Hosted PBX: A Viable IP PBX Alternative?

July 2005

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Agenda

–State of the market–Hosted PBX vs. IP PBX–TCO: hosted vs. premises–Case studies–Co-existence–Future trends

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State of the Market

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Hosted Voice: State of the MarketLarge players are deployed

–E.g., Verizon, MCI, BellSouth, SBC, Telstra, Singtel, T-Systems

CLECs expand–E.g., US LEC, McLeod, XO, CBeyond, BroadWing 100+ others

Residential distracts enterprise deployments (temporarily)

–The Vonage effect

Hosted voice follows IP PBX deployment path

–Trials, branch offices, HQ

Big names deploying–E.g., US EPA, State of Minn., U Kentucky, GMAC, Coca Cola, Texas A&M

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Which Service Providers? ExamplesCompetitive Carriers

Managed SPs / SIs

Incumbent Carriers

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Hosted PBX

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Hosted PBX Follows Software Trends30 years of PBX domination

– Centrex fought back with limited success

– IP PBX same evolutionary model

IP Telephony changing market– From hardware to software

Enterprise software apps migrating to data center– E.g., CRM, ERP, Web hosting,

directory services, email, etc.

Is voice just another data center

application?

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Enterprise Sites

Like IP PBXIP-based software model

Rich PBX + multimedia functionsWeb-based control, MACs

Hosted PBX: Best of PBX & Centrex

Consistent Global Service Delivery

Like CentrexScale, reliability

Purchase incrementallyCentralized control, mgmt.

Hosted PBX

Open, standards-based

Best ofboth worlds

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Attribute Hosted PBX IP PBX

Scale • Millions of users • 1-10K users• Lower numbers of IP phones

Networking • Centralized mgmt. and MACs• Uniform dialing plans• Uniform service set

• Hard-to-manage dialing plans• Service islands

Total Cost of Ownership

• Lower cost with outsource • Higher when total costs factored in

Openness & standards

• SIP-based• Open CPE

• Proprietary• Closed CPE

Convergence • LAN AND WAN • LAN only

Survivability • Robust, IP + geographic • Multiple points of failure

Reliability • 5 9’s for system• Solaris-based

• 4 9’s for system• Windows-based?

Technology Risk • Borne by service provider • Borne by enterprise

Management • Centralized system mgmt. • Mgmt. based on each system

Hosted PBX vs. IP PBX Comparison

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Hosted PBX Economics

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VoiceCon IP PBX RFP SpecificationsSystem requirements

–Single system image–Standard business features–Transparent station/system feature operation–Centralized support services

• Attendants, messaging, system management

–Enhanced 911 supportMessaging

–2750 users, 3000 max–125 ports, 175 max

End points–2700 IP sets–250 analog ports

• Conference phones, fax, backup lines

Primary HQ Site• 1,500 IP line stations• 100 analog ports

Region 1• 500 IP line stations• 50 analog ports

Region 2• 250 IP line stations• 50 analog ports

Branch 1• 200 IP• 25 analog

Branch 2• 100 IP• 10 analog

Branch 3• 75 IP• 10 analog

Branch 4• 50 IP• 5 analog

Sat 1• 15 IP• 2 analog

Sat 2• 10 IP• 2 analog

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2005 VoiceCon RFP: TCO Comparison

Hosted 31% less TCO than 9 system average–34% less than Avaya, 32% less than Cisco

Additional benefits–Carrier grade reliability and survivability–More flexibility to support change, i.e, adding/removing users, sites–Less risk: no technology lock-in, stranded assets

TCO only improves with the addition of sites and users

Summary of Solution Costs – Per Month, Per User Solution Avaya Cisco Avg.- 9 Bids HostedVoice Equipment + Maintenance $14.48 $9.44 $10.70 n/aCarrier Voice Services n/a n/a n/a $18.00Access $12.68* $12.68* $12.68* $3.70*Minutes $5.00 $5.00 $5.00 $5.00CPE (Layer 2/3 Switching) $2.68 $2.68 $2.68 $2.02Phones $8.04 $10.55 $8.58 $5.60Install & Support Staff $25.13** $25.63** $25.88** $10.66**Total $68.01 $65.98 $65.52 $44.98

*Estimated using market pricing inputs**Uses some estimates, some RFP data

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Hosted PBX TCO Beats Existing PBX

$0

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

$140,000

5K 10K 15K 25K

Networked PBXs

Networked IP PBXs

Centralized Softswitch

Enterprise Stations

Monthly Total

“Softswitch solution” offers lower TCO for all size enterprises

TEQ Consult Group – June 2005

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Services/OpEX Costs Overshadow CapEX

$0

$10

$20

$30

$40

$50

$60

$70

$80

CapEx* OpEx Telecom Services

Networked PBXs

Networked IP PBXs

Centralized Softswitch

Monthly Cost/User

Softswitch delivers better CapEx, OpEx, and equivalent Telecom Services versus IP PBX

*Assumes PBX network infrastructure in place

TEQ Consult Group – June 2005

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Case Studies

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State of Minnesota Background

–Large-scale multi-office deployment, 62K users–Offices interconnected by private network

Problems Addressed–Multi-layer administration –Manage call traffic across public and private networks

Key Drivers–Future-proofing to next decade–Open, standard CPE–Substantial TCO savings (voicemail)–Customized interface and services for different agency requirements

“This will further help the state meet current and future telephony needs.”“We will be able to increase the eligibility of state agencies to take advantage of the benefits of IP telephony, which will result in toll savings, circuit consolidation and lower administration costs."

