. The figures speak for themselves!

It’s worth looking at the bigger picture when a business is making a decision, many solutions out there are not as straightforward as they appear in the brochure. Hardware acquisition can also be a factor, by the time you’ve added in the upfront costs of many so called OPEX offerings the cost effectiveness swing towards a traditional, robust, reliable PBX swings even further in its favour.

CBM: What would be your advice to resellers today considering a switch to hosted telephony.
AC: As with any business decision I’d recommend a reseller to take the best decision based upon customer requirement and business need, do so however with the full knowledge of both the consequence and desired result. Listen to the facts and not the hype…

Ed Says…

Where do I start? Firstly, there are a lot of things here that I agree with – not least that the media continues to big up the rise of hosted telephony. Whilst being ‘guilty as charged yer honour’ there are many reasons for this. The media like reporting on new stuff – it’s more interesting so don’t expect that to stop. What has stopped, and ceased a long time ago, is the flow of press releases and announcements from the few PBX vendors that remain in the market. When did you last hear of a new PBX vendor launching a new PBX system on the market?

At Comms Business we do our own research so you won’t find in any of our back issues a disagreement from us on the MZA market figures. We also agree with what the Americans call ‘Mission Creep’ when it comes to either Sat TV or any other pay as you go service including hosted telephony. What we would say however is that with a PBX the ‘Mission Creep’ is front ended. If you want a good call centre application added to a basic PBX then the price goes up – but in CAPEX not OPEX. We do agree as well that hosted telephony pricing is not always cheaper than a PBX alternative but then I thought the argument about this was over and that the case for cloud or hosted applications was not just about price. Rather it is about flexibility and scalability. 

If the firm that bought the PBX with Call Centre apps wanted to scale back, they are stuck with their 5-year lease costs as opposed to a reduction in monthly OPEX.

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David Dungay

Editor - Comms Business Magazine