Hosted vs. Buying – which is really cheaper?

April 7th, 2015

The question of the month:

“Is a hosted VoIP platform better for my company, or is a traditional PBX-Hybrid solution a better fit?”Need service

We hear this every day in our telecom-centric jobs here in Central Texas.  Voice over internet protocol has now been around for many years. In fact, sending voice over hardwired circuits or frame relay connections has been around for twenty five years or more. Voice is no stranger to being moved across data centric circuits. However, the real beauty of converting analog voice to an IP packet is compression and the ubiquity of having Internet access to billions of devices and locations ready to spit bits between your business partners and your customers.

I don’t want to go into to detail about quality of service, compression and other technical issues in this article. Let’s just assume that the VoIP providers are all equal in this initial discussion. Let’s dive into a financial look at the question posed above and breakdown the parts.

First, let’s assume that on most major IP telephone system platforms (ShoreTel, Avaya, Mitel, Cisco, and Adtran) that a standard phone system with nice IP phones, licenses, VM, auto-attendant, Cell phone integration, conferencing, presence, chat and IM is about $750.00 per phone installed with all licenses and training. Some will always be higher or lower, but let’s go with $750.00 as that is an excellent median number for most systems.  Let’s also assume that a fully hosted phone solution is $25.00 to $30.00 per user, per month PLUS the cost of the telephone handset – so we’ll split the difference and make the hosted solution $27.50 per user, per month and a nice round IP phone expense of $100.00 each.

With those numbers, a small business with 50 phones/users would spend $37,500.00 on a new PBX.  Adding on leasing rates for a 5-year term, software assurance and maintenance costs ($150/mo), and you’re looking at a monthly breakdown per person of about $19.65 — after that the system is virtually paid for.

Now, that fully hosted solution was 50 users times $27.50 per month.  Huge difference in pricing! Plus, that is $1,375.00 a month…forever – you never get to a point where you can stop paying that.  In this example. the hosted solution is 28.5% more expensive on a monthly recurring basis.  And don’t forget that the 50 handsets were probably bought out of pocket for hosted, but were included in the total cost for the traditional system – so in addition to the $1375.00 per month, those 50 phones add an extra $5,000.00 upfront burden on the hosted package.

Tune in next week for some additional considerations for Hosted vs. Buying when factoring in call centers and business growth.

David Claypool


    David Claypool

    Unified Communications Solution Architect

    Southwest Region