Cloud-Based System Economics 101

By Wayne Scaggs

The economic considerations of cloud and hosted systems are more than the cost of a premises system versus the monthly payments for a cloud-based alternative and where they cross the breakeven point. Let’s look at the economics of cloud-based and hosted systems to see the full picture.

In the following examples, we will examine the ongoing month-after-month expenses and then examine the one-time expenses of premise-based systems. Individually the expenses may not be very much; however, over the life of the system, the savings can amount to hundreds of thousands of dollars – all while providing your customers with the same services as you would on a premises system.

Consider the following:

Telephony Costs: In many cases you can reduce your telephone bill by moving to a hosted system. First, you only pay for the trunks you need. For example, if you need thirty trunks, then you pay for thirty trunks. On the other hand, with a premise system for thirty trunks on T1s, you’ll need to pay for two T1s – even if you only use a quarter of the second one. Next, you may not need toll-free numbers or circuits. A cloud or hosted system utilizes native SIP-trunking and local DID numbers throughout the country. Last, you’ll stock only the DID numbers you need because you can order individual numbers as you need them and where you need them. Excess inventory of unused DID numbers for premise-based systems is an added cost and a management issue. Eliminating these is a month-after-month savings for cloud-based and hosted solutions.

Technical Staff: It is possible to reduce or eliminate the need for a technical person. First, there is very little equipment on your site that can go bad: the computer workstations and a printer. Also, the connection you have to the Internet is provided and maintained by your Internet service provider as part of your monthly bill. Last, any system issues are immediately addressed by the cloud system’s technical staff, which is part of your monthly fee. You make a phone call, report the issue, and leave the rest to their professional staff. This is another month-after-month of savings with cloud-based and hosted solutions.

Maintenance: If you believe you are saving costs by doing your own maintenance, consider these questions. Are you fully utilizing your skills, talents, and, most of all, your time, in maintaining your system? Your business is answering the telephone. Who is working to grow your business when you are fixing your equipment? You cannot close an account if you are fixing your equipment; you cannot take a vacation if you are fixing equipment; you cannot spend time with your family if you are fixing equipment. And your equipment seems to have a sixth sense: it will wait until the most inopportune time to act up and demand your attention.

All these disruptions cost you your time. What maintenance issue is more important than your time? This is another month-after-month continuous saving with cloud-based and hosted systems that is more valuable than many realize. You may be able to cover the monthly reoccurring cost of a cloud-based or hosted system with the savings from your telephone bill combined with the savings from your maintenance and support fees.

Electric Bill: You can reduce your electric utility bill when you switch to cloud-based or hosted solutions. Older servers can draw as much as 500 watts each, 24/7. Dissipating the heat generated by these servers puts a load on an air-conditioning system and further runs up your utility bill. Eliminating these servers means less cost and another month-after-month savings.

Other Considerations: Additional ongoing monthly expenses that will not be part of a cloud-based or hosted system but which add up for premise-based systems include support and maintenances fees, equipment insurance, and the cost of floor space. These are monthly expenses for the life of the premise system that add up and come off your bottom line.

Large Expenses: Did you know you could eliminate the need for a large UPS (Uninterruptable Power Supply) and generator? You can remove the racks of batteries and the need to replace them every few years. You can avoid the significant expense of an electrician to wire the backup power system and maintain it. These are lump sum expenses that typically occur once or twice over the lifetime of a premise-based system. With a cloud-based system, you are able to replace an expensive backup power system with affordable, off-the-shelf components (for both a UPS and generator if you need it) from a local retail electronic store.

Additional one-time expenses that are not part of a cloud-based or hosted system are the initial system cost, sales tax, interest or lease expenses, freight cost, and your local in-house network upgrade. Plus, with a premise-based system, in five or six years you should expect to need a major system upgrade of either hardware, software, or both.

Wouldn’t it be spectacular to work on your business and not in your business? With all the savings that come from a cloud-based or hosted system, you can plan on having additional time and energy to maneuver your call center through the pitfalls of your business environment. You will save time and money, with more bottom-line results to show for it.

Alston Tascom is offering a no-charge “True Cost of Ownership” calculator that will compare up to five different buying decisions. Email to request your no-charge calculator.

Wayne Scaggs is president of Alston Tascom, Inc., which offers premised-based and hosted contact center solutions.

[From Connection Magazine Jul/Aug 2015]