Hosted vs On-Site IP-PBX A Guide for SMEs

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1 A Guide for SMEs 1

2 When switching to Voice over Internet Protocol (VoIP) telephony, the decision of whether to use a hosted or on-site phone system (IP-PBX) must be made. Both have fundamental differences which will have a long-term impact on how the system is run and maintained. This white paper analyses the distinct advantages and disadvantages of hosted and on-site IP-PBX systems, and compares the differing costs. It also includes a useful decision flowchart to help you determine the most appropriate solution for your business. and productivity. They are suitable for businesses of all sizes - from micro companies to large corporate entities. More than 40 per cent of UK businesses are already using VoIP, with adoption highest among medium-sized enterprises. A further 25 per cent of companies have plans to deploy VoIP in An introduction to voip telephony for business VoIP is a technology that allows voice and video calls to be made and received via a high-speed Internet connection. It enables users to call anywhere in the world for a fraction of the usual cost (typically at least 50 per cent cheaper) and other VoIP users for free. VoIP telephony systems, more commonly known as IP-PBX systems, can provide an advanced set of call handling tools and features to improve service, efficiency Hosted or on-site IP-PBX? VoIP telephony systems can be vendor operated via the Internet on a hosted cloud platform or physically installed at office premises. Hosted systems incur operating expenditure in the form of a monthly service charge, while on-site systems incur an initial capital cost for the phone system hardware. Both have fundamental differences with distinct advantages and disadvantages. It is important to fully appreciate how they differ in order to make the right VoIP telephony decision. What is an IP-PBX? An IP (Internet Protocol) PBX (Private Branch Exchange) is a telephone switching system which enables audio, video and instant messaging communication. It interconnects an internal VoIP network with the public switched telephony network (PSTN) for telephony communications between VoIP and traditional telephone users. 2 1 Source: Vanson Bourne Independent survey commissioned by Telappliant.

3 Hosted IP-PBX A hosted IP-PBX is provided, configured, managed and maintained by a VoIP telephony provider. Calls are routed by the service provider and delivered over an Internet connection. No additional equipment is needed by the customer, other than IP handsets and an Internet connection. PSTN VoIP Provider 4G 3G GSM Traditional telephone networks Hosted IP PBX servers in secure data centre IP phone Internet Router Switch PC IP phone Laptop Wireless 3

4 Hosted IP-PBX advantages vs disadvantages Low capital investment required for expensive hardware or software, which in turn frees cash flow and eliminates perceived risk for businesses using VoIP for the first time Suitable for growing businesses and those with fluctuating demand because new users, numbers and phone lines can be added quickly and easily. Excellent scalability means call capacity can be increased or decreased in line with sales and demand, including seasonal peaks No expensive installation fees or engineer call-outs as the system is in the cloud. Phones can be automatically provisioned, remotely Support and maintenance are included in the monthly cost Provides a unified phone system for companies with several offices, allowing efficiencies and a consistent experience for both users and customers anywhere in the world There is no reliance on a single site, so if a connection to the IP-PBX is lost from one site, calls can still be routed to other sites Enables and supports seamless, professional remote working as calls can be directly routed to any employee, regardless of location. Calls can also be made from mobile phones and softphones, as well as desk phones. By always keeping users connected to the same phone system, benefits including increased efficiency, productivity and employee satisfaction can be achieved Quick and easy to implement with migration from traditional telephony very straightforward. Disruption during implementation is extremely rare and the transition can be complete in a matter of days Minimal hardware storage, racking and cooling requirements because the VoIP provider houses most of the equipment off-site Ensures continuity in the event of a fire or natural disaster because all critical hardware and software is stored off-site in a secure data centre. Even if your premises are destroyed, the phone system will still work, allowing business to continue from another location Hosted IP-PBX disadvantages Call quality is directly influenced by your Internet connection, so it is essential to use VoIP-optimised broadband with the bandwidth to handle your call requirements Dependency on the Internet connection means that if your Internet access goes down, so will the phone system. You will not be able to make outbound calls (although inbound calls can be temporarily diverted to landlines or mobiles). Failover to the PSTN is achieved through hardware, which will require capex and maintenance No physical hardware on site may give the perception of lack of control Telephony features and compatibility are dependent on the VoIP provider and access to its system may be limited Dependency on the VoIP provider means you should thoroughly evaluate its credentials and financials to determine its ability to provide a long-term high quality service Monthly fees may mean that the total cost of ownership may be slightly higher compared to an on-site IP-PBX. Any marginal additional costs however are outweighed by the savings in maintenance charges and will still be less than using the public switched telephone network (PSTN) 4

5 On-site ip-pbx Designed primarily for those organisations wishing to integrate legacy PSTN lines with VoIP, an on-site IP-PBX is installed at the business premises and managed in its entirety by the user. As well as an IP-PBX, a VoIP-PSTN gateway is required to route and convert analogue or ISDN calls to VoIP. PSTN VoIP Provider 4G 3G GSM Traditional telephone networks Internet Router 5 IP phone VoIP gateway On-site IP-PBX Switch PC IP phone Laptop Wireless

