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Mitel Redefines Hosted Communications

 The Hosted IP Communications Market

I am currently updating Frost & Sullivan’s North American Hosted IP Telephony and UC Services study. This is one of my favorite enterprise communications markets and I have tracked it closely over the past nine years. To many that may sound unbelievable as hosted IP PBX and UC services have only recently gained popularity, boosted by the cloud hype.

Over the years, hosted communications services have evolved and matured – both on the platform/technology side and the business model side. BroadSoft has gobbled up two of its original competitors – VocalData (aka Tekelec, aka GenBand) and Sylantro; softswitch vendors such as Sonus and Metaswitch have more aggressively pursued feature-rich services; Nortel’s carrier group has been acquired by GenBand; and a host of PBX vendors have launched various hosted/cloud platforms. Fortunately for these vendors, service providers are becoming increasingly interested in hosted IP communications as traditional voice loses ground to mobile and consumer PC-based communications. On the demand side, economic factors coupled with greater awareness of the benefits of hosted communications are making enterprise decision makers more open to discussing outsourcing alternatives.

I will delve deeper into market trends, market size and competitive factors when I complete my research. In this article, I would like to focus on Mitel and its portfolio of hosted solutions. As always, Mitel is at the forefront of technology development, but this time also venturing with some new delivery models.

Mitel MICD

For about a year now, Mitel has been offering a multi-tenant platform – the Multi-Instance Communications Director (MICD). This solution is targeted at service providers looking to brand their own hosted IP communications services and provide all billing and management support. MICD is a high-density platform that competes directly with the more “traditional” hosted IP telephony platforms (such as BroadSoft’s) and appears best suited for SMBs looking for standard PBX functionality, along with voicemail, twinning and basic conferencing. Its architecture makes it more flexible than most other hosted platforms, however, enabling service providers to deliver more distinct sets of capabilities to each customer, resembling single-tenant hosted PBX implementations.

MICD has so far found appeal with CLECs, traditional VARs, as well as for in-building multi-tenant deployments. Service providers can purchase either perpetual licenses or a licensing subscription. Mitel claims about 15 service provider customers globally.

Virtual MCD

Mitel has been one of the first communications vendors to offer a virtualized solution – Virtual Mitel Communications Director (MCD). It is available to service providers looking to target a slightly different customer base – typically larger businesses with hybrid (hosted and premises-based) environments. Distributed organizations typically have different needs across their geographically dispersed sites. While larger locations favor premises-based implementations, smaller remote sites are more suited for hosted services. Virtual MCD allows service providers to deliver highly customized communications solutions to businesses that require integrations with premises-based platforms and databases. For service providers, the virtual MCD architecture is comparable to MICD in terms of implementation and management costs. It is less scalable, but delivers some superior features and functionalities, such as virtualized contact center, web conferencing and UC capabilities.

Virtual MCD has been commercially available for approximately one year and, to date, Mitel has mostly marketed it, directly and through its channel, to the traditional CPE base. More recently, it has enabled hosted providers to also take advantage of this cloud-based offering. Resellers can use this solution to generate additional revenues and differentiate, leveraging their existing customer relationships, knowledge of customer CPE infrastructure and close familiarity with Mitel’s portfolio.

Mitel Anywhere

For a little over two months now, Mitel has been offering yet another hosted alternative – Mitel Anywhere. With this solution, Mitel steps in as the communications service provider hosting the MICD platform in its own data center. Mitel recognizes that, while demand for hosted communications is growing, a lot of the service providers are not equipped to host advanced communications infrastructures. Mitel has identified the SMB customer segment up to 100 users as the sweet spot for Mitel Anywhere services. It can, however, meet the demand of larger, distributed organizations using Virtual MCD.

Mitel plans to add some advanced capabilities such as contact center ACD to its suite of messaging and audio and web conferencing apps currently available on the platform. Eventually, the full Unified Communicator Advanced capabilities are likely to become part of the offering.

Datacenter Accreditation for Cloud-based Communications Services

On February 7th, Mitel announced a new initiative. The Virtualized Datacenter Accreditation program is targeted at datacenters, and Platform-as-a-Service (PaaS), and Infrastructure-as-a-Service (IaaS) providers. The program is intended to certify partners’ infrastructure capabilities required to support Mitel voice and UC applications. Mitel announced three certified IaaS providers: Artisan Infrastructure, Host.net, and Hosting.com, who intend to support or offer hosted voice and UC solutions to the market in the coming months based on Mitel cloud-ready software.

