Comms Dealer January 2011

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BUSINESS TRANSFORMATION PBX facing extinction?

The market of traditional PBX hardware will disappear completely within a decade, claims Piers Linney, CEO at Outsourcery, who argues the case for business transformation based on a cloud dominated comms environment.

that require high sales volumes to generate profits is a common concern. Due to the need for volume the number of channel solution providers is likely to fall.&#x201D;

he next generation cloud-based converged solutions are very different to the traditional PBX, and the functionality delivered as a service will incorporate presence, chat, voice, video, desktop sharing, document collaboration, virtual meetings, conferencing capabilities, corporate versions of Twitter, unified messaging and integration that enables call initiation from applications and not telephones. The softphone which can run on all devices, including a mobile, will displace the desk bound device and video will displace voice. And according to Linney, building on-premise solutions that can deliver all of this functionality would prove too expensive and the maintenance cost would be too high. &#x201C;There is a general lack of awareness among business owners about the availability of low cost, powerful cloud-based communications solutions,&#x201D; he said. &#x201C;As awareness grows, the on- premise business will dry up very quickly. It already makes absolutely no commercial sense for a business to own the vast majority of its communications infrastructure.&#x201D;

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The rapid adoption of cloud- based services will be driven by RoI benefits. &#x201C;The recession delayed an IT refresh cycle, and as CIOs and business owners look at the options for the next three years

the cloud is one option that has to be seriously considered, especially for commodity applications and telephony,&#x201D; added Linney. &#x201C;Gartner has forecast that 20 per cent of businesses will own no IT assets by 2012. By the next IT refresh this number will clearly rise, and within the decade it is expected that the vast majority of IT and comms infrastructure will be delivered as a service from the cloud. That cloud may be public or private or a hybrid.&#x201D;

Significant RoI benefits of cloud services include no additional support or maintenance costs, a reduced &#x2018;hassle factor&#x2019;, automatic upgrades, updates and resilience, security and back-up options that even large corporates could not afford. In short, there are no reasons why businesses should not adopt cloud services and this influences the analysts who are predicting exponential growth. &#x201C;The cloud market will mature within a decade, and those that embrace change now will be best placed within five years to benefit from a strong position on a rapidly growing market,&#x201D; said Linney. &#x201C;It will be difficult to play catch up because those that are already trusted cloud partners will take everything off the table.&#x201D;

The business model of selling on- premise infrastructure will wane and eventually die, claims Linney.

There is time to support and fund the new model with the existing one

Piers Linney

But it will take time. &#x201C;Only specialist on-premise deployments or expensive security-led deployments will survive and these are certainly not the focus of the vast majority of the channel,&#x201D; pointed out Linney. &#x201C;This transformation is not limited to software either. For many businesses in the channel the shift from sales of hardware to recurring revenues will change their business model, sales incentive structures, cashflows and working capital requirements. There is time to support and fund the new model with the existing model. Partnership with credible providers that are able to make the investment and offer suitable SLAs is crucial.&#x201D;

Virtualisation is a technology that has enabled more efficient, flexible and resilient cloud platforms to develop. The client-server model that prevails today is inefficient as powerful PCs sit on desks running a limited number of applications while connected to often under- utilised servers. Building a virtualised platform is expensive and there isn&#x2019;t room for many providers due to the need for scale. &#x201C;The majority of the channel will resell solutions provided by cloud service providers,&#x201D; commented Linney. &#x201C;The impact of moving to a business model based on a recurring revenue stream from products with low price points

A new sales or commission model may need to be developed. Paying a sales commission based on a percentage of a hardware sale changes into a commission on rolled up revenues or profits from a multi-year contract that needs to be funded. Corporate inertia is a common challenge and it can be difficult to transition people that have grown used to an industry that hasn&#x2019;t changed significantly for two decades. &#x201C;This can be overcome, as it was at Outsourcery when we turned a mobile phone reseller into a provider of cloud- based software and unified communications solutions,&#x201D; added Linney. &#x201C;However, many people did not successfully transition with the business. Some employees want to learn and embrace the new challenges. Others are good at maintaining the legacy business. In many cases you have to change the people.&#x201D;

The most obvious course of first- step action is to select services that are close to an existing core competency. Scale is an important factor when the business model features recurring revenues based on products with low price points. However, the addition of professional services and integration can augment this with higher margin project- based income streams. &#x201C;It is advisable to commit specific resource and management time to developing cloud-based unified communications offerings,&#x201D; urged Linney. &#x201C;The learning curve can be steep. Do you invest in infrastructure or partner? It can take two to three years to create a state- of-the-art and robust platform. Creating a separate business unit with a separate cost structure and P&L can make the developing business model and its financing characteristics more transparent and easier to manage.&#x201D;

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