Have you wrestled with the economics of purchasing a software application vs. paying a monthly fee to a managed service provider (MSP) for access to the application? You’re not alone. I have found that in most cases the specialization and economies of scale of an MSP delivers greater value than trying to do it yourself.

A couple examples of this for our company was in our decision to use a hosted project management solution by Clarizen and a hosted Microsoft Exchange solution by Mailstreet. For example, for us to purchase, install and manage our own Microsoft Exchange server, we estimated that it would cost us at least $10,000 in the first year alone for hardware, software licenses, installation fees and ongoing administration. Instead, we pay less than $100/mo for our employees to have access to MailStreet’s Hosted Exchange service, allowing us to add and delete users any time we need to. For those partners, contractors and customers that need email boxes from us, we simply provide them an IMAP mailbox from our hosting provider, 1and1.com. This approach has saved us thousands of dollars a year and many hours of headaches we used to have trying to manage our own email server in-house.

Our customers find themselves needing to make this same type of evaluation as they consider using our cloud-based monitoring and information management tools – a service offering we call Monitor+. We have learned firsthand that the total cost of ownership (TCO) of developing, integrating and supporting all of the components of Monitor+ over the past 3 years has been much higher than we expected… despite how much due diligence we initially did. Fortunately, we have been able to spread that cost across multiple customers over a period of years and thus we are able to offer very competitive monthly fees.

When considering all the direct costs associated with creating the Monitor+ service offering, I believe our partners and/or customers would end up spending nearly 80% more to acquire and support all of the applications that comprise Monitor+ vs. paying the Monitor+ monthly service fee we charge. When requested, we help our customers evaluate the "rent vs. own" costs for themselves, and typically they end up choosing the MSP option verses trying to develop a proactive monitoring solution on their own. Ultimately, Monitor+ frees our customers and/or partners to focus on their core business and avoid the risk of disruption of their voice and data services.

Depending on your tax situation, the after-tax cash cost to finance the development, installation and support of an integrated application platform like Clarizen, Mailstreet or Monitor+ would favor an MSP option. Since MSP fees are expensed, a growing company can essentially use the MSP’s capital. In today’s environment of tighter credit and a scarcity of cash, most companies should have a bias to a managed service or cloud computing as part of maximizing after-tax return on assets/equity.

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First of all, hats off to Johna Till Johnson and her article this morning in Network World entitled “Cloud computing: The telcos’ game to lose“. In addition to helping all of us understand the role that traditional Telco’s play in offering cloud computing services, she breaks down cloud computing into 3 basic areas:

1. Software-as-a-Service (SaaS)

2. Platform-as-a-Service

3. Infrastructure-as-a-Service

My goal today is not to dig into the differences of these 3 categories of cloud computing (a good future topic), but to simply ask if cloud computing has impacted you lately – either positively or negatively. As I mentioned in my previous blog, Telizent’s service offering to intelligently monitor and maintain business communication systems (Monitor+) is accomplished largely through cloud computing. Using Johna’s definition above, we’d likely be categorized as a SaaS offering, and 95% of the time we are able to remotely resolve any alarm / problem that is identified by Monitor+ using our SaaS toolset.

But what about our internal use of cloud computing? We actually try to walk the talk. About a year and a half ago, we were searching for an easy-to-use project management tool that we could use to manage some of our telecom projects. Microsoft Excel was not interactive and Microsoft Project was too complex and too expensive. After a little research we discovered a SaaS Project Management tool called Clarizen and we haven’t looked back. It enables us to manage projects across multiple locations, clients and users via the web, without having to load anything on a project member’s machine… in fact much of the interaction is done right from their email inbox!

On the bumpier side of the equation, about a year ago we began using Microsoft’s Office Live CRM tool to track our web inquiries and manage our opportunity pipeline. All was going well until one morning (about two months ago) we woke up to find that the “create new opportunity” function in Office Live was no longer working after a new release the night before.

After 6 weeks of submitting several requests to their message board (they have no direct support phone number any longer) and not getting any resolution, I had to find an alternative option for our organization. So far we’re very pleased with our new CRM solution from Tigerpaw Software. However it is with some chagrin that I share with you as I write this blog entry that I decided to check one last time to see if Microsoft had resolved the Office Live issue without notifying me… you guessed it, the “create new opportunity” feature is now functioning again.

Just keeping it real. Cloud computing is of tremendous value to businesses, but there are some risks that we each need to plan for accordingly. What are your experiences with Cloud Computing? If you found this post useful, please leave a comment, share with your peers, or subscribe to the news feed to have my future posts delivered to your news feed reader.

Who hasn’t heard of, planned for or even begun using some form of cloud-based service? From a personal use perspective, if you have a Gmail, Twitter or Facebook account, you can consider yourself an early pioneer of cloud-based services! However, for the enterprise, many IT executives believe cloud computing is or will soon revolutionize business infrastructures. In fact, according to a new poll by Deloitte of more than 750 enterprise-level IT executives, almost 25% see the cloud as a viable option to on-premise server and storage (see Channel Cloud Computing). However, security and ownership issues must be effectively addressed before cloud computing becomes fully adopted.

But how does the cloud affect enterprise voice? Many associate hosted VoIP systems with the cloud craze, but according to No-Jitter’s contributing writer, Dave Michels, hosted VoIP actually pre-dates it. In his article, “Ten Ways the Cloud Will Reshape Voice,” Michels does an excellent job of describing how cloud computing technologies are dramatically impacting enterprise voice. However, the one sentence in his article that I most agree with is “the cloud changes everything and nothing”. I’d like to focus this post on the nothing.

Even if 2010 holds the promise for an organization to migrate to a cloud-based enterprise voice solution, IT / Telecom managers realize it rarely happens quickly, and that they still have to keep the existing phone system fully operational. Fortunately, this is where the cloud can be used just as effectively to remotely monitor and maintain existing premise-based phone systems. Managers can extend the life of their existing systems and/or seamlessly migrate to a new phone system at whatever pace is most appropriate for their organization.

As a third party telephony monitoring and maintenance company, our experience shows that over 97% of the alarms generated by a premise-based phone system can be resolved by a remote technician in the cloud. By using a cloud-based monitoring service, IT managers can cost-effectively prevent system outages by using remote telecom experts and deploy their IT resources to focus on other important IT initiatives.

Remote monitoring, maintenance and management of business phone systems have been operational from “the cloud” for over a decade. This underscores the validity of cloud computing and actually helps usher it in by enabling IT managers to intelligently migrate to cloud-based enterprise voice solutions at the right time and for the right reasons.

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