Blog

What To Know About Total Cost of Ownership:

Reduce Risk, Save Money with Cloud-Based Virtual Phone Systems

You probably already know the importance of conducting a TCO evaluation before you purchase new technology. TCO, or Total Cost of Ownership, is a methodology that provides an estimated financial analysis of the asset in question.

However, cloud-delivered services like Cloud IP PBX from First Communications are disrupting many standard assumptions and practices such as the TCO methodology. Why? Most TCO studies don’t factor risk.

The TCO output is a best-effort forecast. Its accuracy is as good as the quality of the assumptions that go into it. Although the TCO analysis may not show it, one key benefit of cloud-delivered voice, video, and data services is an improved ability to adapt to changes. Keep reading to learn how:

Consider the price of an airline ticket. Which is less expensive: a $1,000 fully refundable fare or a $500 non-refundable ticket? The answer depends on the likelihood of a change in plans. This is not trivial; airlines make considerable revenue related to change fees. That same risk is generally ignored in TCO studies.

Predicting The Future Isn’t Easy.

The TCO methodology attempted to normalize total costs over a given period for a more accurate comparison between tools. The goal of running a TCO comparison is to understand the expected (estimated) financial ramifications of each alternative under consideration.

To determine TCO, multiple elements of a given solution are estimated and compared. These factors vary, but typically include costs associated with acquisition, implementation, administration, training, maintenance, and disposal.

A series of assumptions are then made on a system’s size and configuration, which in turn build the financial framework that determine an estimated TCO for each option. Realistically, these assumptions are usually wrong. Predicting the future is a hard thing to do. Most companies plan to grow, yet many do not. Economic changes, leadership changes, technology advancements, execution factors, natural disasters, and many other factors ruin the best laid plans. TCO exercises, therefore, are inherently a best-effort estimated guess.

Virtual Phone Systems are changing the Game

TCO methods are applied most critically to long-term decisions, yet the formula consistently ignores that change increases over time. Forecasts become less reliable as they age, yet the technical decisions derived from them live on.

Cloud-based voice, video, and collaboration tools from First Communications are future-proof. As an organization’s needs and requirements change, we can adjust your subscriptions. First Communications offers broad capabilities to adjust features, quantities, locations, devices, and more over the term of the subscription. The pay-as-you-go model means you pay for actual, not planned, usage.

The Problem with Owning PBX Hardware

As technology has evolved, business’s technical burdens have steadily increased. Engineering, compatibility testing, and many more responsibilities have shifted from manufacturers to customers such as administration, upgrades, and design services.

This has complicated not only day-to-day operations, but also disaster recovery planning, vacation coverage, hiring, training, and ongoing skills development. This burden is the cost of premises-based long-term decision-making.

The reality is that the cloud is actually far less expensive because it carries far less risk. First Communications offers cloud-delivered voice, data and network services that shift this risk and burden away from your business.

Ignoring risk is risky business. Technology is changing quickly. The way we worked just 20 years ago is practically unrecognizable today. Back then, Kodak ruled photography, fax machines were booming, and one of the most effective forms of advertising was the Yellow Pages.

Less OpEx, Greater Agility

OpEx, or operating expense, is one of the most commonly cited benefits of cloud-delivered solutions. While the benefit of reduced OpEx can be desirable in comparison with capital expenditures, that is only a financing matter. Cloud-delivered virtual phone systems offer benefits far beyond financing:

1. Reduced Commitment

With a traditional capital purchase, the customer not only pays about 70% of the four-year projected cost in such as performance and employee adoption. Conversely, First Communications reduces your risk and commitment. Customers can experiment or pilot solutions. Services are backed by a service-level agreement (SLA) that guarantees performance.

2. Scalability

Most organizations select systems larger than they actually need to accommodate potential expansion. Cloud services simplify the operational, human, and financial aspects of scalability. Many cloud providers allow their customers to scale up and down as seasonal or economic conditions dictate.

3. Predictable Costs

Many believe premises-based solutions offer a more predictable cost structure. This is a fallacy due to upgrades, security updates, and turnover. Implementing upgrades and enhancements requires project management, backups, rollbacks, and of course administrator time – usually after hours. There is no way to know how frequently software updates will occur, how much planning will be required, or how urgently these updates must be applied.

4. Advanced Features

With traditional PBX, adding new features like video conferencing can involve a significant expansion of infrastructure. This makes some features cost prohibitive. With First Communications, new features can be trialed easily, without significant setup or commitment. We allows a business’s greater freedom to try before committing to new solutions.

Virtual Phone Systems Offer More

Traditional tools and methodologies such as TCO can be misleading when you’re looking for a new business phone system. First Communications offers cloud-delivered business voice services that carry far lower risk than the vast majority of premises- based alternatives.

First Communications offers cloud-delivered business voice services that carry far lower risk than the vast majority of premises- based alternatives.

Go beyond standard voice delivery with a full digital network that integrates with your data network. Take advantage of the latest advances in technology to enhance your communications by contacting First Communications today.