An Internet Protocol (IP) telephone system, sometimes known as VoIP, might represent the future of telecommunications for all but the smallest businesses. The move must be made with care, as it represents a real change in the company’s telecommunication system. As with most business decisions, however, the costs and potential savings from the move are of high importance.

Before making a move, consider how much it will cost to have a cloud-based system versus a hosted IP telephone system. Then, consider the costs of telephones and handsets. Add monthly service costs to that and compare it with your current phone system and the cost of associated tools for video conferencing and file sharing… you’re looking at some pretty sizable costs. A good IP-based system can replace some of those services.

Implementing an IP Telephone System

The most important single decision to make, for some business owners, is to host a phone system or outsource their telephone system to a cloud-based VoIP service provider who hosts and owns most of the hardware and provides data storage. While “going to the cloud” is almost the default decision today, it is worth understanding each option in the case of telephone service. Hosting a phone system is expensive in the beginning, because of the routing and switching hardware a business would need. But the investment may well pay off. A cloud-based option comes with lower upfront costs and less technical complexity in setting up and configuring equipment to handle voice and data traffic.

Costs of the System

The main cost factor for a cloud-based phone system is the number of phones the business needs. Of course, this is also true for regular telephone service, which will not include some important communication tools, like chat, instant messaging (IM), and video calling. The other option, to create a hosted system in your company, will cost more upfront.


As the name suggests, this option involves outsourcing the services to a company that runs the cloud-based servers, software, and storage. The cost includes a monthly user fee, the cost of phones, and the cost of headsets. In a business characterized by heavy call volume, like telemarketing or customer service centers, headsets are a must. Here are some example costs to help you estimate what a new cloud-based phone system would cost:

  • $20 per user per month
  • $50 to $100 for each VoIP phone
  • $80 for headsets

These are costs for a basic level of service and standard equipment. Some VoIP phones are packed with features and will cost well over $100 each, for example. Certain businesses will need more bandwidth than they can get at $20 a month or premium features like softphones that are not covered in the basic plan. Hosting a VoIP telephone system is also an option.

Hosted System

To host an IP system, a business owner needs to set up routing and switching hardware on-site. The costs will vary with the size of the phone system, and the number of users it needs to support. A small, hosted IP telephone system might cost $10,000 to $15,000 for 20 to 30 users. This does not include the cost of phones or headsets. That hardware may add $3,600 to a system for 20 users. This estimate assumes $100 each for phones and $80 each for headsets. A business that needs premium features in their phones will naturally end up spending more, just as with a cloud-based phone system.

An experienced VoIP phone vendor can help a business owner decide between hosted or cloud-based system based on the potential costs and the features the business needs to run efficiently and offer great customer service.

Potential Cost Savings

The potential cost savings of a hosted VoIP solution can be considerable. Though the precise savings depend on quite a few variables, these are the main sources of cost savings:

  • Lower long-distance calling costs
  • Less business lost due to being unresponsive
  • Reduced teleconferencing costs
  • Less time playing phone tag
  • Reduced hardware costs
  • Lower cost to scale up

A cloud-based phone system avoids paying for extra phone lines, so callers are not getting busy signals. For example, a business with 20 employees does not need 20 phone numbers. The business risk here is in not having enough lines, so customers get busy signals versus buying too many lines and wasting money.

The other direct savings you get from an IP telephone system are reduced costs for international and long-distance calls, plus, a lower cost to add new numbers as the business grows and changes. Those savings may be considerable for a business that is rapidly growing and/or makes a high volume of international calls.

Compare the costs of your current system, including phones and monthly phone charges for regular service and any premium features. Then add any subscriptions to software that you use to streamline communication and information sharing. You’d then just need to get a quote on moving to an IP-based telecommunications system.

IP Telephone Systems Offer Significant Advantages

The costs of going with a VoIP system depend heavily on the size of the business and whether it uses a hosted, cloud-based, system or hosts its own phone system. Both options offer the potential for real savings versus using regular old telephone service supplemented by things like video conferencing and chat. Whether this is all new to you or you are looking for a new vendor, do not hesitate to contact us for a quote or free information. Ask about our risk-free trial too!