Why Pay for an Old-Fashioned Phone System When Hosted VoIP Costs $20/Seat/Month?

Hosted VoIP phone services are available for as low as $20 per seat per month from numerous providers, but is this the best fit for your business?

Both modern on-premises and hosted phone systems use VoIP and SIP protocols. On-premises systems connect via SIP trunks, replacing outdated analog lines, while hosted systems operate like the old Centrex model: your phones sit on your desk, but the call switching happens at the provider’s data center.

Each VoIP option has distinct advantages and drawbacks, and your business needs will determine the best choice. Hosted systems often simplify access to advanced features like AI-driven contact center management or CRM integration. However, a critical factor to consider is reliability. If your broadband connection fails, a hosted system will be down without a backup circuit, leaving you unable to make or receive calls. In contrast, an on-premises system allows you to continue using local extensions, paging, door intercoms, and access controls during an outage.

Cost Comparison

Hosted VoIP is typically priced per “seat” (phone). For example, with 20 phones at $25/month each, your cost would be $500/month, totaling $18,000 over a three-year contract, excluding taxes and fees.

On-premises systems require an upfront investment or lease payments, but these costs are amortized over time. Once paid off, you only cover the cost of SIP trunk minutes, significantly reducing monthly expenses compared to hosted solutions.

Key Questions Before Choosing Hosted VoIP

Before signing a contract for hosted VoIP, consider the following:

• Read the contract carefully. Understand all terms and obligations.

• What’s the contract duration? Long-term commitments may lock you in.

• Is “free” truly free? “Free” phones or services often come with multi-year contracts.

• Do the phones meet your needs? Evaluate whether physical phones, softphones (for call centers), or mobile apps are the best fit.

• Are softphone and mobile apps user-friendly? Ensure they integrate seamlessly with your workflow.

• Are CRM integrations robust? Verify whether integrations are proprietary or third-party and if they meet your needs.

• Who handles repairs? Clarify responsibility for maintaining or replacing hardware.

• Are there upgrade fees? Confirm whether software or feature updates incur additional costs.

• Does the contract auto-renew? Check for automatic renewals and required cancellation notice periods.

Choosing between hosted and on-premises VoIP depends on your business’s priorities, budget, and operational needs. Weigh the long-term costs, reliability, and feature requirements carefully to make an informed decision.

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