Home / Resources / Blog

Costs of Using IP Telephony

Last updated: 13 Apr 2023

Businesses make a staggering number of decisions daily. They range from deciding on the number of paper reams to order for the copier to strategic technology decisions. For example, the choice of business communications technology can make a meaningful impact on how your company operates.

In the past, business communications required distinct systems for each service. Business telephony required purchasing expensive onsite equipment and connection through a local phone provider. Businesses now have a range of options that have evolved from voice-only communications to connected, integrated communications platforms. In a world where resources are constrained, it can be tempting to select a solution based on price, but there is more to business communications than just price.

For many businesses, connectivity is critical for operations. When your phone, email, or other communications systems don’t work, business grinds to a halt. Price is not always indicative of the quality of service (QoS) you will receive. A low price doesn’t necessarily equate to poor QoS, and high cost doesn’t mean you’ll have flawless performance. Price is often one of the most confusing things about making an IP telephony decision. Is the price presented really the price you’ll pay? Is the advertised price for companies at a specific size and volume? Is there enough of a price benefit to warrant making a change to this technology? The answer is – it depends.

Total Cost of Ownership

You can’t evaluate the cost of IP telephony without understanding the total cost of ownership (TCO). You need to factor in additional benefits, like increased workforce productivity, enhanced business intelligence, deeper customer relationships, and freed-up IT resources. At the same time, it is important to understand any upfront costs, implementation fees, and operational expenses. For example, you’ll want to determine the necessary equipment and hardware, maintenance fees, managed services, required training, and potential certifications. You may also need endpoint licenses for applications while paying for month per-user subscription fees for IP telephony offered through the cloud.

What you Eliminate

Good-bye PBX! With traditional telephony solutions, businesses with multiple lines used an on-premise physical piece of hardware to connect landline phones in an office. The equipment is known as a PBX (private branch exchange), costs tens of thousands of dollars, and was generally a headache to maintain.

See you later, copper wiring! Another benefit of IP communications is the ability for everything to run on broadband. It makes life easier when you are only maintaining one set of wires for connectivity.

Local calling charges are history. Most plans provide unlimited nationwide calling and very low-cost international rates.

Bringing in the Numbers

The key challenge to determining TCO is that you don’t necessarily know all of the numbers. You may have an idea of the costs from the vendors you’re considering. Unfortunately, in many situations, all of the costs associated with their offerings aren’t disclosed until it’s time for contract negotiations. Your best bet is to rely on experts in the field who are working with these solutions today and can offer an unbiased assessment of current offerings and vendors. Just be careful when using “averages” to determine your costs as highs and lows ‚Äî this could skew results considerably.

Size Matters

When determining the cost advantages of IP telephony, it’s clear that businesses can achieve significant savings. According to Robin Gareiss, president of Nemertes Research, small businesses can save as much as $218 per employee each year by making the change to IP telephony. Medium-sized companies can benefit as well, driving as much as $280,000 in savings per year with a new on-premise system. Large companies can achieve the best TCO swings, with the potential to drive nearly $5 million in savings over five years.

To best determine the costs associated with IP telephony and whether or not a change makes sense for your company, talk with our experts at BlackPoint IT Services. We make it our job to understand the challenges, costs, and benefits associated with new communication strategies. We’ll help you determine true TCO so you can make an informed decision.