Market musings

Are Cloud-Based Phone Systems Still Relevant?

by Nina Quasebarth
February 4, 2017

Cloud computing is a well-established concept for business. Rather than building your own IT infrastructure, you rent computing power and applications hosted by a service provider on the Internet. For business, this is a great concept because it minimizes the need for investment in additional hardware and provides a scalable platform that can expand with business needs.

As telephone systems started to migrate to IP platforms, cloud-based phone systems became part of the mix, and telephony services became just another cloud application. However, consumer mobile technology may be making cloud-based phone systems obsolete, especially for small to medium-sized businesses (SMBs).

Consumer trends drive business applications

Consumer technology has always driven adoption of new business platforms, and this has been especially true in telecommunications. Smartphones have taken the consumer market by storm. There are nearly 2 billion mobile-device users worldwide, and 80 percent say they prefer using their smartphones for Internet search. The convenience of a handheld computer is hard to beat, and 67 percent of workers surveyed say they use their smartphones at work.

Adoption of smartphones for work-related tasks creates a dilemma for businesses. If you don’t control data access channels, you don’t control the data, so having users access email and corporate information using personal telephone hardware creates a problem. To combat the problem, 74 percent of companies have adopted or are planning to adopt bring-your-own-device (BYOD) policies.

In addition, 71 percent have changed at least one business process to accommodate BYOD, and 20 percent have changed four or more business processes. It’s the only way to regain control of corporate data access.

And BYOD adoption has proven beneficial for many companies. Companies with BYOD policies report improved sales (73 percent) and greater profits (54 percent). Companies also report they are 58 percent more likely to report improvements in bringing new products to market with BYOD. As an added bonus, companies with a BYOD policy report 37 percent higher employee satisfaction.

Most SMBs that adopt a BYOD policy are now essentially paying for two telephone systems: a cloud-based phone system and a BYOD phone system.

The true cost of cloud-based phone systems

Cloud-based phone systems vary in cost. While you save the cost of in-house wiring and equipment, you still have monthly service fees. Moving from an on-site to a hosted voice-over-IP (VoIP) system, for example, is likely to save money—estimates are that you save 40 percent on local calls and up to 90 percent on international calls—but those cloud-based phone services still have fees. Some sources estimate that fees for hosted VoIP services can go as low as $25 per user, but you also have to pay usage charges, even if those charges are less than with a conventional landline.

And even a cloud-based phone system requires office hardware. You will need IP-compatible handsets as well as routing equipment. As your business grows, you will have to expand your network with more handsets and may even need more bandwidth to accommodate IP phone services.

When weighing the pros and cons of using a cloud-based phone system, you also have to consider that you will lose control of your phone system. You have to rely on the hosted service provider to provide reliable phone service. You also have to rely on your IT staff to make sure that there are no internal networking issues that could disrupt phone service. Consider, for example, what happens if a server fails or if your computer network is attacked. A denial-of-service attack would not only disrupt server traffic but IP phone traffic as well, because it all runs over the same network.

What you really need from your business phone system

Considering the added cost, why do businesses have to maintain two telephone systems? The usual argument is that you need the business telephone system for business phone services such as auto attendant, voice mail, teleconferencing, and related amenities. At the same time, you have business users alternating between handheld devices and the office phone to access messages and conduct business.

In fact, recent studies show that the average mobile worker uses 3.5 devices.

That increases the likelihood that important calls will be missed and that it will take longer to respond to messages. Even with all this worker connectivity, more companies are reimbursing employees for less of their personal phone use. Some states are taking action. Under California law, employers are required to reimburse at least part of employees’ cell phone bills based on how much usage is work-related. However, whether they are reimbursed or not, employees will still use their own phones for business purposes.

There really is no reason for SMBs to pay for cloud-based phone systems and reimburse employees’ mobile-phone usage when it’s now possible to consolidate your employees’ mobile phones into a single, central business phone system. Because your employees will use their smartphones for business anyway, it improves communication and productivity.

For many SMBs, the office phone system consumes a sizable chunk of the monthly operating budget. Although you can reduce expenses with a cloud-based phone system, consider whether or not you need a hosted system at all. You can save more money by allowing employees to use their own equipment and creating your own virtual business phone systems with the help of applications like Spoke.

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