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Are SMEs taking to the cloud?

Hosted or on-premise or a mixture of the two? Tayla Ansell looks at trends in business communications

More and more, businesses are opting for hosted telephony – having their telephone system based in the cloud rather than on premise.

The European hosted IP telephony and UCC services market earned revenues of $3.32 billion in 2014 and is estimated to reach $17.93 billion in 2021, according to Frost & Sullivan’s Analysis of the European Hosted IP Telephony and UCC Services Market.

More and more, businesses are opting for hosted telephony – having their telephone system based in the cloud rather than on premise.
More and more, businesses are opting for hosted telephony – having their telephone system based in the cloud rather than on premise.

Moreover, service providers and industry leaders surveyed by BroadSoft Inc said they expected the UCaaS/ Hosted PBX market penetration to grow by a factor of almost 6 across the enterprise, midmarket and the small business segment.

UK telecoms providers have definitely noticed a shift to the cloud. Steve Haworth, CEO of TeleWare, estimates that over 80% of new deployments in the market are hosted or cloud. This is also the experience of business telecoms specialists Spitfire, which offers both onsite systems and hosted solutions.

Spitfie Direct Sales Manager Dominic Norton said: “Over the last 12 months, the proportion is now significantly in favour of cloud-based deployments, with 88% hosted versus 12% on premise.” For unified communications vendor Swyx, the lion’s share is still on-premise, with cloud telephony sold on a pay-as-you-go basis representing around 20% of the company’s sales. Although Mark Russell, Swyx’s Director of Operations UK & Ireland, does make an important distinction between delivery models.

“Our resellers are also offering hosted unified communications to organisations, on a capex model. This is accessed via a private cloud, but the customer will ultimately own the solution at the end of the agreed term and the only additional on-going costs will be for software updates and support. At the moment, the split between CPE (customer premises equipment) and cloud-based telephony is around 50/50,” he said.

Business boost

The shift to cloud-based telephony has given a big boost to some suppliers.

Commsworld, Scotland’s largest independent telecommunications and digital services provider, has achieved a record number of new telephone connections for businesses and organisations this year. By May, the firm had already deployed circa 13,000 connections, more than six times as many as at the same stage in previous years. This is also the fist time it has exceeded 13,000 connections in a single year in over 21 years of business.

Chief Executive Ricky Nichol attributes the company’s recent success to growth in sales of its Voice over Internet Protocol (VoIP) services. “When VoIP fist appeared on the scene over a decade ago it was certainly exciting, but it struggled against the resilience, speed and practicality of landline systems,” he said. “Now, it suddenly makes a huge amount of sense and it is especially exciting that smaller Scottish firms can now benefit. Thanks to the advancement of networks and cloud services, they no longer need rooms full of expensive hardware.”

There are many reasons why SMEs might want to make the switch to a hosted solution, from lower short-term costs, flexibility and scalability to always using the most up-to-date version and not having to worry about maintenance and upgrades (see Norton’s assessment of the pros and cons opposite).

However, it is true also that there will still be businesses that prefer an on-site solution.“Despite the rise in hosted solutions, there remains demand for on-premises communications from those SMEs that wish to retain total control over their systems and administer upgrades themselves as and when they choose,” said John Whitty, CEO of Solar Comms.

Swyx’s Mark Russell says that security and control are also factors. “An on-premise solution is likely to be favoured by organisations that are concerned about security, location of their data or have sufficient IT resource in-house to manage a solution themselves. Banks, for instance, will want to protect their data so will shy away from a public cloud solution in favour on-site or hosted within their own data centre based in the UK. There are also arguments that if you have other on-premise technology then it may be easier to get different systems to talk to each other and undertake higher levels of customisation,” he said.

Best of both worlds

Another option, says Whitty, is to adopt a hybrid approach that lets you switch between solutions depending on your circumstances. “For Solar, offering choice is critical, enabling our customers to select the deployment model that is right for them, but always allowing the flexibility to easily migrate to hybrid or pure cloud solutions when the time is considered correct,” he said.

Whitty adds that growth in unified communications is also having an influence on people’s choices.“Employees are becoming increasingly accustomed to using applications like live chat, web conferencing (both voice and video) and social collaboration alongside more established communications channels, so organisations can no longer consider telephony in isolation.”

With a range of options to choose from and the ability to make a case both for hosted and on premise solutions, businesses should look carefully at their specific requirements before making a choice.