Episode 33: CPaaS; or, How Did We Get Here?

Clint Mohs
Hey, everyone and thank you for joining us today for this episode of the Free UC with 2600Hz podcast. I'm Clint Mohs, and I'm back in action once again with my co-host Alisa to bring you an exciting new episode.

Alisa Bartash
Hey, everyone.

Clint Mohs
So with all the talk about CPaaS, and what's on the horizon, what's the future of cloud communications, I mean, both on our blog and on this podcast, as well as different industry publications, all the events we've been going to, we thought that it might be kind of fun to take a step back and talk about kind of how we got here--how has the phone in business communications evolved? So in this episode, we're gonna dive into this history to explain how we got here, and why all the talk around CPaaS really makes sense as this next evolution in cloud communications. Because there's so much to cover here, it's a really rich history, there's no way that we could hit on everything. So let's just get right into it.

So the first touch point in this history is really the phase of businesses having PSTN phone service and then transitioning to on-premises PBX. The goal here was really to provide inter-office connectivity by giving each desk its own PSTN line so that offices could call each other as well as making outgoing calls. While this created, obviously greater connectivity across the office clear lines of communication, right, literally, this approach was incredibly expensive, because all of these calls were routed through the PSTN. So even calls between you know, one door down, they're being routed to the PSTN, so they're actually being billed through the PSTN. This approach to having each desk, each phone have its own phone number and phone line, became really, really expensive, really, really quickly.

Alisa Bartash
That's right Clint, and that led to the advent of the PBX in the 1960s. The concept was to save money by sharing a small amount of phone numbers across a large amount of endpoints and devices. And that really entailed businesses purchasing a small number of PSTN lines and blocks of switchboards. And then their internal calls would be routed through the on-premise switchboards without using the PSTN. So ostensibly, it was free. Initially, this was still a very manual process, so businesses still had to hire their own operators to handle calls, which, of course, having to hire people means an expense.

Clint Mohs
So interesting tidbit is at this moment in history, the 1960s when PBXs are starting to be adopted by businesses, the phone network was already using automated switchboards. But there were some concerns around reliability, which had held off on the adoption until the superconductor was introduced in 1972. So switchboards really become automated, and that gives businesses an opportunity to save even more money because now they don't need those on-premises operators. It's this period of automated switchboards that mass adoption of PBXs really starts to happen. And so not only are businesses saving money, because they're able to utilize a small number of phone lines and the on-premises switchboard, but there's also some advanced telephony functionality like extension dialing, call transfers, call forwarding, that all really happened once businesses get these automated switchboards.

Alisa Bartash
Exactly, Clint. And that really brings us to sort of the next phase in history, which is the migration from on-prem PBX to Hosted PBX and things like hosted call centers as well. And you know, with these hosted options, the goal here was really to increase the level of connectivity and decrease costs. So I think that we're seeing a common theme here of better connectivity and lower costs. And of course, transitioning to the cloud is one way to do that.

Clint Mohs
That's right. So the shift to the cloud, there's a few different milestones that enabled this move from the on-premises PBX to a Hosted PBX or hosted call center. The first one really is the development of Voice over Internet Protocol, or VOIP, that is developed in the early 1990s. With a voice call what's happening is a phone receives the analog signal, a computer CPU translates it into a digital packet that is sent over the Internet to the receiving end, and the computer on the receiving end is retranslating the digital back into analog to go through the other end users' phone. This all happened in the early '90s and 1995 is a big watershed moment for VoIP when major hardware manufacturers really start to develop some functionalities that used to be handled by the computer CPU. So for example, a phone doing that translating process rather than needing to have the computer do that.

