How to add true value with hosted IP

Without a doubt, there are significant benefits to be had from creating a single, converged network for your voice, video and...

Without a doubt, there are significant benefits to be had from creating a single, converged network for your voice, video and data, and even further benefits from moving to IP telephony.

But before these benefits can be realised there are challenges to overcome: full convergence will require at some stage an upgrade to your PBX - perhaps on more than one site.

Upfront investment

Upgrading will require upfront investment that could stretch your budget (although some suppliers offer packages to help fund investment). While the case is strong where the PBX needs replacing anyway, there is a tougher decision to make when the PBX is still being depreciated.

It may be that you decide there is a strong case for bringing the advantages of upgrading to selected parts of your organisation immediately, and then bring others into the fold over time. But if you have more than one site, it may be that one PBX needs replacing while others do not, making it more difficult to plan a staged roll-out of IP telephony over time.

Then there is the requirement to set up and manage the IP telephony service, and to keep it up to date as suppliers add new features and capabilities. This in turn means retaining the necessary skills for the business. Paying a third party to host your network could therefore be a smart move. Hosted services essentially provide "a PBX 'in the cloud', managed by the service provider", says John Blake, head of hosted IP telephony at BT.

These services will provide all the features that your business needs - such as call transfer, hunt groups, short code dialling and cheaper calls between sites - while helping you reduce the reliance on upfront capital investment and ongoing investment in skilled resource.

"Hosted services mean no upfront capital investment, the peace of mind of knowing that your network is being managed by an expert service provider, and inherent future-proofing," says Blake. "There is no ongoing management by the user, except for straightforward selection and management of features. Thus, the need to employ skilled resource for set-up, maintenance and ongoing upgrades is avoided."

Converged strategy

The fundamental requirement to get the full benefits from hosted services is a converged network and appropriate network connections into the service provider. You can then have a network to support full IP telephony, web hosting, e-mail, desktops, IT security and even multimedia.

Full multimedia-hosted services have a part to play in a converged strategy, and they are being taken up by medium-sized organisations.

Your hosted services can be linked to your existing PBXs, which means that IP telephony can be rolled out to sites where it might otherwise be difficult due to budget, skills or timing issues.

Since hosted services are managed centrally, you could benefit from the best possible pence-per-minute rates by aggregating all your call spend through a single PSTN breakout, while reducing costs from traditional voice circuits to each of your sites (if you have more than one).

With a converged network it is also possible to link your network to suppliers - such as Microsoft, IBM, BT and HP - for other hosting services

In general there are two types of business model for hosted services: managed hosting and application hosting. Managed hosting will offer infrastructure, IT services and skills delivered for monthly payments, including system installation and configuration, system administration and support, server monitoring and helpdesk support services. Application hosting involves an application or service delivered over a network, with pricing based on the number of users.

Hosted services can include features such as e-mail, and collaboration and enterprise applications such as SAP and customer relationship management (CRM).

Critical applications

Chris Wynne, e-business hosting technical support and offerings manager at IBM, believes there are two scenarios for considering a hosted service.

The first is for support of critical applications, such as providing a service to clients, data security or sales. "SMEs often do not have the IT expertise in-house to ensure the reliability, security and round-the-clock availability for such systems," he says. "By outsourcing the management of infrastructure underpinning these applications, they gain access to high-quality skills that are available 24 hours a day, ensuring that service levels are met."

The second scenario is support for IT systems that are not critical to the business, such as e-mail, CRM and human resources applications.

Siemens has a dedicated SME business unit, called Siemens Solution 1, to offer services including hosting Microsoft Exchange 2003 (including Outlook Web Access), Sharepoint and Microsoft Office, broadband services run over a virtual private network, plus e-mail archiving and desktops. Voice over IP and mobile services are also planned.

"Our portfolio is constructed to address the changing requirements of our customers and the market," says Jonathan Evans, head of marketing at Siemens Solution 1. "SMEs are more constrained by resources than any other sector, but they do have complex IT requirements."

Not surprisingly, a steady growth in demand for hosted services from small and large companies alike is widely predicted. By 2008, the market will be worth £15.5bn, according to a report last year from Forrester Research. Demand for web hosting services should be particularly strong in 2005, Forrester adds.

But one veteran figure in the software industry cautions against the many claims made for hosted application services. Dennis Keeling, chief executive of the Business Application Software Developers Association, points out that hosted services under another name, application service providers (ASPs), were a flop in the 1990s.

"The market everyone expected to take off was the one for application service providers," he says. "It was a brilliant concept, to rent computing facilities instead of buying them. Many of Basda's larger members provided an ASP service - Baan, JD Edwards, Microsoft, Oracle, Systems Union, SAP - all with little take-up."

However, today's hosted services are very different from the old ASP ones. The performance of hosted services today will also rely on a contract that spells out the obligations of both user and supplier.

"As with any outsourcing contract, the relationship with the hosting supplier must be properly understood and managed, and the responsibilities for each party must be clearly defined and agreed," says IBM's Wynne. "The discipline of processes and procedures for handling complex technical issues must be established right from the beginning; otherwise, a customer's relationship with such suppliers can run into difficulties."

With the correct converged network in place, hosted services can add true value to your business, both in terms of cost savings and in increasing your flexibility and responsiveness.

Don't forget, though, that as you consider what they could do for you, your competitors may already be taking advantage.

This was last published in February 2005

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