Premise based phone systems are dying
Understanding premise based phone systems, their benefits, disadvantages, and why you should switch to the cloud!
Malcolm Gladwell wrote about the common misconception surrounding the famous David vs Goliath battle — an oft-quoted, inspiring underdog story where the giant and all-powerful Goliath is defeated by the puny David. According to Gladwell, the complete truth about the story reveals more insights than just an underdog-who-rode-his-luck story. Goliath suffered from acute eyesight problems while wearing a ton of armour which slowed him down. David’s sling was a weapon that could accentuate his strengths while also attacking Goliath where he was unguarded. Premise based phone systems are the Goliath of the phone system market and they are engaged in a similar battle of wits against the modern David (cloud phone systems).
What are premise based systems?
On-premise or premise based systems are completely owned by your organization and housed within your premises.
Complete ownership implies that the purchasing organization takes care of daily operations, maintenance, and upgrades of the associated hardware and software. The complete control over data and operations made premise phone systems, an attractive option for businesses.
What are premise based phone systems?
On-premise phone systems mean that everything related to phone conversations is owned completely by your business.
This includes the purchase and maintenance of local servers, network cards, phone hardware, cables, carrier partnerships. Needless to say, investments in phone systems were capital intensive and exclusive to the largest enterprises.
Why premise phone systems are the modern Goliath
Premise phone systems are the giants of the phone industry. They are the category incumbents and hold a large slice of the revenue pie when it comes to phone systems. Why will they fail? Why are they more like Goliath and not David?
They are short-sighted
Kodak bet big on digital cameras instead of digital photography. The iPhone launch in 2007 was the beginning of the end for mass commercialization of digital cameras. Premise phone systems are similar to Kodak in terms of assuming their suggested solution (IP phone systems) will be the game changer. While there is definitely short-term gains in the IP phone market, a cloud based phone system is the next step in the evolution. It is only a matter of time before we start seeing market share corrections in the global telephony sector. Growth has declined in the premise phone category for two consecutive years, 2017 and 2018.
This directly contrasts with the predicted CAGR of 13% for cloud-based phone systems until 2023. We can directly associate these trends to fiscal prudence as well as the growing popularity of cloud-based phone systems.
Like Goliath, they are slow and cumbersome
You are often locked into a contract for a minimum of 3-5 years when you purchase premise phone systems. These long-term contracts lock you out of new technological upgrades. Your invested capital cannot be redeemed if you suddenly want to expand or switch to a better phone solution. Administrators of modern cloud-based phone systems cannot even begin to comprehend some of the issues tackled by their peers using premise phone systems. This is because cloud systems by its very nature enable phone teams to receive continuous technological and feature upgrades without spending a single extra penny.
The entire responsibility of launching, and maintaining a premise phone system falls squarely on the shoulders of the business. Cloud-based phone system owners on the other hand – neither spend a penny on maintenance nor employ a phone crew to fix issues.
Underestimating the power of cloud
People expected Goliath to win despite a young brave challenger partly because of inherent biases and partly owing to not understanding the strengths of the challenger. When the first set of hosted/cloud phone systems broke through the ranks, the industry witnessed a young, brave contender to the premise phone system stronghold. However, experts rushed to extol the virtues of the current premise phone systems while also amplifying ‘weaknesses’ of the cloud phone systems without careful consideration of these so-called weaknesses. David’s sling was also considered a weak weapon of choice when compared to Goliath’s sword.
Entry of David ( Cloud-based phone systems) into the battle
Hosted followed by cloud phone systems, broke the stronghold of premise systems because of sheer business necessities. SMBs could not afford a complex phone system (on-premise) and this greatly impeded their growth. It also made no sense that while personal communication was becoming modern, business phone systems remained outdated and extremely cumbersome to use. With the advent of cloud-based phone systems, all the shackles were broken and SMBs adopted them with love. However, the large enterprises have been caught off-guard by the change in momentum of the phone system battle. Champions of premise-based phone systems talk about three major points for discouraging greater adoption of cloud telephony
Control over Data
The entire data set of phone conversations gets stored in local servers. These servers are housed within the office premises. Business owners made the mistake of appropriating physical presence of data to actual business benefits without proof.