Alisa Bartash
Exactly. And that's really where VoIP started becoming popular. But in the 2000s, the use of VoIP was really increased significantly, and was enabled by the continued development of VoIP capable hardware and software. There was also an explosion with the adoption of broadband and high speed internet, which of course, we all know and love. And by 2008, only about 10% of the US internet was still using dial up according to Pew Research. And then by 2003 25% of all voice calls were VoIP. And then fast forward a little bit to the 2010s. There was also the maturation of cloud computing and the as-a-service model, which really helped move communications out of on-prem and into things like a Hosted PBX. Things like improved call quality and connection, especially with broadband, and the dramatic reduction in cost because people didn't have to worry about things like paying extra for long distance calls and for all of the equipment, it became a lot more scalable, and a lot more just cost effective in general.

Clint Mohs
Yeah, that's right. And because of this cost effective nature of VoIP PBX, really what you get is almost any company can use it, as opposed to an on-premises PBX that was often only really affordable to really large corporations. With the transition to hosted PBX, companies are only really needing to update their phones, because it's really the service providers that own and maintain the equipment in the data center. What businesses are only paying for is really a per user/per device or a usage fee. So not only does this bring a lot more people into the PBX fold, but it also really creates an entirely new UI for business communication, which is the soft phone. So the soft phone, obviously, we all use them, know them, love them, but it's hard to understate really how impactful this is, right. So not only are you creating an endpoint where it's easier to record and analyze called data, you're also creating this previously unfathomable flexibility to work wherever there's an internet connection. And so it really changes the scope of job markets, wherever your company is based is not where your labor market needs to be for something like a call center.

Alisa Bartash
That's true. And it is how a lot of companies can provide 24/7 service, because you know, they're able to have call center representatives, say in places like Australia, where you know, there's a large time difference. And that really brings us to phase three, where UCaaS is really starting to enter and following closely on the heels of Hosted PBX. And the goal with UCaaS is really to unify multiple channels of communication into a single platform. And for anyone who's unfamiliar with the term UCaaS, it stands for unified communications as a service. And as we mentioned, when we were talking about the last phase, which really brought in the as-a-service models, and we haven't hit on this yet, but another development that's also occurring is the true proliferation of modes of communication. So what originally was just calls and voicemail and faxes, is now so much more than that. It's calls, voicemail, email, IM, text, fax, and I'm sure there are some that I'm missing. But it's really bringing all of a person's business communications together into a single platform.

Clint Mohs
Yeah, so in response to all of these different modes of communication that people are using, both in their personal and professional life, all of these internet based services sort of continue to grow. And the PBX, which was once the primary main source of business communications, now becomes really just like a small part of the larger communications puzzle. So with UCaaS, software companies begin to bundle communications channels into a single UI. So within one client, you have chat and instant message, you have fax- and voicemail-to-email, you have a meeting solution, whether that's audio or video conferencing, you have voice telephony service as well as presence. One of the really big moments in the emergence of UCaaS is 2015 when Microsoft acquired Skype and then rolled out Skype for Business that really brings together telephony, meeting solution, instant messaging, and presence into one feature backed by, you know, one of the most recognized software companies in the world.

Alisa Bartash
Man, and I'm probably dating myself, but gosh, I remember when Skype was its own software, unrelated to, you know, Microsoft, and before it became Skype for Business. I mean, it was, it was such a revolutionary thing that you could make a call to anyone from pretty much anywhere.

Clint Mohs
It really was, and, you know, revolutionary and totally ubiquitous. I mean, Skype pretty quickly became a verb, not unlike how Zoom became a verb over the last few years. And that really brings us to where we are now, that sort of fourth phase, as we've laid it out here, where CPaaS moves to the fore of the industry. And so if UCaaS is unified communications as a service, CPaaS is communications platform as a service. The goal here is really to continue to push toward a greater unification of experience. So taking UCaaS and UCaaS functionality, and extending it beyond telephony and connectivity, to integrate the other apps that are critical to a business. So think about your client relationship manager, think about for a restaurant, bar, hotel, the point of service machines, and bringing all of these together into this unified communication experience. CPaaS is one of those terms that is kind of murky, it's kind of difficult to pin down. So you know, a way to define and understand CPaaS is to think of it as an API-driven platform that integrates real-time communication into business applications for customized UX. So taking your UCaaS function and customizing it by using APIs to plug in additional business applications.