Mitel acknowledges that there are many partners who wish to be between an agent and a service provider. They have the capabilities to interface directly with end users and design and market hosted communications to them, but are not well equipped to manage a datacenter or a sophisticated communications platform with the required billing and management infrastructure and processes. By enabling IaaS and PaaS providers to deliver the appropriate infrastructure to VARs and managed services providers (MSPs), Mitel effectively creates a new business model that leverages the specific skills and capabilities of different providers to extend the reach of advanced communications to a larger number of market participants.

Conclusion

The value chain in the communications marketplace is likely to disintegrate further as vendors and service providers choose whether to develop technologies, manage datacenter infrastructure and/or communications platforms (now increasingly part of virtual datacenter environments), or specialize in marketing, sales and customer relationship management. New business models will emerge and market participants will have to find the formula that best works for them.

Mitel has been fast to market with its hosted/cloud initiatives and is now offering some appealing deployment options to its partners and business customers. It is likely to face competition from other carrier and traditionally CPE vendors pursuing similar strategies. For example, BroadSoft has a cloud service delivered out of its own datacenter in beta trials and claims overwhelming interest from the service provider community. Microsoft is likley to launch a multi-tenant VoIP capability on its Lync platform in the future, even though it has so far declined to support service providers in customizing Lync for hosted voice. Alcatel-Lucent, Cisco and Siemens are developing technologies and strategies for the cloud market as well. As the market evolves, functionality, partner relationships and financial viability will represent key success factors.

WebRTC

Communications on the Premises or in the Cloud: How do you Make the Choice?

As promised, I continue to share my thoughts on the dichotomy of hosted/cloud communications and premises-based infrastructure. Eventually, I will have to deal with the differentiation (if any) between cloud and hosted, but for now, I am not yet sure where to draw the line.  Although some tend to believe that these are two completely different animals, I believe the two have one major element in common: businesses adopting hosted or cloud communications should be willing to outsource all or most of their communications infrastructure and infrastructure management from a third party. Therefore, in discussing the potential for cloud communications, it seems imperative that we look at how the market has evolved over the past decade and what have been some of the factors determining customers’ choice for hosted or premises-based communications.

Historically, businesses around the world have favored premises-based implementations. The U.S. and Canada boast some of the highest adoption rates for hosted telephony, and yet the segment represents around 15 percent of installed business lines in those markets. Several factors have contributed to this uneven distribution and will continue to play a role in the future; the move to IP telephony and UC will, however, change the nature of these factors and their impact on communications investment decisions.

a) Supply-Side Factors

Functionality: Historically, hosted services have offered more limited functionality compared with premises-based solutions. Although TDM Centrex supports most key PBX features, such as abbreviated dialing, call forward, call park, call transfer, DID, DOD and music-on-hold, businesses are frequently drawn to PBXs for their superior functionality. With the advent of hosted IP telephony, however, more comprehensive service bundles (including messaging, presence, conferencing and other applications) are making the hosted offerings more appealing than alternative premises-based solutions.

Contract Terms: Centrex and other hosted services deliver greater flexibility, especially in terms of capacity adjustments at times of downsizing or rapid growth. Centrex contracts typically last two years, allowing customers to more frequently change solutions or providers based on new requirements.

Marketing and Awareness: The advent of IP telephony has further boosted PBX penetration as PBX vendors have been faster to market with advanced IP telephony platforms and have marketed them more aggressively than hosted services providers. Incumbent service providers have been slow to upgrade their communications infrastructure to VoIP and have only cautiously pursued IP communications offerings for fear of cannibalizing their existing Centrex and other legacy services. Service providers are, however, becoming more confident in marketing their next-generation services as they ramp up their cloud architectures and IP communications capabilities.

b) Demand-Side Factors

Security: Historically, telecom managers have considered multi-tenant, outsourced platforms to be less secure than premises-based systems, and IP telephony has raised even more concerns in that area. As security technologies rapidly improve for hosted solutions, we expect this concern to dissipate.

Control: Similarly, concerns about control continue to favor PBX implementations, in spite of the fact that advanced, hosted IP telephony offerings provide in-house staff with greater control than traditional Centrex services. For example, graphical management interfaces allow IT/telecom managers to perform moves, adds, and changes (MACs) quickly and conveniently without having to contact the service provider or pay for a technician to visit the site. These interfaces also allow managers to configure some features and settings on the go, based on user needs.

