It is no secret that there is a 40% churn rate in the Remote Hosted Service industry! That means 4 out of every 10 new customers discontinue service within the first contract term. There are three main reasons to NOT choose Remote Hosted Service, and understanding them will help you serve your customers better, and grow your business at the same time:
1.) Poor Reliability & Inconsistent Voice Quality
This is because there are at least twice as many points of failure as with onsite equipment. While the Remote Hosted Services argue they have superior reliability with redundant servers and multiple nodes for failover, the truth is they are reselling service themselves and have to pump it all back out again to their own provider. Further compounding the issue, are the economics of a Remote Hosted Service which dictates that they bulk as much traffic on as little bandwidth as possible. Even when all systems are working in concert, they may still be providing poor voice quality if there are any issues with any of the connections.
“The lady doth protest too much, methinks” William Shakespeare, Hamlet
The problems are so prevalent that many customers revert to their old telephone systems – even after investing in new internal cabling, routers, switches, battery backup, and telephones – because they are accustomed to the reliability of their old systems. Save their investment and rest their fears by installing a Spydur with traditional analog trunks or a PRI instead!
2.) Remote Hosted Service makes you pay FOREVER!
Whether Purchased, Expensed Lease, or Managed Service; an on-premise UCS is a fraction of the cost for a Remote “Rental” Hosted Service! To prove this: assume that the Customer is going to be in business for at least 10 years and wants service for at least that period. Take the price of any of the three primary ways of acquiring a communications system, and amortize how much it costs on a monthly basis. This will give you the monthly equipment expense, but to be fair you also need to add in the “trunks” needed to run your business (with an on-premise solution, you get to choose your own carriers).
If you know your customer’s usage, a fairly accurate way to price a carrier is at 2 cents per minute. If you do not know your customer’s monthly connect time, simply take the number of trunks they need and multiply it by $10 per trunk monthly.
Just do the math, and you will clearly see how “basic service” with Remote Hosted is 2~4 times the cost! Add the amortized equipment investment and the monthly SIP trunk expense together and that is your customer’s monthly expense for an onsite enterprise grade UCS. For Remote “Rental” Service, take the monthly cost for each extension (dial tone), and multiply it by 120 months to see the difference.
3.) General Lack of Features & Very Limited Services
We’ve all heard it before… “All I need is basic telephone service” …but customers don’t understand just how very basic, basic can get! Unless they can be happy with dial-tone, a simple greeting/menu, and ring group… there is no such thing as basic telephone service. When a customer says “I need ________”, you already know they won’t be happy unless they get an actual system with some power and flexibility to it (ACD, Reporting, Call Logging, Managed Conferences, Exchange Integration, Third-Party CRM, etc). The reason for their shortcomings are obvious: all customers are being serviced by the same hosted system, and their limited feature set absolutely must have consistency and uniformity across all users. Unfortunately, businesses are not cookie-cutter, and what happens to be considered basic by one customer is not basic to any other business!
So who is Remote Hosted Service actually good for?
Remote Hosted Service is viable for only three types of Customers:
Very Small Offices
One, two, and three man offices (not associated with a larger corporation) typically only need the most basic of services, and may be satisfied by a remoted hosted “basic” service. These businesses are just looking for dial tone, and often rely more on their cell phones to run their businesses. You’re really not going to save very small individual offices, and they simply don’t need an enterprise-grade system.
“Hi, my name is Gary and I’m running for political office. I need a system until next November. Can you help me?” Gary is not going to need the telephone system after November. He either didn’t win the election, or doesn’t need the system anymore because he got elected (and his publicly funded communications system is being paid by the taxpayers).
The customer who needs a communications system to start a business, or to stay operational but has no money. These customers have no company history, and often have a very hard time getting financing. While you should certainly be careful, you by no means need to avoid these customers if done properly.
Whenever you find a Customer that is currently using a Remote Hosted Service, make sure that you give them your business card and call on them periodically. Make sure that you know when their service agreement is coming due. It will be easy for you to convert the customer at that time and they will love you for it!
Qualify your customer by asking them if they want to own, expense, or have a managed service. Give the customer an idea up front about the type of capital expenditure a purchase will be. When a purchase price is going to be an issue, quote as an expensed lease with a $1 buyout at the end. Make sure they know the monthly expense ends after the 36th or 60th month; whereas payments never end with a Remote (Rental) Hosted Service, and they need to know that!
If you have an experience you’d like to convey, let us hear from you!