What are the hard costs of an integrated on-premises phone system?

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Phone systems for many businesses are the primary method of communicating with their customers, partners, and amongst employees. Having a proper and reliable phone system could mean the difference between a business succeeding or failing.

Many businesses have their own explicit communication needs and the costs of installing an integrated on-premises phone system can vary. For many businesses, the cost of a phone system, its add-ons, and the number of lines all factor directly into the overhead of the company. This leads to a deeply vested interest in minimizing the costs to increase profitability.

With an on-premises system, the hardware costs range from $3500 - $4500 for the basic phone system and enough desk phones for 5-10 lines, plus average monthly service fees of $66 per line. For a larger company, with 100+ lines this cost will grow exponentially as the base system will have to be expanded to meet your company’s infrastructure needs and each of the lines will add an additional cost that can grow out of control very quickly.

The "hidden" costs with an integrated on-premises phone system

There are other costs involved in using on-premises phone systems and services, and these costs that may not show up on your monthly bill but will add up just the same. It’s important to plan for them, because they represent significant periodic expenses that may make it infeasible to host an on-premises system.

  • Maintenance Contracts. Typically, the yearly cost is about 10 percent of what you paid for your system up front.
  • Moves, adds, and changes. Need to move a phone, add phones, or otherwise change the configuration of your system? With traditional phone systems, this is not a do-it-yourself proposition. Instead, you have to pay your system provider to send a technician to do it for you, at additional cost over and above your maintenance contract.
  • Expanding your phone system to keep up with your business. You have to buy the additional phones, of course. But you usually also have to buy a new piece of hardware for your system—a line card—to accommodate the new phones. And typically, you have to buy this hardware and service for four lines at a time, even if you don’t need that many.
  • The cost of downtime. If the power goes down at your office, you’ll lose your phones, too. Your customers won’t be able to reach you. You can lose both revenue and the good will of your customers.
  • Switching providers. Want to change from one phone service provider to another? Better check your contract—you could be on the hook for a substantial penalty for breaking your contract with your current provider.

None of these additional costs should be dismissed as insignificant. Their impact may vary based upon your company’s size, location, and needs but they will nevertheless have a substantial impact on your bottom line.

Cloud-based phones can cut costs by over 50%

With a cloud-based ("hosted") PBX system, businesses start seeing the savings immediately. Cloud voice systems eliminate the costs for installation of the on-premises PBX system, and in some cases the hardware costs. Additionally, when you reduce your business' phone services bills, the savings add up over time.                                                           

Beyond the savings, you will get the following benefits with a Cloud PBX system:

  • Network Reliability: Moving to the cloud improves the reliability of your voice system. That's because they stay running even if your local lines are knocked out by a storm or a power outage.
  • Keep your existing phone numbers: With a Cloud PBX system you can port over your phone numbers with no disruption to your business.
  • No additional costs for adding phones other than the additional low monthly fee for each line you add.
  • If you want to move a phone, it’s simple: you literally pick it up and plug it into any other outlet that has an internet connection.

There are other solutions to help mitigate the costs of an on-premises PBX solution; however, hosting it off-site provides a great number of additional benefits that cannot be achieved by hosting your system on-site.


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