Businesses also tend to believe that they have greater flexibility and control over features and capabilities with a premises-based solution, since they can purchase or develop those internally as the need arises. In reality, the increasing complexity of communications architectures favors an outsourced solution, since a service provider is motivated to more rapidly upgrade and enhance the service offering.

TCO Analysis: The most compelling factor in choosing hosted or premises-based communications is the total cost of ownership (TCO) for the two scenarios. Of course, TCO varies widely, depending on a company’s existing infrastructure, number of sites, number of users (total and per site), specific application requirements, and available telecom staff.

For enterprises with a few larger sites, a premises-based solution typically offers a better TCO over a longer period of time. To a large degree, that’s because businesses often extend the life of their communications solutions well beyond the amortization period, at which point the asset has no book value – and therefore, no associated cost. Furthermore, with only a break-fix maintenance contract in place, support costs can also be reduced. Of course, this approach involves a significant amount of risk and can prove quite costly if an outdated solution begins to malfunction on a regular or system-wide basis.

Alternatively, Centrex and hosted IP telephony have been adopted by businesses that choose not to maintain in-house support staff and instead outsource their communications. Staff reductions, therefore, result in immediate and ongoing cost savings for these customers. It should be noted that TDM Centrex scenarios may involve some additional costs if a technician needs to be dispatched to the site on occasion; however, hosted IP telephony eliminates this cost burden as well due to more flexible network monitoring and management solutions.

Further, hosted services, and especially hosted IP telephony, provide significant TCO benefits to small branches and small sites within large organizations. Businesses choose hosted services for their remote locations in order to lower the costs of adding incremental capacity and to deliver uniform capabilities across geographically dispersed users.

Science, WebRTC

Google to Drive Business Migration into the Cloud

Google has become a powerful force in the lives of many people. It certainly is my window to the World today as I land on the Google search page as soon as I open my eyes in the morning and before I go to bed at night.  It has become a symbol and an icon, our “virtual home”, almost synonymous with the Internet, Internet browsing, and … the Cloud! With its presence already established in the consumer world, Google is also making an aggressive foray into the business market with a set of cloud applications.

source: Frost & Sullivan

Since I promised to post several articles on the raging battle between premises-based and hosted/cloud communications, I will dedicate this one to Google. So much has been written about it, that it seems there is nothing left to say. However, two of my colleagues – Subha Rama and Alaa Saayed – put together two very different pieces on Google that provide some unique value. Subha chose to look deeply into Google’s corporate culture and identified several major factors that have driven and will likely continue to drive Google’s success going forward. Alaa, on the other hand, managed to get a hold of Rajen Sheth, Senior Product Manager for Google Apps, and received some first-hand insight into Google’s vision for the enterprise market.

My key takeaway from the two articles is that Google’s success is largely due to the fact that it’s built on the tenets of the Internet and the Internet age. Its product portfolio benefits from the advantages of the web and the cloud; its culture and internal organization also derive their efficiency from applying the innovative spirit and democratic principles of the new age in IT and communications technologies.

Here I provide excerpts from both articles, as well as links to the complete versions on our website.

Subha Rama’s piece is titled: “Google: the IT Iconoclast ”, and it can be found here. According to Subha, Google’s success story is based on two simple tenets: “question established ways and have a healthy disregard for the impossible”. She writes: “As Google grandly outlined in its first SEC filing, its mission was “to organize the world’s information …. and make it universally accessible and useful”. Google believed that the most effective, and ultimately the most profitable, way to accomplish this mission was to put the needs of their users first. This has become more or less the governing principle behind almost all its product innovations.”

Then Subha goes on to ask “What makes Google, well… Google?” She believes that, at Google, “crazy definitely triumphs comfy”. She points to the fact that Google strives to hire only the best talent out there, people who are academically exceptional and are capable of thinking out of the box. You can find neurosurgeons and rocket scientists, in addition to nerdy computer engineers, among Google’s employees. Also, it continues to adhere to its Stanford culture, allowing employees to dedicate 20 percent of their time to work on their pet ideas. This is how products such as Google News, Orkut and Google Images came into being. Subha recognizes that Google employees are constantly challenged to think in new directions and come out with defining ideas. She further notes, however, that Google also focuses on productivity and enforcing deadlines so that it is not drowned in chaos, which can be so typical of highly creative environments.

