Comparing Phone Systems For Small and Mid Size Businesses


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For small and medium-sized businesses (SMBs) looking to not just survive but thrive during a tough economy, a VoIP phone system may be just the answer. It will give you communication capabilities previously available to only the largest companies. It will let you work in ways that you would have found impossible before. It will help you accomplish more with fewer resources. And it can save you considerable money.

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Comparing Phone Systems For Small and Mid Size Businesses

  1. 1. Comparing Phone SystemsFor Small And Mid-Size BusinessesWhite Paper • March 2011
  2. 2. For small and medium-sized businesses (SMBs) looking to notjust survive but thrive during a tough economy, a VoIP phonesystem may be just the answer. It will give you communicationcapabilities previously available to only the largest companies.It will let you work in ways that you would have found impossiblebefore. It will help you accomplish more with fewer resources.And it can save you considerable money.But even if you are more than ready to move to VoIP, choosing thebest system for your individual circumstances isn’t easy. There areseveral contrasting approaches to VoIP telephony, each with itsown benefits. The biggest differences among them are who owns,operates and maintains the equipment, and where it is physicallylocated. These differences produce major variations in cost,convenience and ease of management.This report analyzes the three leading options, which are:premise, hosted and hybrid-hosted. The report describeseach approach, explaining how they work and the equipmentand support they require. It also lists the advantages anddisadvantages of each option. To learn more, please visit or call 877- FONALITY
  3. 3. PREMISEThe legacy approach is for the SMB to buy and operate the equipment. The SMB either installs the IP PBXitself, or has a dealer or VAR (value added reseller) do it. The equipment sits in the company’s own premise,connects to its LAN, and distributes calls to IP phones also connected to the LAN. The company owns theequipment and software, and administers and maintains them both. VoIP Calls can come to the IP PBX from thecommunication service provider over traditional PSTN (Public Switched Telephone Network) lines or over thecompany’s broadband Internet connection.The premise approach has several advantages. Although the upfront cost is higher than with hosted service,at the end of the day the company owns the system, rather than having to make monthly payments. Andwith ownership comes increased control, and so companies can customize or extend the capabilities of theirsystems more than they could with hosted service. Another advantage is that it’s not necessary to rely solelyon the Internet to deliver calls. A premise based IP PBX can give fallback capabilities to the PSTN should yourInternet service be interrupted. Security can also be higher because all messages and call data remain on thecompany’s premise.But when compared to hosted and hybrid-hosted solutions, there can be significant disadvantage dependingon the needs and resources of your organization. The biggest is monitoring system maintenance, includingenergy costs. Someone has to be available virtually all the time to make sure the system is running correctly.Someone also has to maintain and upgrade the hardware and software on a regular basis to ensure capabilityand proper security standards are up to date. Premise systems typically require maintenance contracts thatadd significantly to the total cost of ownership. Accessing the system for administrative tasks such as moves,adds and changes also requires either having someone on site to do it, contracting with a VAR or establishinga special connection setup to allow remote access. The latter typically involves opening a special port throughthe corporate firewall, which can not only be a tricky process but may be against company security policies.Configuring remote users can also be complicated and thus expensive. PROS CONS Significant costs for hardware and software Own the system with available financing options maintenance contracts Can customize to suit needs Requires on-site staff or monitoring and maintaining Administration requires on-site staff or special Doesn’t rely on Internet for quality, reliability connection setup Configuring remote users can be tricky Hardware, software upgrades eventually necessary if user numbers grow Ever increasing energy costs To learn more, please visit or call 877- FONALITY
  4. 4. HOSTEDTraditional hosted VoIP, also known as hosted IP PBX service, runs on equipment belonging to and located inthe data center of a service provider. This Software-As-A-Service approach has been made popular in othertechnology sectors by companies like Salesforce and NetSuite. Calls travel to and from the SMB’s offices viaits broadband Internet connection. Many, but not all, hosted services can provide the features and capabilitiesthat traditional phone systems offer. Users can make or transfer calls by dialing internal extensions. They canalso make conference calls, park and pick up calls, and answer calls forwarded to groups of extensions, knownas ring groups. That’s not to mention all the new capabilities that VoIP makes possible, such as listening tovoicemail messages through e-mail or another online interface, or placing calls by simply clicking on names inonscreen address books. Unified Communications capabilities ensure seamless information flow via presenceand into voice, e-mail, or secure chat is also a common feature.The biggest benefit of the hosted approach is its low upfront cost. Often, the only equipment a company needsto buy to get started is VoIP phones for its employees and some providers include these phones in the monthlyfee. It then pays a monthly fee for each user license, which typically includes packages of minutes or unlimiteddomestic calling as well as cheap international rates. This approach lets the company increase the number ofusers it’s paying for exactly as needed and eliminates some ongoing costs. There are no hardware or softwaremaintenance contracts, for example, and no need for in-house IT staff to monitor equipment and fix problems.All service, maintenance, and updates are managed and provided by the service provider. Overall savings cansurpass 40% or more versus taking a legacy approach.If you don’t ask the right questions you will find that some hosted services can have notable drawbacks.While hosted services can provide many of the same features and capabilities of traditional phone systems,traditionally they do not compare to premise and hybrid-hosted solutions in available features. The monthlycharges can add up, especially when they involve paying full rate for little-used but necessary extensions. Andunlike with equipment purchases, the payments continue as long as the service is used, and upon terminationof service the business is left with no associated asset. Security is often another concern, since the hostedsystem sits on the network and may be subject to various forms of attack if not managed proactively. Callquality and service reliability can also be significant worries, since both are totally dependent on the company’sInternet connection. PROS CONS Low upfront and operating costs Quality, reliability depend on Internet Quick and simple system setup Pay full rate for little-used features Increase capacity exactly as needed On-going payments, no eventual ownership of equipment No need for maintenance contracts or IT staffing Potentially increased levels of security exposures To learn more, please visit or call 877- FONALITY
