Hosted PBX: A Viable IP PBX Alternative?

1. Hosted PBX: A Viable IP PBX Alternative? July 2005

2. Agenda • State of the market • Hosted PBX vs. IP PBX • TCO: hosted vs. premises • Case studies • Co-existence • Future trends

3. State of the Market

4. Hosted Voice: State of the Market • Large players are deployed • E.g., Verizon, MCI, BellSouth, SBC, Telstra, Singtel, T-Systems • CLECs expand • E.g., US LEC, McLeod, XO, CBeyond, BroadWing 100+ others • Residential distracts enterprise deployments (temporarily) • The Vonage effect • Hosted voice follows IP PBX deployment path • Trials, branch offices, HQ • Big names deploying • E.g., US EPA, State of Minn., U Kentucky, GMAC, Coca Cola, Texas A&M

5. Which Service Providers? Examples Incumbent Carriers Competitive Carriers Managed SPs / SIs

6. Hosted PBX

7. Hosted PBX Follows Software Trends • 30 years of PBX domination • Centrex fought back with limited success • IP PBX same evolutionary model • IP Telephony changing market • From hardware to software • Enterprise software apps migrating to data center • E.g., CRM, ERP, Web hosting, directory services, email, etc. Is voice just another data center application?

8. Best of both worlds Consistent Global Service Delivery Enterprise Sites Hosted PBX: Best of PBX & Centrex Hosted PBX Like IP PBX IP-based software model Rich PBX + multimedia functions Web-based control, MACs Like Centrex Scale, reliability Purchase incrementally Centralized control, mgmt. Open, standards-based

9. Hosted PBX vs. IP PBX Comparison

10. Hosted PBX Economics

11. System requirements Single system image Standard business features Transparent station/system feature operation Centralized support services Attendants, messaging, system management Enhanced 911 support Messaging 2750 users, 3000 max 125 ports, 175 max End points 2700 IP sets 250 analog ports Conference phones, fax, backup lines VoiceCon IP PBX RFP Specifications Primary HQ Site 1,500 IP line stations 100 analog ports Region 1 Region 2 500 IP line stations 50 analog ports 250 IP line stations 50 analog ports Branch 1 Branch 2 Branch 3 Branch 4 200 IP 25 analog 100 IP 10 analog 75 IP 10 analog 50 IP 5 analog Sat 1 Sat 2 15 IP 2 analog 10 IP 2 analog

12. 2005 VoiceCon RFP: TCO Comparison Summary of Solution Costs – Per Month, Per User • Hosted 31% less TCO than 9 system average • 34% less than Avaya, 32% less than Cisco • Additional benefits • Carrier grade reliability and survivability • More flexibility to support change, i.e, adding/removing users, sites • Less risk: no technology lock-in, stranded assets • TCO only improves with the addition of sites and users *Estimated using market pricing inputs **Uses some estimates, some RFP data

13. Hosted PBX TCO Beats Existing PBX • Enterprise Stations TEQ Consult Group – June 2005 Monthly Total “Softswitch solution” offers lower TCO for all size enterprises

14. Services/OpEX Costs Overshadow CapEX • *Assumes PBX network infrastructure in place TEQ Consult Group – June 2005 Monthly Cost/User Softswitch delivers better CapEx, OpEx, and equivalent Telecom Services versus IP PBX

15. Case Studies

16. Background Large-scale multi-office deployment, 62K users Offices interconnected by private network Problems Addressed Multi-layer administration Manage call traffic across public and private networks Key Drivers Future-proofing to next decade Open, standard CPE Substantial TCO savings (voicemail) Customized interface and services for different agency requirements State of Minnesota “This will further help the state meet current and future telephony needs.” “We will be able to increase the eligibility of state agencies to take advantage of the benefits of IP telephony, which will result in toll savings, circuit consolidation and lower administration costs." Keith Payden, State of Minnesota Chief Information Officer

17. Background 18K students Unsatisfied with Cisco Call Manager deployment Problems Addressed Networking existing equipment, IP PBXs, hosted users IP PBX scalability Deployment Reloading Cisco phones with SIP for BroadWorks Delivered by Lucent & Alltel Key Drivers Reuse of existing Cisco IP phones, switches, routers Able to meet scalability needs E.g., Solaris vs. Windows Carrier-grade service offering University of Kentucky

18. From PBX to Hosted PBX: Before & After

19. IP PBX Interworking

20. Hosted and IP PBX: Coexistence • SIP Trunking • Provide connectivity to IP PBXs • Save on capex: no need for PRI gateway • Virtual Services for Existing PBXs and IP PBXs • E.g., Click-to-dial, auto attendant, attendant console, Enterprise-wide voice mail, ACD/call center, voice VPN

21. IP PBX SIP Inter-working • Build a next-gen integrated communication bundle designed to enhance the deployment of IP (SIP) PBXs. Current Network SIPConnect VoIP VoIP TDM Carrier VoIP Network IP-PBX IP-PBX Legacy TDM Network SIP GW IP Phones IP Phones GW Customer Premises sold and managed by Channel Partner Customer Premises sold and managed by Channel Partner

22. IP Platform Start with trunking service Add Voice Mail Add Unified Messaging Enhanced Services for PBX Users • Add Click-to-dial • Add Auto Attendant/IVR • Add Find-Me/Follow-Me • Add Remote/Tele-worker Services Remote/Tele-worker Service IVR, Find-me/Follow me Auto Attendant Enhanced Services No offering Hosted PBX Unified Messaging Voice Mail Voice Mail Basic Service Voice Trunking Voice Trunking Connectivity TDM IP

23. SIPConnect™ Overview • Partnership • Specification • Open source: www.sipconnect.info • Availability • From Cbeyond today • Additional carriers adding service

24. Future

25. Hosted PBX vs. IP PBX: Sweet Spots 10,000+ Campus Fortune 500 Hosted PBX Sweet Spot IP PBX Sweet Spot Hosted PBX Sweet Spot 1000 Number of Employees Hosted PBX Sweet Spot SME Retail 10 1 10 100+ Number of Sites

26. InfoTech Forecast for Line Shipments • This forecast reflects historical, end-user demand, emerging offers, and channel capability trends

27. Hosted vs. IP PBX: Avaya “Sell” Report • Hosted: Steal ~15% of IP PBX market in next 4 years • Reasons: • Broadband = more hosted competition (vs. Centrex monopoly) • IP = hosted parity with premises offers • Avaya poorly positioned for hosted Source: Janco Partners Inc. November 2004

28. Future: Mobile Hosted PBX • Same Hosted PBX Application • Mobile handset looks like IP phone • For existing and 3G networks • Extend Existing Services • Group mobile subscribers into an “enterprise” • Support for Dual Mode Handsets • Use WiFi inside and cellular outside enterprise VoIP Application Server Managed IP Network IP Access Network Wireless Network Enterprise Sites Mobile Phones Support Mobile Handsets with Hosted PBX Enterprise Application

29. Summary • The Hosted PBX market is moving into the mainstream • Large carriers, enterprises are embracing Hosted PBX globally • Hosted PBX can have significant TCO savings vs. an IP PBX • Hosted PBX has lower TCO vs. doing nothing • Future = SIP inter-working, mobile integration • Hosted PBX can provide a great alternative to an IP PBX

30. For More Information Scott Wharton, VP Marketing 220 Perry Parkway Gaithersburg, Maryland 20877 USA +1.301.977.9940 swharton@broadsoft.com www.broadsoft.com