The Economics of Cloud Migration for Service Providers

Service Providers that offer unified communications (UC) are navigating a challenging IT landscape in 2024, with aging infrastructure and shifting vendor priorities putting pressure on traditional on-premises systems. To stay competitive, manage costs, and meet increasing demands for innovation, many are considering cloud migration.

Cloud migration for UC service providers is a way to modernize operations, reduce expenses, and access the latest technology advances available without the burden of maintaining outdated hardware. At the same time, it drives higher-quality and more seamless customer experiences that improve satisfaction, loyalty, and ultimately growth potential.

But migrating to the cloud can be a complex (and even daunting) undertaking—even for seasoned IT teams. In this article, we’ll provide clarity on the economics involved, with a focus on how moving to the cloud can drive financial and operational efficiencies that save cost, boost performance, and create competitive advantage.

Quick Takeaways:

• Cloud migration allows UC service providers to modernize their operations, reduce costs, and stay competitive in a rapidly evolving market.
• Aging infrastructure and limited vendor support are driving many SPs to consider cloud solutions as a more sustainable alternative.
• Moving to the cloud enables SPs to offer cutting-edge UC services that enhance the customer experience and long-term loyalty.
• Evaluating all available modernization options is crucial, but cloud migration often provides the most comprehensive benefits for sustainable growth.
• Partnering with a reliable cloud provider like Intermedia can turn UC offerings into a significant growth engine for SPs.

IT Pressures Facing Service Providers

Service Providers (SPs) are facing mounting pressures to modernize as traditional IT infrastructure struggles to meet the demands of today’s market. Aging feature servers, once the backbone of many SP operations, are now nearing the end of their lifecycle due to shifting vendor priorities.

As the softswitch market loses steam, SPs have limited options for support and innovation. The situation has required SPs to rely on outdated systems that are costly to maintain and increasingly vulnerable to performance issues and outages. Maintaining on-premises solutions in this environment presents several significant challenges:

• High operational costs: Managing data centers, hardware refreshes, and technician support consumes significant resources.
• Lack of continuous innovation: Legacy systems are rarely updated, making it difficult to offer modern features and stay competitive.
• Increased competition: Competitors leveraging newer technologies gain an edge in the market.
• Vendor dependency: Relying on vendors exiting the market increases vulnerability to disruptions.

These challenges have become the impetus many SPs needed to turn toward cloud solutions that offer more reliable, scalable, and cost-effective alternatives.

By moving to the cloud, SPs can reduce operational costs, access the latest innovations, and focus on delivering enhanced services to customers. It’s a crucial step for any SP that wants to maintain a strong market position and lead in providing cutting-edge technology as part of their offerings.

Evaluating Your Options

Cloud isn’t the only potential pathway for SPs offering unified communications solutions. Before taking the leap on cloud migration, service providers must understand and evaluate all available options. Let’s evaluate them in more detail:

1.   Status Quo or Band-Aid Approach

Sticking with the status quo or applying a temporary fix—such as integrating a new soft client—might seem like a low-cost, low-disruption option. This approach allows SPs to extend the life of their current infrastructure with minimal immediate expense.

However, this strategy provides no avenue for growth and fails to address the increasing churn caused by outdated technology. SPs that choose this path risk falling further behind as competitors adopt more innovative solutions. Further, relying on vendors who no longer invest in the development of their legacy systems increases the likelihood of performance issues and service outages.

2.    Moving to Another Feature Server

Another option is to replace the existing feature server with a new one from another vendor. This allows SPs to continue with a familiar operational model, which can be advantageous for those hesitant to change. However, the benefits are limited. The number of available vendors is shrinking, and this option still requires significant investment in technician support, rack space, and power.

Moreover, moving to another feature server doesn’t solve the fundamental issues of declining innovation and increased operational costs. But SPs will still need to manage their infrastructure, which can be both costly and resource-intensive.

3.    Exiting the Market

For some SPs, exiting the unified communications (UC) market altogether may seem like a viable option. This approach allows SPs to focus on their core products and avoid the complexities and costs associated with maintaining or upgrading their UC systems.

However, this means leaving money on the table and potentially losing a steady revenue stream. For SPs looking to maintain a competitive edge and capitalize on the growing demand for UC services, exiting the market is not a smart strategy.

4.    Moving to a Cloud-Based Solution

Migrating to a cloud-based UCaaS (Unified Communications as a Service) or CCaaS (Contact Center as a Service) solution presents the most comprehensive and forward-thinking option for most SPs. Choosing a cloud provider with experience and expertise in UC can save costs, drive innovation, boost flexibility, and generate economies of scale.

While migrating to the cloud does require giving up some direct control, the trade-off is access to a constantly-evolving platform that keeps pace with new technologies and market demands. In turn, SPs can constantly enhance UC features to best serve the end user.

Take the Next Steps with Intermedia

Continuing with the status quo—or putting a band-aid on it—may seem like the economical approach in the near term, but it’s not sustainable. It hinders growth and can even frustrate customers. Cloud migration for service providers is  the best way to enhance innovation, position your brand as a leader in its field, and delight your customers with exceptional UC experiences.

Intermedia can help turn your UC offerings into a growth engine. Our partners experience up to 25% year-over-year growth, and we have the products you need to win long-term, including:

• Market-leading UCaaS and CCaaS: Deliver top-tier communication services to meet the evolving needs of your clients.
• Advanced Teams PBX integration: Seamlessly integrate Microsoft Teams with superior PBX capabilities.
• Comprehensive Archiving Solutions: Ensure compliance and easy retrieval with industry-leading archiving tools.
• AI-Powered Tools: Leverage AI in both UC and CC to enhance efficiency and customer experience.

Get in touch with our team today to learn how we can support your cloud transformation.

Brian Gregory

Brian Gregory is the Senior Director of Product Marketing at Intermedia Communications. He has responsibility for guiding Intermedia’s service provider marketing initiatives, including product strategy, content development, business analytics, and go-to-market execution. Brian has held various roles in marketing and product management at communication service providers and technology concerns, including Ribbon, Metaswitch, and Sprint.