Alisa Bartash
Exactly. The real benefit here of CPaaS is being able to do your own custom integrations, because that's really key. And that's where things are moving, because everyone needs something different. You know, you mentioned CRMs, and integrating CRMs, into your communication platform, but think about how many different CRMs there are. And a lot of them are very industry specific. So if you think about, you know, you have customers who are in the real estate business, and customers who are in the hospitality business, they're very likely using different CRMs. And so, you would need to integrate the various CRM software used by those different industries into your communications platform. And that's really one of the big selling points of CPaaS and why it's gaining popularity now and why it's at the fore of the industry, as you said, and its rise to prominence has really been driven by a number of different but seemingly interrelated forces. So you have business processes that are becoming more complex, which as time goes on, it's just what happens. And then it's also easier than ever to buy and deploy third party applications, we also have the desire for a unified experience, which stems from the concept of UCaaS, where everything is unified and integrated. Lastly, we've seen a lot of mergers and acquisitions over the past couple of years. And there's a huge distinction without difference across platforms. So from one communications platform to the next, we're seeing a lot of the same features and functionality. So there's not a lot differentiating your solution from that of your competitors. But CPaaS is really the game changer for that. Because like I mentioned before, you can utilize CPaaS to integrate with the different software and other tools that your customers use every day, regardless of what industry they're in. But also, if there are any industry specific tools that they use, you have an opportunity to come in and really fulfill their specific needs by integrating those specific tools and software.

Clint Mohs
That's right and at this moment, this is really where telephony is going, as you mentioned, right, like business processes are not going to get more simple in our lifetime--they're only going to get more complex, there's only going to be more CRMs there's only going to be more POSs. If you're a service provider, you are trying to cater to the needs of different customers across different industries. And so this ability to offer a customized solution is just really where the cloud comms space is going. And, at the moment, we're at a sort of interesting inflection point, because there's really sort of a two-fold update potential. So on the one hand, you have folks that were early adopters of UCaaS solutions, but find that their needs have grown more complex in the intervening years. And they're really being underserved by their UC solutions, looking to add a CPaaS element to create that customized component, on the one hand, and on the other, you have larger enterprises that were able to afford an on-premises PBX and made a very large investment, and having that on-site communications connectivity and have yet to move off premises due to their costs and anxieties about transitioning over to the cloud, you know, not unlike the initial adoption of VoIP, where it was sort of slowly but surely adopted once the software and hardware technologies caught up and, you know, you mentioned at the top, Alisa, that there is this thread that connects these things of these developments are happening to make communication more seamless and easier and to save costs. And there's another thread about sort of adoption of kind of anxieties about the new sort of bleeding edge technologies. But we're at a point now where you know, cloud computing is pretty firmly established and is quite reliable. While broadband internet, at least in the States isn't completely ubiquitous, it is growing more and more accessible by the year. So we're really at this moment where these two very separate groups of business needs can both be addressed and resolved by some CPaaS functionality. Well, that about covers how we got here and why CPaaS really represents the next phase of cloud communications. As we've talked about, right, the driving forces behind how business communications have evolved is this desire for greater or more streamlined connectivity and lower costs really has led us to the CPaaS moment and how it has addressed these issues, but it also offers the opportunities for customization that streamline both communication, and business practices. While this is by no means meant to be an exhaustive history, we hope you at least joined learning a bit about how we've kind of arrived at this moment in cloud communications. Thank you so much for joining us today. And don't forget to subscribe wherever you're listening so you don't miss our next episode. And while you're there, please rate and review us. It takes just a minute of your time and we cannot tell you how much it helps us. Alright, well we will see you next time.

Alisa Bartash
Bye everyone.