Hosted VoIP Phone Systems vs. TDM: Who Really Wins on Cost?

The cost savings of a hosted VoIP phone system often comes under scrutiny from some of the remaining providers of TDM, or “traditional”, phone systems. You know the kind, those broom closet phone boxes of yore. Through the use of a narrow lens, they push out misinformation that may lead small business owners to think that a TDM solution will somehow save them money over VoIP.

This is, however, an act of desperation on their part – not a reflection of reality. By choosing the scope of their argument, they can stack Apples v. Oranges and shine a deceptively attractive light on their systems. Zoom the camera out a bit, get the whole picture, and you’ll see why smart businesses have been abandoning TDM solutions in droves for the advantages of hosted VoIP.

The Classic TDM Cost Savings Argument

Let’s start with the argument for a TDM phone system. In a nutshell, these providers cite the benefit of their systems as being the fixed cost to own, e.g. pay for the PBX equipment and the installation, and it’s yours to own for life. They then compare that high fixed cost to a month-to-month hosted VoIP service like FreedomIQ over some extended period, say, 24 months, to say the TDM phone system carries a smaller price tag in the long run. Conversation over, right?

Not even close.

Where the TDM Argument Falls Apart

Hosted VoIP is a managed service, and much of the cost savings is abstract from the direct cost of equipment and ongoing service. Any savvy business owner knows that the price tag they should care about, the real price tag, is one that includes both direct and indirect costs to get the Total Cost of Ownership (TCO). With that in mind, here’s what you’re not seeing with a direct business VoIP vs. TDM cost-of-service comparison:

1.  Deprecation of Hardware

TDM PBX equipment, like a car, loses value the minute you deploy it. The notion that you’re going to “own” your PBX isn’t exactly exciting if it doesn’t hold any value 6 – 12 months down the road and you’re back in the market. Worse still, if it breaks down while you “own” it, that means it’s your responsibility to pay to have it fixed or to buy a replacement. Even if you’re covered by a hardware warranty you’ve purchased, that cost needs to be a part of their big picture comparison.

With a hosted VoIP phone system, you’re not dropping capital into hardware that’s going to become obsolete. There’s no buying replacement parts for your wall switch and no risk that a year from now you’re going to be stuck with a 5-figure paperweight. Not to mention the fact that the equipment delivering your hosted service from remote is enterprise-grade and fully-redundant, something you’re not going to get from a comparable TDM solution.

2.  Scaling Up Your Business

TDM phone systems are notoriously inflexible to the growing needs of your business. With this kind of phone solution, you’re likely to fall into one of two camps: the over-paying, or the under-provisioning. That is, you either buy a PBX that is too big for you right now, thinking that you’ll eventually grow into it, or you buy a PBX that meets your short-term needs, understanding that you’ll have to figure something else out should your needs change. Result? You’re paying more than advertised, either right now for the privilege of future expansion, or down the road when the necessity to upgrade your PBX hits you like a ton of bricks.

Hosted VoIP phone systems are scalability machines. By taking your hardware off-premise and having phones interconnect and transmit calls via the Internet, you’re removing the limitation on what size of PBX you can have. You won’t need to overpay for more phones and capacity than you need or buy a brand new PBX within a year because your staff size has grown by 20%. With hosted VoIP, you can add phones to your system at any time and from anywhere with no extra costs to scale.

3.  Paying IT Staff / Maintenance

The coup de grâce. Owning your own TDM PBX again brings the responsibility of management, maintenance, and configuration in-house. That means some percentage of your IT staff budget is getting allocated to making sure your phones are always up-to-date and in working order. Even if you’re talking a tiny fraction (5%) of just one IT employee’s time, you’re talking about thousands of dollars each year to manage your own PBX.

Part of what you’re paying for with a hosted VoIP PBX is, essentially, the outsourcing of this responsibility. We maintain the equipment that provides you with service. We keep your phones updated to the latest firmware. We help you configure your service and troubleshoot your setup with free U.S. technical support. Meanwhile, your IT staff gets to focus on issues more critical to advancing your business, and the money you save (or make) by keeping them on task all but pays for your hosted VoIP phone system.

Be sure to do plenty of research and look at the big picture when considering what type of phone system is right for your business. Look beyond the price tag to what a system provides in flexibility and time saved, as those ultimately lead to keeping dollars in your pocket.

Hosted VoIP Lite: Getting Your Feet Wet

Making the move to a new business phone system can be downright scary. The communications technology that a company chooses has become so critical to business efficiency, that one IT misstep can easily set you back weeks in terms of productivity.

This is just one of the many reasons we’ve seen businesses turn to a hosted VoIP phone system. With hosted VoIP, there’s no big upfront commitment. No massive equipment or servers to finance, no infrastructure changes, no heavy wiring. You are free to try out the system with as small of an initial deployment as you’re comfortable taking on – even just a single phone – before deciding if it’s right for your business.