Further, Subha discusses “the long-tail model”, which forms the foundation of Google’s strategy: “Google strongly believes in the long-tail model, that as the costs of online production and distribution fall, niche products and services can become as economic as mainstream ones. This theory forms the core of a cloud-based service delivery model, which while accommodating a wide variety of applications is not subject to the lowest-common-denominator principle that we apply in a physical environment.” According to Subha, this business model focuses on a large number of products, each targeted at a relatively small audience, thus addressing niche segments, and building customer communities in the process. Further she concludes that the Google business model is in fact based on openness, interoperability, decentralization and accessibility, the pivots around which cloud-based services are built.

Alaa Saayed tackled similar issues of corporate culture and success factors in his recent interview with Rajen Sheth, Senior Product Manager, Google Apps, posted unabridged here. In this interview, Rajen Sheth identified some of Google’s strategic directions as well as some of the key factors impacting Google’s success.

When Alaa asked Sheth if they were finding it difficult to migrate customers to Google Apps, Rajen admitted that it used to be very difficult, but things are rapidly changing. He stated: “Almost every CIO that I talk to is planning a cloud strategy and the value proposition of the cloud is very widely known at this point. For most corporations, now, it seems, it’s a matter of WHEN rather than IF they are going to move to the cloud for a lot of their core services…We are a serious player in most of the conversations we are having about messaging out there.”

Then Alaa asked Rajen about innovation at Google: “Google is well-known for its unwavering commitment to innovation…How is the process of innovation managed at Google”?

Sheth responded as follows: “Having worked in different companies, I could say that Google really operates in a very different way than a lot of organizations out there. It really operates in a way that spurs this innovation. I think there are a few elements to it. The first thing is that we are not afraid to look beyond what an existing space is all about right now, and so if you think about it, in many of the cases where Google has been successful, we’ve reinvented existing spaces … We take an existing space, not thinking about it in terms of how it is today, but what it should be, and how do we make it a brand-new experience”.

“Another big element to it is the notion of cloud computing, and that is actually one of the things that spur innovation. In many cases where you have to build packaged software, you are forced into a stream where you are releasing major updates every two, three or four years. The problem with that is that you have to think three, four-plus years in advance what is going to be the innovation that you want to push, whereas in reality, innovation happens all the time. With the cloud computing paradigm, we have it such that all our applications are centralized and we can update them incrementally, and that actually increases our innovation rate quite dramatically.

Finally, the Google culture definitely spurs innovation. The structure is very, very flat and people are encouraged to think, and to take risks, and think in brand-new areas. In fact, we have this philosophy that we call 70-20-10 and basically what it means, we put 70 percent of our effort in the core of our business, but we put 20 percent of our effort in new areas that are beyond the core business that we think might be fruitful. So we think beyond what is making money right now. Then we put 10 percent of our effort in completely off-the-wall things that may or may not see the light of day, may or may not be a great technology. There are definitely some great examples of technologies that have started out in that bucket and that have become some major areas for Google”.

I believe the discussion above clearly highlights the factors that will make cloud computing and cloud communications successful and will drive continued growth for Google itself. I will still caution, though, that the cloud is not for everyone – both on the supply and the demand side, but that is the topic of another post.

WebRTC

Communications on the Premises or in the Cloud: How do you Make the Choice?

In my 10 years as a Frost & Sullivan analyst, hosted IP telephony has always been one of my most favorite coverage areas. I believe in the value of outsourcing core communications capabilities for certain types of organizations and users. I also believe that IP technologies have dramatically changed the value proposition of hosted voice as new hosted IP telephony offerings deliver a number of additional features and capabilities compared with TDM Centrex.

I have to admit, however, that, although I am gaining some insight into how cloud technologies can further elevate the value of outsourced, multi-tenant communications infrastructures, I have not yet reached an epiphany on that matter. In fact, I find the hype around “cloud”, particularly as it relates to real-time communications, somewhat exaggerated. Most people seem to think of the cloud as being synonymous with Skype and Google TO THE EXCLUSION of various other multi-tenant, IP-based architectures. They may be right, but in that case, I find the definition AND potential for business-grade cloud communications rather limited.

I am not currently equipped to provide a final distinction between cloud communications and hosted IP telephony, but I am working on a couple of studies with Vanessa Alvarez (check her out on Twitter) that aim to offer some good insights on specific advantages and disadvantages of both approaches as well as some perspective on the different market participants. In the process, I plan to post a series of blog articles on hosted and cloud communications drivers, challenges and trends.

