Before discussing the state of managed voice services, I must say that I am confused by the terms bandied about by vendors, providers and other learned industry commentators. What is a managed service? How does it differ from a hosted service?

I believe these two terms are being used indiscriminately to mean whatever vendors or service providers think an enterprise customer wants to hear. This is not unusual today as corporate CEOs blame competition for price pressure. But let's take a crack at a working definition we all can use.

A managed service is what the provider does for the user: manage the service, removing the need for the user to employ a staff to support (e.g., deploy, test, monitor, repair, upgrade) the service. The managed service provider delivers the contracted-for services in exchange for a guaranteed price over the term of the contract, usually for three or more years.

By contrast, a hosted service refers to how the service is delivered by the provider — usually from a hosting site or data center. A hosted service is almost anything that can be delivered to a user from a remote location. With the Internet and virtually ubiquitous IP, the ability to deliver all types of services has increased exponentially.

Hosted services aren't new. Before the breakup of AT&T in 1984, Centrex services from the telephone companies accounted for as much as 20% of all business lines for both large and small businesses. Why Centrex lost its luster is a complicated interweaving of technology, regulation, business strategy and distribution. Maybe the time for hosted voice service will come again soon. If a new hosted voice model is to succeed, providers will have to solve these issues and deliver a cost-effective, evolving, feature-rich voice (or unified communications) service that will both unburden the user and deliver a leading-edge service that is as cost-effective for the user as buying and deploying their equipment or contracting with a provider to manage this service.

With the emergence of PCs and the Internet came the enormous growth of e-mail, which became the next major hosted communications service. Hosted e-mail was provided by ISPs as part of delivering the Internet, and it is still popular today with most consumers and many small businesses. However, many larger businesses instead chose to deploy their own e-mail infrastructure, keeping their IT departments busy and their users reasonably happy.

Both of these services — one voice and one data communications — were and still are managed services, as the provider — the phone company or ISP or other e-mail host — largely removes the burden of managing the service's technology, capacity or capabilities from the user. Common services and scale allow the hosted/managed provider to deliver the service more cost-effectively than the multiple duplications required when the user does his or her own management.

The underlying costs — the price of service from initial capital outlay to ongoing operations expenses — have led to a complex financial evaluation that often becomes the focus of a user's decision-making when considering hosted, managed or owned alternatives.

As we move deeper into converged networks and services, the complexities of solution provisioning, procurement and delivery choices will only grow. At least we have solid definitions to work with, and an average user like me now knows what a sophisticated outsourcing provider means when it says it will host and manage my UC for much less than I could on my own.

David Yedwab is a partner with Market Strategy and Analytics Partners LLC. He can be reached at (908) 879-2835 or david.yedwab@mktstrategy-analytics.com.