The Way It Used to Be (Traditional PBX)

Before the days of hosted VoIP, your IT decision maker’s best friend was research. They’d spend hours reading white papers, watching presentations, or attending webinars on why they should choose one PBX vendor over another. The prospect of trying out a phone system live on your premise with little to no commitment was laughable. There was simply too much that needed to be done to get it to work, and no vendors that would do that work without expecting to be paid in full.

It’s not the vendor’s fault, really, but a problem in on-premise technology itself. All premise-based PBX systems require equipment and wiring that takes a solid investment of time and money. If things don’t work out, whether the technology simply isn’t a good fit, the service isn’t reliable, or the customer support is lacking — it’s too late. You’ve already signed on the dotted line and there’s no going back.

But over the past few years, hosted VoIP has changed the game. Speculative research and sales fluff has given way to live on-site demonstrations, demo phones, and the advent of the phased-in VoIP phone system.

The Phased-In VoIP Phone System

As businesses become more savvy about VoIP phone system technology, we’re seeing more and more opting to get started with a small set of VoIP phones (or even just one). These phones use your business’s existing data connection, requiring no invasive wiring, no premise hardware, and can be up and running in the course of a single visit.

This way, your key players like the head of IT, the CEO, or even a small department can serve as guinea pigs without impacting the day-to-day operation of the entire business. These limited roll-outs can often be fully integrated with your existing business phone system for a seamless phasing-in of phones over time.

And it doesn’t take long. As you experience important factors such as call quality, reliability, potency of features, and ease of use, the decision largely makes itself. If you’re not happy with the technology, it’s easy enough to pull the plug. If you’re confident in the technology, the ability to add new phones anywhere at any time helps you ramp up your deployment to include additional departments and even additional locations.

Are you ready to try hosted VoIP for yourself?  Give our consultants a call at 888-955-3520 to have a risk-free, no-obligation conversation about how you can test out FreedomIQ for yourself with a small deployment.

How to Convince Your Boss to Try Hosted VoIP

IT managers working for an SMB have a tough gig: maximizing the return on every IT dollar spent. With tech budgets shrinking across the nation, there’s an urgent need for every IT product or service a company chooses to deliver higher value at a lower price. Fortunately, this need has resulted in the emergence of a host of cost-effective, productivity-enhancing technologies. Among them, the hosted VoIP phone system leads the charge for smart business communications.

But, if you’re an IT manager, you already knew that. You’ve done your homework. Now it’s time to convince your boss, who may be coming from a different perspective and have different priorities. Here are some tips on how to present a hosted VoIP solution that will get the C-level to sign on the line that is dotted.

1. Easy on Cash Flow

Why not lead with the knock-out punch? Hold the pretty explanations and come out of the gate with the fact that the upfront capital expense of a hosted VoIP PBX is tiny compared to any other professional phone system. For equipment, you’re paying for the cost of your VoIP phones and maybe a couple VoIP routers. There’s no $10k+ box-in-the-wall or clunky on-site server to worry about financing. Hosted VoIP is the professional phone system your boss can afford even if he or she can’t afford a professional phone system.

2. Conserve Your IT Staff Resources

With a managed service like FreedomIQ, you don’t need to squander your precious time wondering what the blinking light on your PBX means. You don’t have to thumb through manuals or search for tech guides online should a phone go on the fritz. Your boss can keep you and your IT staff on business-critical development full-time because you have a hosted VoIP service provider to take care of these things (or prevent them from happening in the first place).

3. No Investment Risk

Remember when we were talking about the minimal investment required (#1) to get hosted VoIP service? Well, not buying that wall switch or server in the first place means you and your boss don’t have to worry about what to do with it a year or two down the road. You know, the time just after its hardware warranty has run out and it’s either a) quickly turning into a steaming pile of junk or b) you’ve outgrown it to the point where it’s practically tinkertoys relative to the needs of your business. Hosted VoIP’s equipment-free nature provides an ease of scalability that saves your boss from the embarrassment of a 4- or 5-figure PBX paperweight.

4. Strong Productivity ROI

Saving money is great, but what about your employees? Won’t somebody think of the employees? Enhanced productivity is where you’ll find that hosted VoIP is no slouch. Even though you’re paying a fraction of the price, you’re getting all of the advanced features and functionality of an enterprise phone system.

You get unlimited local and long distance calling, a professional auto attendant, call forwarding with ACD routing, voicemail service, Internet faxing, web-based settings and call reports – the list goes on. But the real productivity kicker is when you show your boss how FreedomIQ integrates into the programs his or her employees already using, like Outlook and Salesforce CRM. With this feature, FreedomIQ works seamlessly with your existing business environment, helping employees be as efficient as possible.