Cash Flow

Hosted solutions smooth out cash flow requirements and free up cash in the first year for other needs, rather than being spent on capital equipment (although premises systems can be leased, which also smoothes out the cash flow). When equipment is capitalized, companies benefit from depreciation but the net cash flow benefits have to be assessed based on a multi-year total cost of ownership to determine the advantage or disadvantage of capitalizing the equipment.

Custom Applications

Unquestionably, the ability to develop and integrate customized applications on CPE systems is the greatest advantage of CPE solutions over hosted services, especially as IP-telephony matures. In order to run additional applications such as those developed by manufacturer software development partners, hosted solutions have to either extend an API interface to the premises or run the application on their site. At this time InfoTech has not seen an API interface offer from any hosted provider. It is not known how flexible the hosted providers will be in any such offers.
Another issue is the manufacturer equipment used by the service provider. Hosted providers using Avaya or Cisco systems, for example, for their IP-telephony offers would force customers to go to the corresponding set of software development partners for applications.
Counting on hosted providers to run custom applications in the provider’s own datacenter can be problematic. The hosted provider would need to approve of the application and the server, and this opens the question as to who maintains the server/application. Will hosted providers have the capacity to continue to add hardware/software to support these efforts? InfoTech has seen no evidence that carriers are planning to support vertical applications that customers might elect to use from outside sources.