India Gadget Reviews

ShoreTel and 3CX - A Tail of Two Phone System Licensing Strategies

The trend in the Unified Communications industry is to charge a "per seat" license for access to VoIP Business Phone Solutions. In large part a legacy "flat tax" from the old TDM world, phone system suppliers continue to license based on the number of users that the system supports. Microsoft, ShoreTel, Avaya and CISCO all seem to have software licensing based on the number of users. Some licensing strategies become more complex as features and services are added. ShoreTel has by the simplest licensing strategy of the major suppliers, but they do count the number of users as the base software license cost. Additional license fees are assessed for "Professional" Communicators or Communicators that access Workgroup functionality for Agents and Supervisors. It is all rooted, however, in the number of users the system will be hosting.

If we consider a simple 100 extension solution, ShoreTel will have a $20K software license fee before you purchase any of the required VoIP hardware. Basically, you are paying $200 per user for an Extension and Voice Mailbox. After you purchase your software license, you will still need to purchase handsets, gateways and servers! Microsoft, CISCO and Avaya, though significantly more complex in their licensing strategies, start from the same basic "per seat" model. In fact, if you look across the business communications landscape all suppliers have to offer basically the same set of components Yes, all automobiles are different, but they generally have four wheels, a steering, seats, dashboards and a power source!

Clearly this has a significant impact on your ongoing cost of support. For reasons that I have yet to figure out, "technical support" is somehow a function of your system acquisition cost? The industry trend is in the range of 10-20% of your total system cost, including software licenses, will then be used to calculate your ongoing cost for software insurance and technical support. I know there are smarter people than I that have been working this out, but I just cant see the relationship between the cost of equipment and the cost to service that equipment? I get "making money", but I don't' see the value relationship in punishing customers for buying more equipment?

Is there another model out there? Are we forever bound to the "per seat" license model? In fact there is another model out there! Enter low profile, high performance, global provider of Unified Communications, 3CX! These guys amaze me and I think they are harbingers of how the communications industry will work as we move deeper into the 21st century. Now hear this, they do NOT charge a "per seat" license! Contrary to the industry trend, they also include most functionality that the other players generally "option". Full chat or IM services, presence, fax server, call center and mobility services, soft-phones, iPhone and Android applications are included with no "per seat" cost! Then how do they bill for their software? Simple. They license based on "simultaneous connections". Clearly, if you have a 100 user system and a PRI for PSTN connectivity, all your users are not on the phone at the same time. Why not pay only for the maximum number of live phone conversations that you project for your business? 3CX pricing ranges from 4 to 1024 simultaneous connections and that can cover both large and small deployments. Lets assume that same 100 extension system and instead of $20K or $200 a user, you paid $5K to support 64 simultaneous phone calls?

This is not some small upstart trying to buy market share. This company 3CX, a certified Microsoft Developer, has been deploying on a global basis since 2006. They have a fully formed, Unified Communications solution that can match the established players, feature for feature. They will not compete with ShoreTel and CISCO in the 1000 seat market, but in the larger 25-250 seat multi site segment, they are a serious contender. Technical support is offered on a global basis, is astonishingly effective and uses a combination of traditional TAC center live remote support but leverages alternatives like video wiki, community, email and chat support.

I know I am alone in the belief that you can not be both a hardware company and a software company! I think you have to pick one side of the street and really do it well to create a defensible market share and posture for growth! My son argues that is a ridiculous position, "just look at Apple they do both and have the best products on the market"? Not withstanding Microsoft, I think that the issue of comparative size plays a key role in enabling a company to pursue both. If you are a comparatively smaller player (SHOR market cap $247M, APPL $611B, CSCO 110B) I would argue that it is more important that you figure out if you are a hardware company or a software company!

I would identify 3CX as a company that you need to pay very close attention to!

This post was written by: Sabrez Alam

This is Sabrez Alam, a passionate blogger and creator of this blog and many more. You can follow me on Facebook