Skype for Business Server has one new version coming. After that, enterprises could get stuck between an economic rock & a financial hard place.
Skype for Business Server 2019 is coming. However, given all the pushes toward O365/Teams, it’s not unreasonable to presume that 2019 will be the last on-prem version of Skype for Business.
This presents a major problem for larger businesses. They will either have to move to Teams, or investigate another on-prem Unified Communications provider.
What’s wrong with moving to Teams? Nothing! …except possibly cost. When you scale up to enterprise-level user bases, a cloud service like Office 365 could really strain the budget. What if your business has 1,000 users? 5,000? 10,000+? Even if you’re paying a few dollars per user per month, the total monthly cost for all those O365 subscription licenses adds up fast!
Let’s look at the whole conundrum enterprises using Skype for Business will have to face. It’s a quiet, creeping financial snarl…and it’s coming in just a few years.
Does Teams Cost Less than Skype for Business Server? No, and Here’s Why.
First, let’s talk numbers. Microsoft touts Office 365 and Teams as its “Intelligent Communications” option for businesses, and wants everyone to move to the O365 platform. Okay, fine. How does that work out cost-wise for enterprises?
Let’s say we have three businesses—one with 1,000 users, one with 5,000 users, and one with 10,000 users. How much would these businesses spend if they all used Teams (and Office 365)?
I’ll use two subscription levels here: E1 and E5. Why these? Because we’re finding that our O365 customers, even smaller ones, need one of these two levels the most. They need the backend services E1-E5 gives them. If they already have Office licenses, they go to E1. If not, E5.
I am using the Office 365 ROI Calculator for the monthly cost per user. It gives slight discounts on the regular costs.
E1 Monthly Costs*:
- $6.59 x 1,000 users = $6,590/month x 12 = $79,080/year
- $6.38 x 5,000 users = $31,900/month x 12 = $382,800/year
- $6.18 x 10,000 users = $61,800/month x 12 = $741,600/year
E5 Monthly Costs*:
- $28.82 x 1,000 users = $28,820/month x 12 = $345,840/year
- $27.93 x 5,000 users = $139,650/month x 12 = $1,675,800/year
- $27.04 x 10,000 users = $270,400/month x 12 = $3,244,800/year
(*Monthly values do not include initial setup fees or hardware maintenance.)
These numbers quickly move from ‘doable’ to ‘ridiculous.’ Dropping 3 million a year for Office 365?
Let’s compare these numbers to the cost of an on-prem Skype for Business Server. I’ll use numbers from a previous post on this topic:
Skype for Business Server with 1,000 Users:
- 1 Front End Server License (MSRP) – $3,646.00
- 1,000 Standard User CALs – $36.00 each, or $36,000 total
- 1,000 Enterprise User CALs (Conferencing & desktop sharing) – $124.00 each, or $124,000 total
- 1,000 Plus User CALs (Voice & call management) – $124.00 each, or $124,000 total
Exchange Server (for voicemail):
- 1 Exchange Server (Enterprise) License – $4,051
- 1,000 Standard User CALs (MS Open License) – $5.00 each, or $5,000 total
- 1,000 Enterprise User CALs (MS Open License) – $55.00 each, or $55,000 total
Grand Total for 1,000 users: $351,697
(This is a three-year cost, and assumes no discounts.)
So if an enterprise with 1,000 users opted for an on-prem Skype for Business Server, it would cost roughly the same as 1 year of Office 365 E5. Fair enough. But the Skype for Business Server has a three-year usability period…
Assuming a 5% maintenance cost (about $17,500) for Years 2 and 3, they would end up paying $386,697 over those three years. If they went with E5 and didn’t have any maintenance costs at all, they’d end up paying $1,037,520.
At enterprise-level, Teams actually costs more than its predecessor!
The Quagmire: Skype for Business is Going Away
This is a serious cost discrepancy. Big enough to push larger businesses away from Office 365, back to on-prem.
Now, some enterprises would have no problem paying these amounts. They also get additional value from the related O365 services (see Addendum below). If so, great, more power to them! However, Accounting usually likes to save money. These numbers may cause them to balk.
What will the enterprise do if they want to save money? At these user counts, an on-prem server actually saves money. Sticking with Skype for Business Server makes economic and organizational sense.
But what about after Skype for Business Server 2019? Microsoft has not clarified if another version is on the roadmap. Given their merging all Skype for Business tools into Teams, it does not look likely. If there’s no on-prem version coming after 2019, then enterprises are stuck! They’ll have three choices:
- Move to Teams anyway,
- Keep their Skype for Business Server running as long as possible, and/or
- Switch to another on-prem Unified Communications provider.
On-Prem Skype for Business Alternatives for Future Succession
I cannot accurately speculate the Unified Communications landscape in 2020 and beyond. All I can do is look at what’s available now, and prognosticate their future offerings.
If you’ll need an on-prem, full-capability Skype for Business Server successor, I expect the following will still be around:
- Slack Enterprise Grid
- HipChat Data Center
- Ribbon Application Server
- Cisco Jabber
- Zoom does have an on-prem Meeting Connector, but it’s more of a hybrid solution. Still, the Zoom system is pretty stable, so it’s a viable option.
I’m NOT saying these solutions are better than Skype for Business Server (or Office 365 for that matter). Just presenting alternatives that have staying power.
Enterprises: The Time to Start Thinking about your On-Prem Skype for Business is Now
Microsoft’s push away from on-prem to the cloud has merits, in many respects. That said, just because a larger business has the budget to spend on lots of cloud services, doesn’t mean it’s the best use of the money. Office 365 may just not be the choice for them.
Unfortunately that presents a serious financial quagmire. It’s not here yet…but it’s coming.
(By the way, we will gladly support on-prem Skype for Business Servers into 2020. And beyond!)
Enterprise IT employees, what’s your Unified Communications outlook for the future?
ADDENDUM 5-17-18: As Mark pointed out in the comments, I didn’t factor in other Office 365 services as a pricing justification. This is true, and a good point for him to make. Office 365 does come with more than Teams – Exchange, SharePoint, OneDrive, etc. It also reduces the need for on-prem hardware and staff.
I don’t want to minimize the value here. O365 can be a huge help for businesses who need full-fledged IT infrastructures, and may not have the budget to build them on-prem. That said, I’m still not sure enterprises would gain financially from an Office 365 move as opposed to on-prem. At least as far as Skype for Business is concerned.
(I may do a follow-up post to address this part of the situation in more detail. Stay subscribed!)