Hosted VoIP eliminates cost, complexity

News Analysis

Hosted VoIP eliminates cost, complexity

Kate Dostart, Associate Editor

An increasing number of businesses are adopting hosted voice services in an effort to avoid the cost and complexity of premise-based solutions, according to a recent study by Frost & Sullivan.

Businesses are also reaping the benefits of supplemental capabilities -- including unified communications, simple-to-use conferencing, and find me/follow me. The study recorded hosted Voice over Internet Protocol (VoIP) services revenues at $372.6 million in 2005, with estimates reaching to $14.6 billion in 2012.

"Small businesses that account for the majority of the end users are likely to continue driving hosted IP telephony deployments," Frost & Sullivan senior analyst Lynda Starr said. "Medium and large businesses' interests in hosted IP telephony and VoIP access service are also likely to increase."

Decreasing hardware prices, improved voice quality resulting from advances in codecs, and tight service level agreements (SLAs) have fueled the drive toward hosted services. Hosted services allow businesses with limited budgets and staff to balance the cost of a more efficient communication system with a level of available productivity. They also offer customers the immediate benefit of upgrades that otherwise would not be considered a practical expense for another 10 years.

The Frost & Sullivan study also found that most companies with a premise-based system already in place are seriously considering a hybrid solution as they migrate to hosted IP telephony, allowing them to continue using existing systems for a number of years.

"As these two systems can coexist," Starr said, "service providers are likely to offer end-user enterprises a hybrid solution of both premise-based and hosted solutions, enabling customers to phase in a hosted solution with a trunking service and existing legacy equipment."

Enticing businesses to switch to partial or complete hosted service will be VoIP service providers' biggest challenge. Hurdles include offering customers a unique set of features that are not available over circuit-switched offerings and a pricing model that offers adequate return on investment to the customer.

Starr concluded that end users of VoIP found the rapid growth potential for the hosted services reassuring when beginning a migration from outdated Y2K-era systems. She added that small and midsized businesses in particular stood to gain a more professional phone appearance.

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