The Cloud – Simply a CapEx/OpEx Choice?

Ken Landoline

Ken Landoline

Summary Bullets:

  • The cloud approach to telecom solutions is catching on like wildfire as a growing number of vendors offer a cloud version of their products and some report that cloud solutions already account for the major portion of all sales.
  • In addition to a shift of expenditures from a large capital outlay to a monthly operational expense the reasons companies are moving to the cloud fall into a few more categories including; flexibility in changing capacity levels, speed in adding applications to premise-based solutions while protecting current investments, and disaster recovery back-up.

While much is made of the CapEx versus OpEx comparison of premise- versus cloud-based solutions, it seems those decisions are limited, for the most part, to end users that are in the start-up or “greenfield” mode of their lifecycle. Conversations I have had with many enterprise end users regarding the premise versus cloud decision process, as well as vendors selling telecom solutions, suggest many purchasing situations fits into one of three scenarios. In scenario 1 the business has a premise-based solution but appreciates the ability of the cloud to add capacity when needed and shrink capacity when activity slows down. Such a situation could be a retail contact center with a premise-based solution that must expand and shrink based on the seasonality of their business. Adding remote, home-based agents via a cloud offering is the perfect solution. Scenario 2 are end users with a substantial investment in a premise-based solution but a requirement to add applications and broader functionality quickly and efficiently without scrapping the not yet depreciated investment. The application of a “hybrid” solution allows the business to add applications to existing solutions without scrapping the premise based solution prematurely, before it is fully depreciated. In scenario 3, a few end users see cloud solutions as a method of providing a disaster recovery, back-up system to their premise-based system that will take over operations when disaster strikes. In this situation the cloud solution can be run in parallel to the premise solution and the cloud could take over if and when the premise-based solution fails for any reason, maintaining operations. Although the disaster solution may add significantly to operating costs, in many situations company revenue streams can be preserved, which make it a feasible investment.

My observations may suggest that cloud solution providers may want to expand their sales approach when selling their cloud solutions to enterprises and consider a product and market strategy based on the various scenarios which may be found at an enterprise besides CapEx versus OpEx. For example the disaster back-up solution is a solution that has been formalized by Siemens Enterprise Communications in the contact center marketplace. The company prices the back-up service at a fraction of its normal cost and charge customers higher rates when it is called into action. In addition, specific application providers in the customer care market, such as NICE Systems and Verint Systems, may want to focus efforts on selling their recording solutions in the cloud to customers wanting to add such functionality to create a hybrid solution, but not wanting to invest in premise equipment or take on the responsibility to manage such an application on site. Also, enterprises should see the cloud as delivery channel that can be applicable across a broad set of applications and usage scenarios. I would be interested in your opinions on why or why not a cloud solution may, or may not be right for your specific situation.

About Ken Landoline
As Principal Analyst within the Current Analysis Business Technology and Software group Ken Landoline tracks the enterprise unified communications and contact center (UCCC) markets.

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