Is Hosted PBX the Emperor's New Clothes?

Peter : On Rad's Radar?
| Peter Radizeski of RAD-INFO, Inc. talking telecom, Cloud, VoIP, CLEC, and The Channel.

Is Hosted PBX the Emperor's New Clothes?

Since 2004 when I started blogging, I have blogged about a hardware solution less than 2 dozen times - and not one product review. I have talked with OneAccess, a hardware company that was launching a new line of IAD's that was aimed at my clients, but no product review. I have mentioned other IAD vendors, like Edgewater, and even mentioned PBX vendors in passing (Avaya, Shoretel, 3CX, etc) when discussion premise versus hosted.

Lately, the PBX manufacturers have contacted me. Honestly, I don't think the future of telecom is the premise PBX. In too many cases, companies are trying to get rid of real estate and the associated costs. BYOD, virtual employees and other trends have actually shifted costs from the company to the employee, while shifting the company from a brick-and-mortar office to a distributed virtual environment. More than 35% of the US are freelancers. More and more people are cellular only. So where does a premise PBX fit into that model?

The small business, single location business with less than 99 employees is a large market place and many of them still want a key system, so that is the fit. But as voice declines and people communicate with social media and texts/SMS, how does the key system or SMB PBX help?

Two thousand providers are betting on Hosted VoIP solutions as the answer. AT&T and Verizon are betting on UC&C and cellular.

VARs certainly wish nothing would change, since their business model revolves around box purchases and installs. In addition, quite a few VARs and Inter-connects have the mindset that the SMB is better off economically buying a premise PBX.

Yeastar released a new line of PBX based on Asterisk. I did receive an interesting answer to one question from Yeastar.

Me: With cloud, NFV and SDN, why bring a premise based line of PBX to the market now?

Yeastar's reply: "Although NFV and SDN are very laudable and interesting technologies for the enterprise, they do not fit with 90% of the market, in my view. My experience has been that they either do not have the cash to invest, the expertise to implement, the infrastructure to implement, or a combination of those factors."

"The SME wants an affordable, dependable system that offers advanced features and easy setup." [Yeastar means small business under 99 employees not SME.]

Yeastar continues with, "Cloud is the Emperor's New Clothes! With hosted providers it's smoke and mirrors, like the story of the Emperor's new clothes. The Emperor had two tailors, had wonderful cloth, but was told that only intelligent people could see the cloth. The king could not see the cloth, because there was in fact no cloth, but did not want to appear ignorant, and as he's walking out among these people he's of course naked, and everyone who sees him can clearly see whether the Emperor has clothes on or not, but they also believe that everyone else must be ignorant and that they are not, until a child states the obvious."

Yeastar: "If we go back to the 1980's we used to have something called Centrex. What happened is that AT&T, at the time, had just one mission: they bring a POTS line and stick a phone on the end of it. If you want another extension, add another pots line, add another phone... all the PBX functionality is held in the exchange...that sounds like cloud doesn't it?"

Me: It was the first version of Hosted PBX, hence why it was called IP-PBX at first.

Yeastar goes on, "Okay the technology is different, we are not using POTS lines anymore, we're using IP, but conceptually the model is the same: per extension, per service, per month. Sounds familiar?"

"Then there was an explosion of PBX systems, why? People looked at the model: $20 per user, 100 users, $2,000.00 per month, $24,000.00 a year, and not only did they have cause to push to cheaper on-premise solutions, they also gained control over their communications systems. The Yeastar PBX's aren't even 5% of that, and though I might be standing against the tide at the moment, all of this seems familiar to me, and that things are coming around full circle again. The Yeastar PBX's offer a much more affordable, and power over their communication systems. We wear these lovely clothes that did not come from the tailor."

Of course, the world view of a hardware manufacturer is going to be ... hardware is the answer. Even Cisco believed that hardware was the answer, until the ground shifted under them and they went Hosted then cloud (HCS and Spark).

Shoretel went cloud by first buying M5, then re-vamping everything to Shoretel Connect. Mitel went hosted. There isn't one right answer right now. Some reasons for that are as follows:

  • Current Decision makers and their world view.
  • Fear of Change.
  • No one gets fired for buying AT&T, Cisco or IBM, right?
  • Confusion in the marketplace - who do you go with?
  • No clear leader.
  • Microsoft Office365/Skype added uncertainty.
  • Implementations suck!
  • User adoption isn't where it should be.

Maybe business owners will wake up and decide to buy the latest version of Office, download SugarCRM and put that server back in the closet. Cheaper, more control, etc. As Slack reaches 3 million daily users, it will start to decline, fast -- like Instagram, Facebook, Snapchat, Uber, and other Unicorns. Maybe that will happen, but Google, Apple, Salesforce, Dell, IBM and Amazon bet otherwise to the tune of a trillion dollars.

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