Keith Payden, State of Minnesota Chief Information Officer

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University of KentuckyBackground

–18K students –Unsatisfied with Cisco Call Manager deployment

Problems Addressed–Networking existing equipment, IP PBXs, hosted users –IP PBX scalability

Deployment–Reloading Cisco phones with SIP for BroadWorks –Delivered by Lucent & Alltel

Key Drivers–Reuse of existing Cisco IP phones, switches, routers–Able to meet scalability needs• E.g., Solaris vs. Windows

–Carrier-grade service offering

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From PBX to Hosted PBX: Before & After

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IP PBX Interworking

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Hosted and IP PBX: Coexistence

SIP Trunking– Provide connectivity to IP PBXs– Save on capex: no need for PRI gateway

Virtual Services for Existing PBXs and IP PBXs– E.g., Click-to-dial, auto attendant, attendant console,

Enterprise-wide voice mail, ACD/call center, voice VPN

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IP PBX SIP Inter-working

Build a next-gen integrated communication bundle designed to enhance the deployment of IP (SIP) PBXs.

SIPConnectCurrent Network

IP-PBX Legacy TDMLegacy TDM NetworkNetwork

IP Phones

Customer Premisessold and managed by

Channel Partner

GW

VoIP TDM

IP-PBX CarrierCarrierVoIPVoIP

NetworkNetworkIP Phones

Customer Premisessold and managed by

Channel Partner

VoIP

SIP

GW

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Enhanced Services for PBX UsersIP Platform

–Start with trunking service–Add Voice Mail–Add Unified Messaging

TDM IP

Voice Trunking

Voice Mail

Connectivity

Basic Service

Enhanced Services

Voice Trunking

Unified Messaging

IVR, Find-me/Follow me

Hosted PBX

Remote/Tele-worker Service

No offering

Voice Mail

Auto Attendant

Add Click-to-dialAdd Auto Attendant/IVRAdd Find-Me/Follow-MeAdd Remote/Tele-worker Services

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SIPConnect™ Overview Partnership

Specification– Open source: www.sipconnect.info

Availability– From Cbeyond today– Additional carriers adding service

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Future

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Hosted PBX vs. IP PBX: Sweet Spots

10

1000

10,000+

1 10 100+Number of Sites

Num

ber o

f Em

ploy

ees

Fortune 500

RetailSME

Campus

Hosted PBX Sweet Spot

IP PBX Sweet Spot

Hosted PBX Sweet Spot

Hosted PBX Sweet Spot

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InfoTech Forecast for Line ShipmentsThis forecast reflects historical, end-user demand, emerging offers, and

channel capability trends

02,5005,0007,500

10,00012,50015,00017,50020,000

Hosted IP-PBXCentrexManaged IP PBXIP-PBXKTSPBX

Hosted IP-PBX 61 195 726 1575 2688 3866

Centrex 711 586 487 414 356 310

Managed IP PBX 222 300 467 821 1493 2182

IP-PBX 3631 5386 6097 6690 7342 8243

KTS 4106 4473 4572 4356 3930 3305

PBX 4314 3120 2286 1698 1222 904

2003 2004 2005 2006 2007 2008

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Hosted vs. IP PBX: Avaya “Sell” Report

Hosted: Steal ~15% of IP PBX market in next 4 years– Reasons:

• Broadband = more hosted competition (vs. Centrex monopoly)• IP = hosted parity with premises offers• Avaya poorly positioned for hosted

Source: Janco Partners Inc. November 2004

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Future: Mobile Hosted PBXSame Hosted PBX Application

–Mobile handset looks like IP phone–For existing and 3G networks

Extend Existing Services–Group mobile subscribers into an “enterprise”

Support for Dual Mode Handsets

–Use WiFi inside and cellular outside enterprise

Managed IP Network

Enterprise Sites

IP Access Network

Mobile Phones

Wireless Network

Support Mobile Handsets with Hosted PBX Enterprise Application

VoIP Application Server

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Summary–The Hosted PBX market is moving into the mainstream

–Large carriers, enterprises are embracing Hosted PBX globally

–Hosted PBX can have significant TCO savings vs. an IP PBX

–Hosted PBX has lower TCO vs. doing nothing

–Future = SIP inter-working, mobile integration

–Hosted PBX can provide a great alternative to an IP PBX

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For More InformationScott Wharton, VP Marketing

220 Perry ParkwayGaithersburg, Maryland 20877

USA+1.301.977.9940

swharton@broadsoft.comwww.broadsoft.com