Every business, large or small, should have a business-grade PBX capability because it projects a more professional image to your customers and prospects. Features like automated attendants, Find Me – Follow Me and Unified Communications can make a real difference in how your business is perceived by callers.
But owning and operating your own fully installed PBX can be prohibitively expensive for a small or mid-sized business. Costs for a fully deployed PBX system can vary widely but on average initial deployment cost can be as high as $1,000 per user. This doesn’t include the expenses associated with incoming phone lines, maintenance of the system, additional phone lines or in-house staff to manage the system.
Hosted PBX has emerged over the last few years as a viable alternative to a fully installed, on-premise PBX system for many businesses.
Quite simply, Hosted PBX is your phone system in the cloud. And it has many advantages:
- Low Upfront Costs – No need to buy any PBX server or expensive installation.
- No CAPEX Requirements: You turn a capital expenditure into a operational expense because you pay by the month.
- Extremely Scalable: Just add another IP phone to the network and program a new phone number and you’re done.
- Predictable Billing: Flat rate calling and low international rates.
- No Additional Staff: No need for extra staff to manage internal voice communications
- Disaster Proof: Since your phone system is managed in your provider’s offsite data center, phone traffic is just routed to voice mail or cell phones in the event of a floor or fire in your office
- Virtual Office Capability: Plug your IP phone into any internet connection, anywhere in the world and you have access to your company directory, extension dialing, voice mail etc.
- Regular New Features: You get new features as your hosting provider rolls them out.
With so many advantages, the only real issue for small businesses is cost. More specifically, does Hosted PBX offer a lower total cost of ownership (TCO) compared to an on-premise system?
Let’s use a typical example of a small 40 person company and the relative costs of an on-premise PBX vs. a Hosted PBX situation over a 3 year period.
- On-Premise PBX Solution
- With an on-premise PBX, we will use the $1,000 per seat metric that we referenced earlier
- We will make the reasonable assumption that annual maintenance of the on-premise PBX is $9,000
- An average of one hour of employee staff time will be required to manage the system
- Hosted PBX Solution
- $29.99 per user per month (typical fees for full range of features and support)
- 3 year contract
Cost Year 1 Year 2 Year 3 Total On-Premise PBX Solution Buy/Install PBX Server $40,000 $0 $0 $40,000 Annual maintenance $7,000 $7,000 $7,000 $21,000 In-house IT staff (growing at 5%/year) $2,100 $2,205 $2,315 $6,620 Total Cost of On-Premise PBX $49,100 $9,205 $9,315 $67,620 Hosted PBX Solution Yearly Fees (50 phones) $14,395 $14,395 $14,395 $43,185 Cost Difference $34,705 -$5,190 -$5,080 $24,435 Source: Slideshare
On-Premise PBX Solution
Buy/Install PBX Server
In-house IT staff (growing at
Total Cost of On-Premise PBX
Hosted PBX Solution
Yearly Fees (50 phones)
From this example, the conclusions are clear:
- On Premise PBX requires a significant up-front capital expenditure.
- Yearly maintenance and licensing costs are not trivial for on-premise PBX – especially for smaller businesses.
- Hosted PBX yearly fees are predictable; makes for easy budget planning
- Over a three year period, a business can save around $20,000 with the Hosted PBX solution