6 Hosted IP-PBX advantages vs disadvantages Cost of ownership reduces over time, with lower operational expenditure and savings over the course of several years No monthly subscription payments, because you have purchased the system outright No need to change current call carrier because an on-site IP-PBX can connect to the PSTN, which in turn minimises procurement changes PSTN can easily be used as a failover when Internet bandwidth is limited or disrupted More control over the feature set and call routing (if using an open-source platform such as Asterisk) Significant up-front capital expenditure is often prohibitive or deemed to be too high, especially by businesses using VoIP telephony for the first time Hardware maintenance and upgrades are an ongoing expense, requiring engineering slots with the provider/manufacturer, as well as in-house technical expertise Flexibility, scalability and bespokability are limited by the physical hardware Increasing the number of users is not straightforward and can be a complex process, particularly if the system has already reached the maximum number of allowable users. This in turn reduces the suitability of an on-site IP-PBX for companies, including those which are growing or plan to do so, and those with fluctuating demand Licencing costs for upgrades and additional users can be high even if the hardware is capable The IP-PBX is a single point of failure that could lead to significant downtime Support for homeworkers may be limited as it is reliant on the site housing the system and the available bandwidth (with bandwidth requirements doubled for outbound calls as a result of tromboning) Failure or loss of the PBX will mean incoming calls get a busy tone, indicatingthat no transmission path to the called number is available. This can potentially lose sales and damage a professional reputation Physical disasters or power/broadband outages at your premises will put the PBX and therefore the phone system out of action Business premises rarely offer the resiliency and protection of a purpose-built secure data centre, potentially exposing the phone system to greater risk Additional space will be required to house the system, along with racking and cooling The full potential of the system may never be realised due to relatively limited in-house technical knowledge. This will minimise the benefits gained from VoIP telephony and the investment itself 6

7 Cost comparison: hosted vs on-site IP-PBX As with any purchasing decision, costs are a vital consideration. The distinct differences between hosted and an on-site IP-PBX mean there are significant cost differences too. The table below compares these differences so you can make a fully informed decision. Capital investment costs Hosted IP-PBX On-site IP-PBX IP-PBX system Low High VoIP-PSTN gateway N/A From 20 Router From 40 From 40 Server N/A From 650 IP phones From 20 each From 20 each Softphone headsets From 20 each From 20 each Monthly costs IP-PBX system 8 per user N/A Technical support & maintenance Included 15-20% of solution cost Service charges Included Depends on system 30 concurrent calls One-off costs Less than 200 (including DSL and SIP trunking) More than 500 (including ISDN lines) Installation and setup Less than 10 per user More than 75 per user Software upgrades Free Dependant on system Upscaling (adding more users) Free Depends on system Lead time A hosted IP-PBX typically takes 24 hours to set up. An on-site IP-PBX can take as long as three months to implement. 7 Costs based on a 60 user system (Hosted IP-PBX costs based on Telappliant VoIPOffice plus)

8 Making the decision - hosted or on-site IP-PBX Use the flowchart below to help you make the right VoIP telephony decision. START Is the business growing or planning to grow? Hosted IP-PBX is likely to be the best solution because its excellent scalability means you can easily add additional users. Do you have offices in several locations? Hosted IP-PBX will easily unify all of your offices with a single telephony solution. This will allow a consistent, productive employee & customer experience. Do you have staff with the capacity & ability to install & maintain an IP-PBX? Hosted IP-PBX is maintenance-free and does not require any in-house technical resource. Complete and ongoing technical support is provided by the VoIP service provider. Do you have seasonal or fluctuating demands which influence the number of calls? Do you require an advanced set of call handling tools & features as standard? Are you able to make a significant initial investment in hardware? An on-site IP-PBX is likely to provide a viable long-term telephony solution. Hosted IP-PBX will allow you to easily and instantly add or remove users and lines, providing a flexible solution to respond to fluctuating demand. Hosted IP-PBX typically comes with a wide range of advanced call handling features, making it ideal for companies wishing to effortlessly improve call handling performance. Hosted IP-PBX requires no upfront capital investment. Instead, the system incurs an affordable monthly fee. 8

9 IP-PBX solutions from Telappliant VoIPOffice Hosted Professional is Telappliant s flagship hosted IP-PBX system. It enables users to enjoy the features and benefits of an advanced VoIP telephony system but without the hardware and maintenance costs of an on-site IP-PBX. VoIPOffice consolidates business communications from multiple locations anywhere in the world under a single high performance IP telephony platform. As well as intelligent call handling tools and features, it provides free internal calls and external calls at less than 1p per minute. VoIPOffice is also available as an on-site IP-PBX solution, including all the hardware, software and complementary services such as call plans and incoming phone numbers. About Telappliant Telappliant has been delivering Internet telephony solutions since It is a founding member of the Internet Telephony Service Providers Association (ITSPA) and was one of the first companies to launch VoIP services into the UK SME market. Telappliant owns one of the largest VoIP networks in the country and offers a range of associated services. In addition to hosted and on-site VoIP telephony systems, these include SIP trunking (VoIP telephone lines ), VoIP-optimised broadband, global telephone numbers and unified communications solutions. The company is ISO 9001 certified and uniquely positioned to deliver state-of-the art, integrated end-to-end VoIP solutions, with high quality business support and dedicated account management. Discover VoIPOffice For a no obligation free VoIPOffice trial, please visit or call The trial is designed to avoid any disruptions to your business and can run concurrently with your existing telephone system and numbers. For 10% off VoIPOffice, quote the code WHITEPAPER when you place your order. 9

10 Telappliant Ltd. Layden House Turnmill Street London EC1M 5QU United Kingdom Tel: Web: A Guide for SMEs 10