Hosted PBX vs. Hardware PBX
Costs
Knowing what a PBX system will cost requires understanding how the system works and what associated costs will be incurred. It's not as simple as saying hosted systems cost less because you don't have to pay for hardware. Nor is it as simple as saying that PBX hardware is cheaper in the long run because you don't have to pay for incoming calls. In general, a hosted service, like VirtualPBX, will be less expensive to get started, regardless of the size or complexity of the system. It will also have lower support costs because the support is done by the service provider. However, call costs and the cost for phone lines are likely to be higher for a hosted PBX, meaning higher monthly bills. Full cost details can be found by clicking on one of these two links:
| Hardware PBX Costs | Hosted PBX Costs |
Based on the detail covered in those links, it is possible to look at the relative costs of each type of system. An important distinction, however, is whether the client company wants to offer toll-free service to its callers. Toll-free numbers are included in the VirtualPBX service, while customers of a hardware PBX will have to pay separately for that capability. If there is no need for toll-free service, the relative costs look like this:
PBX cost comparison without toll-free service
| 5 User System | 40 User System | |||
| Up-front Costs | ||||
| Standard PBX | $ 6,250 | $ 50,000 | ||
| Hosted PBX | $ 150 | $ 150 | ||
| Difference | $ 6,100 | $ 49,850 | ||
| Monthly Costs | Per month | Per Year | Per month | Per Year |
| Hosted PBX | $ 241 | $ 2,895 | $ 1,830 | $ 21,960 |
| Standard PBX | $ 93 | $ 1,110 | $ 650 | $ 7,800 |
| Difference | $ 149 | $ 1,785 | $ 1,180 | $ 14,160 |
| Payback in Months | 41 | 41 | ||
| Payback in Years | 3.42 | 3.52 | ||
These costs include all of the costs associated with each system. For example, a hosted system will need to pay for an incoming phone line for every employee, while a hardware PBX will have higher support costs. As can be seen, a hosted system will cost a lot less to start, but will have higher monthly costs. The payback period is the number of months or years it would take before the premise-based equipment would be cheaper. It could be argued that a company that doesn't need the other advantages of a hosted PBX, such as routing calls to distributed employees, might be better off by choosing a hardware PBX, as long as the company is willing to wait for about 3 years to see a cost advantage. Since most small companies change PBX equipment every two years or so, these companies should rarely choose a hardware PBX system.
When a business wants to offer toll-free calls to its customers, the monthly cost difference is much smaller, because the per-minute charges for toll-free service are included in the hosted system but cost extra for a hardware PBX. This results in a longer payback period, as indicated in the following example:
PBX cost comparison with toll-free service
| 5 User System | 40 User System | |||
| Up-front Costs | ||||
| Standard PBX | $ 6,250 | $ 50,000 | ||
| Hosted PBX | $ 150 | $ 150 | ||
| Difference | $ 6,100 | $ 49,850 | ||
| Monthly Costs | Per month | Per Year | Per month | Per Year |
| Hosted PBX | $ 241 | $ 2,895 | $ 1,830 | $ 21,960 |
| Standard PBX | $ 193 | $ 2,310 | $ 1,150 | $ 13,800 |
| Difference | $ 48 | $ 585 | $ 680 | $ 8,160 |
| Payback in Months | 127 | 73 | ||
| Payback in Years | 10.59 | 6.11 | ||
Given a payback period of over 10 years, there is no reason for a small company that wants to offer toll-free service to its customers to ever use a premise-based PBX. Even larger companies in this situation would have to examine long term plans closely before a choice was made to implement a hardware PBX. Remember also that a hosted service is scalable and can easily grow with company needs. A hardware system has a finite capacity that the company may outgrow.
All of these cost comparisons were done assuming a "middle of the road" hardware or software PBX system vs. the hosted service offered by Virtual PBX. It is possible to find PBX hardware that is either less or more expensive than this mid-range approach. It's also possible to find a cheaper hosted PBX provider than Virtual PBX. It is not possible, however, to find a more feature-rich hosted system. So if a business wants the cheapest system available, there will be a way to decrease the cost point of the hardware system and perhaps the payback period. If the company wants the most feature rich system, however, the hardware system will be much more expensive, and the payback period much longer.