5 Hidden Costs of On-Premises Phone Systems


You can’t research business phones without reading that Hosted VoIP is cheaper than its on-premises cousin. But while Googling you might ask yourself: what would it really cost your business to stay with an on-premises solution? Perhaps you’re skeptical that Hosted VoIP could revolutionize both your phone bill and your company’s image, and rightly so.

So let’s take a look at some of the key points, and see how the costs can add up when you get behind on phone service.

  1. Upfront Requirements.For the traditional option, you’ll need on-premises analog PBX hardware, which is used to manage your call flow and extensions. It may seem like the perfect opportunity for rolling up your sleeves to DIY. But according to an estimate by PCG Telecom & Data Network, running an on-premises PBX for 75 extensions costs about $75,000 upfront. You’ll probably also need an in-house IT staff member to maintain it, again adding to the upfront cost.With Hosted VoIP, the whole point is that someone else is running your servers—which means no additional hardware is required. That same estimate by PCG Telecom noted that a Hosted VoIP system with 75 extensions costs $22,500 or less, even with all new phone hardware. The main requirements are high speed internet service and a business-grade router, which are staples in many workplaces. And since you can often configure your own line directly from your computer, there’s no need to acquire new staff.
  2. Ongoing Costs.Minutes are the most expensive part of an on-premises bill, primarily for long distance calling at an average of 6 cents a minute. Calls to toll-free numbers and international dials can have an accumulated effect, too.This is where Hosted VoIP shines, precisely because it treats sounds as data packets traveling through the Internet rather than as minutes. Analysis shows that you save as much as $1,200 per phone line over 2 years with VoIP, as compared to a traditional line. With Hosted VoIP you generally pay a flat rate per month for typical business traffic, including long distance calls. Even the international and toll-free calls are cheaper!
  3. Contact Centers.Some have claimed that the age of the call center is over, since call center packages are more costly and unwieldy than smartphone apps. It’s true that on-premises call centers can cost a whopping $1,500 per agent, not including the additional fees for setup and installation. But with Hosted VoIP, you pay a monthly flat rate for agent, making it nearly 70% more cost-effective than the traditional call center. If you’re one of the many businesses that rely on contact centers for customer outreach, Hosted VoIP can be a great alternative.
  4. Customer Perception.On-premises phone systems are time-tested, and that can seem like an asset when dealing with customers. However, 90% of consumers say they would consider avoiding a company if it uses outdated technology. Customers have come to expect things like auto attendants, call queues, and customized voicemail, and will perceive your company as less efficient and professional if you opt out of these extras.In Hosted VoIP, these enterprise-grade features usually come included, so there’s no need to worry about paying for more. As OnPoint co-founder and CEO Brian Clark said, “Standing still is falling behind. Either you implement new technologies or you risk getting passed by your competitors.”
  5. Employee Retention.The Pew Research Center found that Millennials now constitute the largest generation in the workforce, at 34% and rising. An Intel study also found that these Millennial employees have a strong understanding of technology and demand much more from it. They also prefer to use their smartphones and have greater job flexibility, something that can only be achieved with the mobile apps and gadgets that Hosted VoIP can provide. If you stay with on-premises phones that are stuck at a single location, you risk alienating that base of candidates, or causing your tech-savvy employees to flock elsewhere.

Choosing a phone system may not be easy. But when it comes to immediate costs, it’s clear that Hosted VoIP is indeed cheaper than an on-premises equivalent. And as a long term solution, Hosted VoIP can strengthen your public image and keep your employees happier for longer.

These are just some of the drawbacks to holding on to an on-premises phone system. Learn about the benefits of moving to Hosted VoIP with our Buyer’s Guide, or learn more about GoTo Connect.Hosted VoIP Buyer's Guide Banner