Business phone systems are shifting from the costly, antiquated key systems that offer limited capacities to one of a variety of Private Branch Exchange setups. The reason is three-fold, as a PBX is capable of delivering:
- A far wider degree of flexibility
- Simplified installation, modification, and setup
- The most advanced features for voice communication
PBX systems are split into three main configurations that vary in their upfront costs and total cost of ownership (TCO). With options that include hosted, cloud-based solutions, and on-site installations, a highly simplified way of looking at the buying process is to view a hosted phone system as a business expense and an on-site installation as a capital investment.
Your Three Option Include
Physical Phone System (capital investment):
Traditional PBX system that relies on copper wiring yet remains scalable for the addition of lines and features
Virtual Phone System (business expense):
Cloud-based and hosted by a phone system provider with all connections and features managed virtually "in the cloud"
PBX VoIP System (capital investment):
Provides the same features and many of the same cost-cutting operational efficiencies as a cloud-based model yet it’s operated and maintained on-site through your company's server
Physical Phone System
The term physical phone system used to refer to Key systems, a limited setup designed for use by less than 50 employees. And while this type of business phone system is still in place in older buildings, physical phone systems are rapidly being replaced by PBX systems.
PBX business phone systems integrate hardware and switches that are responsible for handing and routing calls. Controlling all inbound and outgoing calls, a PBX system can be as small as 20 extensions or as large as several hundred. This scalability makes it ideal for a wide range of businesses yet it tends to be primarily used by larger companies that have the in-house IT and technical staff to manage and maintain the equipment and companion software.
Offering a combination of basic and sophisticated features, PBX phone systems are capable of supporting even the most complex implementations, with call features that are easily applied to individual lines or the system as a whole. The architecture of the system is controlled via software, enabling IT staff to instantly add any available features to a designated extension.
Most importantly, a PBX installation is totally programmable and tends to be more reliable than systems based on web connectivity (at least within a single physical location). Employees that require mobile connectivity often have to use their own mobile handset and are connected to the system through an assistant or an operator. This often represents additional costs and inconvenience for companies that have a mobile workforce. Physical phone systems also tend to be somewhat more complex in terms of operation than virtual or VoIP solutions.
Estimated Costs: Physical Phone System
The costs of a PBX business phone system are numerous and may include everything from wiring and equipment to licensing, installation, and training. Estimated costs can be calculated per phone and range from $120 to $220 per extension. Unlike other systems that get cheaper with each additional component you add, the cost of a business phone system increases in tandem with its complexity.
For example, with a small installation of 15 phones, you can expect to pay around $2,000 or about $130 per extension. In contrast, larger systems of 50 phones or more will start around $11,000 or about $220 per extension.
Virtual Phone System
Commonly referred to as a "hosted business phone system," virtual setups are operated and managed entirely through the web. Hosted systems provide a range of cost-saving benefits for small and mid-size companies while extending the reach of the system itself throughout the world. This connectivity has become a significant asset to organizations with a large number of mobile employees, as well as those who employee freelance workers within varied geographic locations.
In addition to ease of use and mobile access, the primary benefits of a hosted solution are advanced features and integration with a host of business software. Among buyers, some of the most important features include:
- System configuration and management via the web
- Voicemail with limitless storage capacity
- Multiple business phone numbers
- No busy signal
- Call routing that tracks the location of employees to automatically ring calls through to their current location
- Queue management to expedite callers through the system, quickly and efficiently
In addition to the most advanced calling features, hosted business phone systems provide two critical benefits to modern business: reliability and outsourced maintenance.
Estimated costs: Virtual phone system
- Reliability. Unlike a standard PDX system that can become overloaded during heavy call volume, hosted platforms are essentially limitless. They provide the same expediency and level of service regardless of call volume and remain up and running during power outages, natural disasters, and similar disruptions.
- Outsourced maintenance. Hosted phone systems provide their services via web connectivity, requiring no on-site control units or servers. The maintenance of this hardware, and the software that controls the system, is conducted behind the scenes by the provider. This has the potential to save thousands of dollars each year on even the smallest systems, making this type of setup ideal for small to mid-range companies that cannot support in-house IT staff.
Hosted business phone systems have no upfront costs for cloud-based VoIP hosting. The only exception is the purchase of digital phones or mobile handsets as analog phones are not compatible with this type of business phone setup. Services are provided for a monthly subscription fee based on the number of phones (extensions) and the inclusiveness of the features you opt for. The more extensions, the lower the monthly price per extension. It’s also worth noting that discounts may be available for lengthier commitments of one to two years.
