5 Ways Cloud Communications

Can Lower Your Total

Cost of Ownership

Cloud Communications solutions have emerged as a

highly desirable collaboration option for organizations of
all sizes and locations. Thats in part because of the way
they help organizations lower their costs and increase
the communication options available to enterprises, their
employees, partners and customers.

resources in the most strategic and business-enhancing

technologies and services.

The legacy PBX systems that Cloud Communications

solutions are replacing have become aged, rigid and
costly assets to maintain. Some PBX platforms date back
decades and have been barely upgraded since. After the
recession of 2008, many organizations opted to forgo
upgrades and other investments to these platforms,
instead minimizing their investments to the lowest
practical levels. This practice of sweating the asset
is now resulting in systems that are both outdated and
limited in their capabilities. Making matters worse, some
PBX vendors no longer support these older platforms.

of communications modalities, including voice, video

calling and group conferencing, chat, presence and
mobile device support. All this empowers organizations
to integrate communications into both the productivity
processes of knowledge workers and the formal business
processes of service personnel.

As a result, many organizations are looking at complete

fork-lift replacements of existing systems. But this can be
expensive, costing as much as $500 to $700 per user.

accuracy.

Cloud Communications Adoption Drivers

competitors still using older, voice-only solutions. The

How can Cloud Communications help your organization

you consider a wide range of factors. These range from

desktop phones. Also take into account the cost of core

1
Moving to the cloud involves up-front costs from a

Shift communications budgeting

from a CAPEX to an OPEX model

Simplify management and

cost tracking

Increase scalability

40
35
30

Increase IT speed and agility

25
20
15
10

Improve disaster recovery

and business continuity

5
0

With minimal upfront hardware to purchase, an organization can start deployment immediately, instead of having

Budget planning
With a hosted solution, an organization can plan its budget accurately, since the subscription model is predictable
and easy to calculate.

A hosted solution costs less to run, without the upfront capital investment. Migration of a business application to a

business perspective. But Cloud Communications is a

buying an electric generator and managing electricity
production yourself, your company buys electricity under a
from other areas where activities are being outsourced.
Work previously done in-house is moved to a third-party
service provider. Companies are able to take advantage of
a managed service model, the option to add services as
needed, standardization and the availability of innovative
new features that are included as part of the monthly
upgrades.
impact on overall costs, including:

Administration
the cost of administering and operating a
communications system is ignored. Thats
because communications systems were
generally considered to be cost centers with

they generally did not include it in their cost

comparisons among legacy vendors or even in
comparison to cloud-based systems that have
Thats unfortunate, because PBX administration is

Administration
Deployment
Upgrades
Maintenance and support
Access to the public telephone network
Lets look at each separately.

typical administration cost.

With more modern premise-based Cloud Communications,
administration as a percentage of total costs can actually
increase to more than 50 percent, according to research

administering the old systems and the new one is night

complexity with multiple systems or capabilities to be
provisioned and managed, not to mention user training
costs.
But Cloud Communications can dramatically lower the
the Canyons School District in Sandy, Utah. There, Dean
Glanville, director of technology support, replaced a 1,500-

Glanville had earlier determined that the older PBX was

the system needed at least one, and possibly two, more
administrators. Now, hes supporting twice as many users
as before with half as many administrators and also
freeing the other full-time administrator to focus on new

modern cloud solution can provide and the impact on an

organization are critical to an overall cost analysis.
Theres another related area where Cloud
Communications can help reduce administrative costs,

highly trained telecom technician.

Panavision and other companies that have adopted cloud
communications across large distributed organizations
praise the single pane of glass visibility of the
administrative portal and the simplicity of operations their
cloud solutions deliver.

Another cost that is often overlooked involves

upgrade. With an on-premises communications
system, a rip-and-replace upgrade is among
the most challenging and costly events.
A successful migration, including the scary

costs that are typically not well accounted for,

including:
Expanded work, often involving overtime
pay, from current employees

skills than do complex, on-premises systems, which means

you can get the same work done with less technical and
costly employees.