I will follow up this post with a discussion of some economic realities that require a new approach to communications investments. In the meantime, I would greatly appreciate any thoughts on hosted versus premises-based as well as hosted versus cloud.

Virtualization to Transform Enterprise Communications Infrastructure

Virtualization is the process of ‘decoupling’  users and applications from the hardware characteristics of the system that performs the computational tasks. Virtualization enhances the ability to manage and change the physical environment of the hardware and software without disrupting the performance of the enterprise. The benefits of virtualization have never been disputed. While the growing demand for Windows and Linux-based servers has led to the popularity of server virtualization, the need to eliminate incompatibilities among the several applications deployed by enterprises today has spawned a market for applications virtualization. Though server virtualization accounts for the bulk of the virtualization services market today, there are other critical ones such as virtualization of desktops, storage, networks and services.  

Virtualization is not a new trend by any means. For example, server virtualization finds its origins in server partitioning while desktop virtualization has been around as ‘thin client’ computing from the early 1990s. The big impetus behind thin-client computing or its more recent version, desktop virtualization, has come from the adoption of virtualization in data centers. The movement was led by VMware, which developed the hypervisor technology that involves the carving up of an industry-standard x86 server into multiple virtual machines. Each of these virtual machines shares the resources of the servers including processing power, memory and input/output while performing their tasks as a standalone machine. Since VMware’s initial foray into this market, the number of vendors has multiplied. 
Microsoft, Citrix and Sun Microsystems have developed capabilities in hypervisor technology and are making aggressive inroads into the market.

Who's Who in Virtualization

Who's Who in Virtualization

My colleague, Subha Rama, just completed a brief study on virtualization trends in the communications space and she concluded as follows: 
A looming question confronts communication vendors contemplating virtualization. Which would be the most attractive market segments to target? What should be the horizontal and vertical strategies? While there are no ready answers to this question, there are certain considerations that differentiate large enterprises from small and medium businesses while adopting application and desktop virtualization. Frost & Sullivan believes that medium-sized businesses would be the most attractive target segments for desktop and application virtualization services.
  • The prevailing server-to-virtual desktop concurrent user ratio makes this technology the most attractive for mid-tier companies. We believe that the technology has issues when it is scaled up to really large deployments (more than 5,000 users).
  • The application and deployment needs of medium enterprises are less diverse. There are fewer exceptions in terms of user profile when compared to large enterprises.
  • qThe higher volume and diversity of applications deployed by large enterprises today make it difficult to deploy them over a virtual desktop-application streaming model.

Target Market
Target Market

Subha identified the following factors as the key drivers for virtualization adoption: 
  • Innovation Drives Adoption: The market for server virtualization is fast approaching maturity. However, VDI and application streaming are still evolving. These technologies address a major pain point of enterprises – delivering communication solutions irrespective of location, device and time. Coupled with this, is the ability of organizations to scale application deployment without incurring large-scale investments. Frost & Sullivan expects that these factors will drive accelerated adoption in the next few years. By 2012, we expect at least 10% – 15% of large enterprises to have implemented application virtualization in one form or the other.
  • The UC Factor:Virtualization will gain new impetus from the growing need for organizations to deploy unified communications (UC) suites. Cost of implementation is the single biggest deterrent for large-scale UC adoption by enterprises. Enterprises that cannot afford the switch-over to IP-based communication networks that support ubiquitous enterprise collaboration can leverage virtualization and the public cloud infrastructure offered by a number of virtualization providers today. Though these services are attractive to mid-tier organizations, large organizations that find it difficult to keep pace with the rapid technology flux happening across the UC space may find virtualization a better option.
  • New Market Entrants Endorse Technology, Add to Market Confidence: Entry of large networking and communications vendors into the virtualization market has sent strong positive signals to end-users and instilled confidence in the technology. Communication vendors are partnering with virtualization technology providers to diversify solution delivery and offer advantages of virtualization to existing customers. This strategy also allows them to target new vertical and horizontal markets.
  • Lower IT Budgets in Times of Poor Economy Open Up New Opportunities: Gloomy economic conditions is exerting pressure on enterprise IT budgets. However, there are some sweet-spots that open up opportunities for vendors. One such opportunity is UC on mobile devices. While UC vendors innovate on the mobile application front, virtualization offers an attractive deployment option.

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