Hosted vs. Cloud PBX & why it matters to know the difference in large UCaaS deployments

Brad Carrell, IT/Telecom Solutions Consultant

With over 250+ Hosted/Cloud PBX providers out there you should know what you are really buying when you peel the onion layers off. This article was written with Enterprise IT departments in mind.

Hosted PBX
providers are usually telco carriers or were at some point. Most use Broadsoft, Metaswitch, Shoretel, or Cisco HCS. A few examples (not even close to an all-inclusive list) are West IP, Vonage, Comcast, Momentum, CenturyLink, Windstream, Shoretel, a local data center or local MSP. Hosted PBX providers are hosting someone else's technology. There are hundreds of hosted PBX providers out there.

Cloud PBX
suppliers built their systems from scratch usually and control all aspects of the service and feature sets. A few examples are companies like Ring Central, Jive, Fuze (formerly Thinking Phone Networks), 8x8, and Broadview. Cloud PBX providers are offering their own technology. Cloud PBX providers will integrate some features from 3rd party suppliers but usually own the majority of their features themselves. When they integrate from a 3rd party, it is usually a feature that all their customers get with a specific Seat type. There is a fairly small number of Cloud PBX providers out there that have made the investment to build their own system.

Large Enterprise customers can often go through an extensive RFP process and still not understand the differences between these options
Failure to understand the differences can result in some missed opportunities on the negotiations, misunderstandings on the redundancy you think you are buying and on the actual end results of the project. If your C-Suite wants a certain feature and it doesn't work the way they thought it would, then it reflects poorly on the Infrastructure Team. It is a common misconception to think that these 2 models more or less deliver the same service. That is also not at all true. There is an old saying..."the devil is in the details" and that is certainly true in this discussion.

Hosted PBX :
PBX providers do not own the system they are running. They are usually doing one of two models. I will focus on the Broadsoft platform since it is used by the widest variety of service providers in the Hosted PBX space.

Hosted Business Model #1 -
They are buying 2 or more Broadsoft switches for instance and putting them in their own data centers. These multi-tenant switches are very expensive and often the case is they only have 2 switches even if they are a huge national telco provider. If they have 3+ switches it is rare. They still need to buy maintenance and licenses from Broadsoft to run the platform. These providers often already have nationwide DID services and don't need a full resale model but usually are not Hosted PBX providers as a core business.

Hosted Business Model #2 -
The 2nd model is a resale model where a service provider is renting a Broadsoft "instance" in multiple data centers. If your provider says they are diverse in 5 or more geo-redundant regions, then this is likely what they are doing and worth a follow up question. These providers have higher costs because they are renting the system, the licenses and the maintenance. They are only self-sourcing the support, the sales team, and the billing. This is a "we also" model. We are a MSP but "we also" offer nationwide Hosted PBX services and use Broadsoft to get DID's in every market. We are a national carrier that sells circuits but to stay relevant "we also" offer Hosted PBX. We are a local data center but "we also" offer national Hosted PBX service. We are a cable company that doesn't want to lose market share as customers drop their local phone lines and move to SIP so "we also" sell Hosted PBX service to offer more services to our customers. These setups usually work well for smaller companies with a few locations.

Cloud PBX
providers usually built their system from scratch on Asterisk or their own proprietary gear. They are putting their own system in multiple carrier hotels without the need to license or buy maintenance for their core product from a 3rd party. This is where a lot of confusion comes in with Hosted vs Cloud PBX. A cloud PBX is in multiple data centers so that sounds like it is being hosted because technically it is a company hosting their own gear. In this UCaaS environment the difference in the term "hosted" is whether or not they are hosting their own technology (cloud) or someone else's technology (hosted). Hopefully that makes sense. Cloud PBX vendors tend to be 100% all-in as a Cloud PBX player that doesn't get involved in selling other products such as circuits except as a necessity to support their core business. Hosted Providers are a mix of companies that range from small local MSP's all the way through to large global UCaaS specialist suppliers.Understanding the differences in a supplier's infrastructure can play out in a big way during a proper evaluation and negotiation.

Hosted PBX
vendors can only add some features on their own to a Hosted PBX environment. If you need a feature, they do not have, then they have to stand in line to ask the manufacturer to offer it most of the time. In order to add a feature for a specific customer project they have to stand up a custom instance of just your configuration and make the manual adjustments. When the manufacturer (Broadsoft for example) releases a new software version, then everyone gets it. But if you have a custom configuration with your own "instance" of the deployment, then they have to re-implement the customization every time an upgrade happens. There are always exceptions and this is not an absolute statement but more times than not, this is how it will play out. It is always possible that a future Broadsoft update could make your customization incompatible and no longer work. That has happened before! Your Hosted Provider is not the only one asking for features so they are at the mercy of their supplier for most of the features on their roadmap and when they get them, then all the Broadsoft vendors will get them as well (most of the time). Custom setups for large deployments require complex customizations and if you aren't buying off the standard menu, then be aware!

Cloud PBX
suppliers are the PBX manufacturer (OEM) and the service provider. They add new features and everyone gets them. If a large customer demands a feature in order to sign up it will get developed and everyone benefits. The downside is this is usually customer project based but the upside is that if enough people are asking it may get built anyway. What has really changed a lot over the last few years is the Cloud PBX vendors for the most part have caught up to the large switch manufacturers and are rarely missing any important features and often have some unique features that they invented.

Food for thought.

1) Understanding the service provider's business cost model helps you understand who can control pricing and who can't. Does your provider own their own costs or do they resell someone else's products?

2) Understanding the training the sales engineers have that are answering your questions comes into play here. Do they only sell this one product or is this a "we also" add-on product. There are Hosted PBX providers that sell Hosted as a core business. I am only asking you to keep in mind if you are working with a specialty supplier or a supplier that offers this service as an add-on product. A common RFP miss by "we also" suppliers is the following. "Do you integrate with Outlook and offer presence?" UCaaS Sales engineers say, "Yes we do!" The problem with this is that what a customer really means usually is that they want to see presence in their actual Outlook screen and that is not what an Outlook API plug-in offers. Now take this same example and think through how you are going to carefully ask questions about the next 80 features you want to have to make sure your true question is correctly answered. RFP's are for commodities and this is not a commodity product. Experts are needed for UCaaS deployments.

3) You need to really think about whether you want to have your UCaaS environment run by a UCaaS supplier that runs this as their core business or trust your national MPLS vendor with this product as well. The feature sets are really materially different as well between Hosted and Cloud. Some customers truly prefer a telco supplier that can sell them 10 different products with one back to pat. Some customers will take important business decisions to specialty suppliers. Either answer is OK as long as you understand the strengths and weaknesses of each option.

4) There are a lot more ways to compare Hosted vs Cloud and this is just a starting point.Just know for sure what you are buying and how to negotiate with each supplier. Know their cost model and their strengths and weaknesses. Be thorough. Ask for advice.

About Strategic Telecom Partners, Inc. -

Strategic Telecom Partners is a vendor neutral independent telecom consulting firm based out of Overland Park, KS that specializes in helping clients accurately match multi-location IT infrastructure project challenges with the optimal vendor or multi-vendor(s) solution strategy. Strategic Telecom Partners delivers better service, better advice, better overall technical solutions for better prices by providing customers with instant strategic relationships and detailed knowledge of the capabilities of over 60+ global, national, regional, local and niche providers.