Contractors to maintain the existing

This is due to the fact that cloud systems generally include

Web-based administration portals and these dramatically
simplify all administrative processes. At Canyons

Consultants to help plan, manage and

conduct the installation

or vice versa

Training, training and more training to run

the new system

These tasks create two additional issues: First, they can

easily raise the initial cost of a new deployment by 10-20%.
Secondly, these costs are often ignored by managers

organizations existing infrastructure. This also means the

system can be validated for operations. Also, users can be
easily transitioned from the legacy on-premises system to

been more upgrades, which is not uncommon, as vendors

then the costs will be even higher. And thats not including
new hardware the user may have to purchase in order to
implement the upgrades new functions and capabilities.
systems now put their software releases into an end-of-life
cycle after only about three years. As a result, within about
longer supported. Depending on the point in the release

both resources while minimizing the risk greatly below that

Upgrades

on-premises communication system by 30-50% And once

again, these are costs that managers often overlook when

An on-premises communications system, when

version. Then, the vendor typically will release a

must either pay for the upgrade when they

want it or sign up for a relatively expensive
subscription support package that includes
future upgrades.
cost anywhere from 25-60% of the original license if

premises system will be upgraded twice; and to keep

scalability as one of their top challenges with on-premises

communications.
Cloud Communications systems dramatically lower these
costs. Features and upgrades are generally included in the
added by paying a small additional monthly fee; but even
here, the costs are limited only to those users who truly
need that capability. The result: large upgrade costs are
avoided.
based developer of 3-D and other visual technologies for
the motion picture and consumer electronic industries. The

company opted to become a Masergy customer in large

part due to the cost savings from switching to a Cloud

use. This may be a great business opportunity for telecom

clear analysis of PSTN costs should be a critical part of any
companys buying and upgrade decisions.

or associated maintenance and upgrade issues.

Maintenance and Support

as low-cost assets, their thinking being that
over time, this core asset has been fully
depreciated. While that may be true, those older

By contrast, cloud vendors typically include PSTN

access as an integrated part of their monthly fee. Among
most U.S. suppliers, this fee includes unlimited calling
within North America, plus a favorably structured plan
for international calls. And in some cases, new Cloud
Communications technologies such as WebRTC
incurring any PSTN costs at all.

maintenance and operational costs.

manager Manuel Pena says administering and maintaining
his legacy PBX is horrible. Support and maintenance
alone costs his company about $17 per month for each
user. Recently, NETGEAR has migrated several of its
remote sites to Masergys Cloud Communications
platform, which Pena describes as much better than
an upgrade. While his Masergy Cloud Communications
range of features and capabilities.

into any communications-systems cost analysis and

buying decision. Because all of these variables will impact
an organizations overall cost model, they all need to be
An analysis that ignores these costs may favor an onpremises solution. However, for most organizations, when
these costs are included, the overall life cycle costs of the
solution will favor todays next-generation cloud solutions
and business models.

When NETGEAR recently moved 100 users to a new

Even when these costs are excluded from an analysis, true

cloud solutions are generally less costly than on-premises
alternatives. Panavision, a manufacturer of high-precision
camera lenses, has determined that the basic costs of its

plugged in, all the users were up with full UC capabilities

at the new site, with no issues and no extra costs.

on-premises solution would be. Even better, the cloud

solution does so without tying up capital for hardware

Now Pena is looking forward to migrating all of his users to

the cloud. That way, hell not only avoid initial capital costs,

Similarly, NETGEAR has found that the subscription fees

costs for a legacy PBX, making the switch to the cloud an

easy decision.

Access to the PSTN from an on-premise system

system assumes a relatively long life cycle based on

The cost of this access can be highly variable.

However, given todays rapid changes in communications

systems, the legacy modeling of costs and transitions

common and they often result in costs that are

communications system running in modern compute

Whats more, carriers often generate bills that are virtually

charges that cannot be reconciled to actual operational

theyre often put on amortization cycles of 7-10 years.

Using these longer-term depreciation values may not
represent actual costs and future transitions.

Conclusion
As recently as a few years ago, for organizations
contemplating a change in their communications
infrastructure, Cloud Communications was not a viable
option. Today, thats changed. Cloud has come a long
way, helped by the continual increase in bandwidth,

technologies.
Todays cloud solutions deliver high levels of capability
and reliability while lowering administration and
operational costs. Whats more, they do all this with pricing

analysis is done completely and accurately, factoring in

administrative, deployment, upgrade, maintenance and
support, and access costs.
Many organizations that believe investing in on-premises
solutions will lower their costs will likely be disappointed.
These systems appear to be a lower-cost alternative,
organization needs to replace a legacy PBX and move to
new Cloud Communication capabilities, factor in all of the
costs and consider the cloud.

www.masergy.com

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EMEA +44 (0) 207 173 6900
Masergy Communications, Inc.