Monthly subscription fees range from:
- $35 to $40/month for 1 to 2 extensions
- $25 to $30/month for 10 extensions
- $35 to $40/month for 20 extensions
- $20 to $30/month for 20 to 100 extensions
- $19 to $25/month for 100+ extensions
Hosted plans often charge for extras such as toll free services and even voicemail in some cases. Other enterprise or professional plans provide them at a higher monthly rate. Smaller companies will probably benefit from a basic plan that can be supplemented with add-on services. Large organizations or companies with heavy call volume will typically find the inclusiveness of a deluxe package more cost-effective.
VoIP Phone System
Voice over Internet Protocol (VoIP) technology uses a broadband Internet connection and digital IP-enabled telephones to replace the extremely limited Legend systems of the past. By incorporating the advancements of digital communication, VoIP systems can transcribe and send voicemails to email, place and receive calls through a web-enabled computer or mobile device, and create efficiencies throughout your organization due to a system that’s designed to cost-effectively handle dozens to hundreds of concurrent calls.
Similar to a standard on-premise PBX setup, VoIP business phone systems are controlled through an IP PBX. Each unit supports a set number of extensions or concurrent calls, ranging from 50 to more than 500 per unit. PBX units can also be networked to further increase the scale of your voice communication setup.
This expandability, in combination with advanced calling features, has proven beneficial to organizations that include medical offices and hospitals, call centers, insurance agencies, law offices, and a host of professional services that rely on voice communications for effective operation.
In fact, VoIP is quickly becoming the preferred telephony system due to the ease with which it can be integrated with internal customer relationship management (CRM) and medical practice management (MPM) software platforms, among others. It automatically syncs with records and accounting databases to provide increased access and flexibility through smartphone apps and mobile connections. Ideal for organizations that have mobile employees, users simply log into the mobile app and their handset becomes an extension of your business phone system, even displaying the caller ID associated with your company.
The other benefit of a VoIP system is that it minimizes upfront costs, preventing you from expenditures associated with installation and maintenance of hardware and infrastructure. Apart from the phones themselves and the license agreements (assessed per extension), the costs for this type of system are minimal, with features that can be added as your needs change.
Additional benefits of a VoIP setup include:
- Accessibility with no international or long-distance fees – Connect your phone to the system via the web anywhere in the world.
- Automatic updates, backup and failover – Any changes to the system happen behind the scenes and are corrected through platform updates. Backup and failover features provide redundancies that ensure continuous uptime and minimal technical issues.
Above a certain threshold, it’s more cost-effective to purchase an on-premise VoIP system than pay a monthly fee. For companies with more than 200 employees, an on-premise PBX is often preferable to cloud-based setups due to its cost-saving potential and system control. The purchase of an IP PBX frees you from ongoing monthly service fees. Organizations of this size also typically employ a full-time IT specialist responsible for maintaining the system and any software updates, further cutting costs associated with post-sale service agreements.
In contrast, hosted VoIP tends to work best for companies and organizations with 5 to 15 employees. Mid-range to large businesses requiring 100 or more extensions also opt for a cloud-based business phone setup due to the mobile access and ease of use it provides.
If you’re unsure which business phone system is best suited to the scale and needs of your organization, start by speaking to a service provider or reseller that specializes in VoIP technology.
Estimated costs: VoIP phone system
Two costs factor into a VoIP phone system: the base, or PBX, and the phones themselves. An IP PBX controls the entire phone system and represents a substantial portion of the upfront capital expenditure. The cost increases as lines and accessories are added. In general, you can expect to pay as little as $350 and as much as $7,500 for a small unit capable of supporting 15 to 30 concurrent calls (which is usually more than adequate for a small business. The inclusion of a built-in server and pre-installed open source operating systems will drive up the cost. Larger models cost an average of $19,000 to $25,000 and support more than 400 concurrent extensions. Easily networked with additional PBX units, these models typically include expansive RAM (up to 4 GB) and internal hard drives (with up to 250 GB of storage) to support built-in voicemail, call routing, and intercom systems.
New digital IP telephones start around $60 but tend to be somewhat limited in the features and sound quality they provide. Look to mid-level handsets that sell for $200 to $400 per unit. These models offer built-in video conferencing, Android operating systems, Bluetooth and Wi-Fi, and stereo sound.