Control over Operations
Laying out the telephone cables, setting up your routers, phone receivers, and hiring a round-the-clock phone team to ensure that your phone operations are always working. Ah, the good-old sweet smell of blood, sweat, and tears from building and launching phone operations and then trying to scale it over multiple locations, an increasing number of employees, etc.
To be fair to premise phone systems, even IP-hosted systems can give the same amount of sleepless nights and endless troubles to phone administrators or managers. For example, Avaya released a video explaining how simple their IP phone systems were to set up. If you are a manager and want to launch your phone operations, the first thing you need to do is earth-proof your hands and find a nice screwdriver to get everything started. This is after you have purchased the hundred parts and they all arrive on time for you to wire your entire office building. If this sounds like your ideal day, you should give premise phone systems a try.
Control over Employees
Premise-based phone systems rarely support virtual supervision. This implies that unless an employee is at their desk – no one has any clue about the productivity of the team. Also, if the employee is having a business conversation away from their desk, how is the supervisor expected to assess the employee or the quality of the conversation without any help from the phone system. Hence premise phone systems encourage supervisors to chain their teams to their desk additionally enforcing strict desk-work policies which are never popular amongst a largely millennial workforce.
Understanding the true cost of switching to the cloud
Back in 2012, WIRED published a post explaining why businesses should switch to the cloud. The common assumption back then was that it was only a matter of time before businesses started to re-think on their software and IT strategies. Sometimes markets change course in an instant and sometimes they fail to grasp the true potential of a solution until the solution makes a comeback and seizes the day. For example, back in the 1900s, the market share for electric vehicles in the United States was more than 30% (1 in every 3 vehicles).
The automakers knew the eventual end-game was to build electric vehicles but set about delaying the inevitable. Now we are at an inflection point where the clamour for electric cars is sky-high and all major countries are pushing for zero-emission vehicles. Similarly, cloud phone systems are the eventuality. And so, if you are still undecided or unclear about transition to the cloud, let me list a few good reasons to switch to the cloud.
True Cost of Ownership
Owning the end-to-end phone system puts a huge burden on your firm’s working capital. Cloud-based phone systems provide you the ownership rights without the burden associated with owning a system. Furthermore, you pay a subscription fee to cloud telephony providers which is but a small fraction of the total premise phone system cost.
True Cost of Maintenance
My own experience of working in the services sector, as well as tech publications such as the WIRED, point out that most organizations spend a lot trying to maintain current systems. Cloud phone systems are maintained by your business partner or vendor without you having to invest a penny. Not a single penny.
True Cost of a happy Workforce
Millennial workforce demand flexibility in work timings, nature of work, and work locations. Cloud phone systems grant you two things
- Happy team
- Happy supervisor
True Cost of Data
Cloud-based data storage implies that all the phone conversations and their associated notes, tickets, recordings cannot be deleted or lost because of a local outage or a natural disaster. With the advancements in cyber-security, most of the date on the cloud are securely encrypted and stored. What this means for your business is that –
- All your data is backed-up
- Data can be encrypted
- Data is available anytime from anywhere post login.
True Cost of Growth
Your business needs software that can scale seamlessly without forcing you into long-term contracts or extracting a huge working capital from your pocket. Cloud phone systems help growing teams scale without any burden.
David vs Goliath – 2019: The battle to be your preferred phone system
When I first read the David vs Goliath story, it came across as a straightforward plot with a twist, and a strong moral lesson. Reading it with a different lens has helped me understand how it is easy to overlook strategies when you see them through preconceived notions.
Every business, every product, every winner has a story where the market incumbent a.k.a Goliath seemed formidable and scary. However, when faced with such adverse conditions, new entrants evolve and sometimes change the very nature of the battle.
Malcom Gladwell summarises this shift when he said, ‘ The very same thing that appears to make a company so formidable–its size, its resources–serve as stumbling blocks when they’re forced to respond to a situation where the rules are changing, and where nimbleness, and flexibility, and adaptability are better attributes. Which is the story of David and Goliath, right? David had nimbleness. He changed the rules. He brought in the superior of technology.’
Illustrations by Karthikeyan Ganesh
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