  5. 5. HYBRID-HOSTEDThe hybrid-hosted approach combines the key elements of hosted and premise systems, with the hostedelement based on Software-as-a-Service (SaaS) technologies. The service provided by the service provider isbuilt on servers located in its secure data center, and added equipment located on the customer’s premise tomeet reliability and security needs. The service provider monitors and manages the premise and data centerequipment from its centralized management system. This arrangement offers most of the benefits of bothhosted and premise solutions, while doing away with most of the disadvantages of both.As with conventional premise solutions, hybrid-hosted systems do not rely solely on the Internet for the qualityand reliability of calls, though Internet transport is an option. And messages and call data can remain within thecompany confines.And as with hosted solutions, hybrid-hosted systems significantly decrease the hassles and headaches ofpremise solutions through one monthly fee. Part of it is ease of use. Administrators and managers can accesstheir systems from anywhere, anytime via web browsers, rather than having to be on premises or to haveconfigured special routes through their firewalls. Setting up remote users is simple too, and linking branchoffices is a one-click process. Users can even configure their own extensions from wherever they are.Perhaps most important, the hybrid-hosted approach alleviates monitoring and maintenance headaches. Fromits data center, the service provider proactively watches all related hardware and software, 24 hours a day andseven days a week, for impending failures, and takes action before they happen. It also transparently maintainsthe software, pushing out automatic updates without the need for someone on the company’s premise to doanything. The service provider backs up the customer’s configurations, allowing for easy recovery in case ofdisaster. PROS CONS Own the system with available financing options Reliance on the service provider to provide reliable service Can customize to suit business needs Reliance on the service provider to maintain high security In some cases upfront capital costs for Don’t rely solely on Internet for quality, reliability on-premise hardware Vendor monitors for faults 24/7 Vendor backup of customer configurations with easy disaster recovery Automatic software upgrades Easy remote administration through Web browser Easy setup of remote users One-click linking of branch offices To learn more, please visit or call 877- FONALITY
  6. 6. WHICH ONE IS RIGHT FOR YOU?From the above discussion, it should be clear that the functionality offered by these three styles of solutionscould be substantially equivalent. Therefore, your choice should be based on business and financialconsiderations, both in terms of cash flows (including start-up investments) and Total Cost of OwnershipFor example, the up-front costs are substantially higher with a premise solution which requires you to purchaseyour own PBX or server system. From a cash flow perspective, hosted or hybrid-hosted solutions require you topay only for what you use and distribute the cost on a monthly basis. Both of these include all maintenance andupgrade costs, all of which are out-of-pocket expenses which come with a premise system. What this implies isthat with a hosted or hybrid-hosted solution, you don’t need to hire and train IT resources to run your telephonysystem.Why would you choose a hybrid-hosted solution over a traditional hosted one? Both have lower upfrontcosts and zero maintenance worries, but in the traditional hosted solution, call quality and reliability are solelydependent on Internet connections. With the hybrid-hosted approach, you relegate your reliability and securityrequirements to the service provider, who also provides all monitoring and maintenance. Administration is alsosimplified.A systematic comparison of the three options is summarized in the Table. Hosted Premise Traditional Hosted Unlimited Calling Included Additional Cost Included For 10 Users Business Class Features Included Additional Cost Additional Cost Direct-Inward-Dialing Phone Included Additional Cost Additional Cost Numbers UC Desktop Applications Included Additional Cost Additional Cost Mobility UC features Low Cost Additional Cost Additional Cost Initial System Set-up Fee $0 High Cost Low Cost Initial Cost For Phones $0 Additional Cost Additional Cost Monthly Fees $300 $500+ $300-1000 Training and Support $0 Additional Cost Additional Cost Moves, Adds and Changes $0 Additional Cost $0 Year One Costs $3000 $8,000-25,000 $4,000-8,000 To learn more, please visit or call 877- FONALITY
  7. 7. Ultimately, of course, the choices are all about capability and cost.Poor voice quality or unreliable service can lose you significantbusiness. Spending staff time taking care of equipment also meansspending money. But the most important cost to keep in mind isthe cost of doing nothing. Not moving to VoIP means giving up theopportunity to make your business work better by leveraging newfeatures such as Unified Communications. It means missing thechance to save money through increased employee efficiency, orto increase revenue through making better use of employees’ timeand talent. In short, taking advantage of opportunities such as VoIPcan provide a rewarding return even in the toughest environment. To learn more, please visit or call 877- FONALITY
  8. 8. Fonality, Moving Your Business ForwardFonality is North America’s fastest growing business communicationscompany and a leading provider of cloud-based VoIP and UnifiedCommunications solutions for small and mid-size businesses.With a unique software model approach, Fonality provides all thefeatures of legacy providers without the cost or complexity.Founded in 2004, Fonality has delivered more than two billion phonecalls across the cloud while enabling more than one million users ofopen-standards based communications software. Investors includeIntel Capital, Draper Fisher Jurvetson, and Azure Capital Partners. for more information or call 877-FONALITY. 5601 Granite Parkway, Suite 500 • Plano TX 75024 1-877-FONALITY •