Hanging Up on Hosted VoIP

By Doug Allen Comments
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Doug AllenTo hear most telecom observers tell it, hosted VoIP is set to dominate the business telephony space, while premises-based systems tend to pale in comparison — maybe not for the large enterprise, but certainly for small and medium businesses. But the real story is more complicated than that. Premises-based VoIP is alive and well and even increasingly stealing back some dissatisfied hosted VoIP customers, who’ve resorted to “rip and replace" tactics to regain control of their voice services. The numbers may be relatively small, but it’s clear that the hosted VoIP channel needs a fallback plan when the service doesn’t perform as advertised, and that’s a good, old-fashioned on-site PBX.

It’s hard to size this phenomenon. A number of vendors, analysts and solution providers agree they’ve heard “Back to CPE for me!" stories, but have no hard numbers. Still, such incidents are on the rise, according to Randy Kremlacek, president of TeleDynamic Communications Inc., a VoIP and unified communications provider, who said the number of customers making the switch is steadily increasing, “which is an odd byproduct of hosted companies getting ever-greater market share."

Ben Stiegler, CEO and founder of SynerTel, a managed service provider, said he encounters a few such cases each year, but that those who return to CPE VoIP are always happy with the results.

Stiegler’s from-the-trenches observations on these forced migrations are worth quoting at length:"We had one case about two years ago where we had bid a small Toshiba on-premises system, and the client chose a hosted provider. About a week after they moved in, I received several abandoned calls from their Caller ID, but no voice. A few minutes later, the operations manager called from his cell to phone to ask ‘How fast can you install that system you proposed to us?’ I had to tell him that we could do it in a day or two, but that migrating their published number back from the hosted provider would take some time and effort. Fortunately, we were able to install alternate landlines in a hunt group quickly and forward from the hosted provider to the landline hunt group in a few days. But they basically bought a hosted system and had to throw it away."

What were the total losses for the small business of five or six users? Stiegler estimated around $1,500 in hard costs. The damage to the overall business is harder to nail down, since “business operations were compromised for weeks," according to Stiegler.  

Still, even at this level of risk, as Kremlacek pointed out, roughly a third of disgruntled hosted VoIP customers are willing to switch providers and give the model a second (or third) chance.

There’s a variety of reasons for that, not the least of which is the economic constraints on IT staff, particularly for SMBs, driving a growing acceptance of hosted services. “From what I’m hearing from customers, they are growing increasingly comfortable with the concept of hosted, plus the marketing barrage from all the hosted providers is very effective as the hosted providers pretty much own Web-based marketing, versus the individual dealers who don’t have the budget or marketing expertise to market at such a high level," said Kremlacek. “…Without Internet marketing, hosted would never have gotten off the ground."

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