The preference of Voice over Internet Protocol (VoIP) phones over traditional landlines is partly due to their affordability. This is mainly because most providers do not charge service fees or require monthly commitments.

Again, the system only requires minimal hardware components that are relatively affordable.

In addition to reliable and quality communications, VoIP phone systems will also give you access to call reports, call recording and forwarding capabilities.

Basically, VoIP phone system costs between $195 and $1,550. Cloud-based VoIP systems, on the other hand, can cost as low as $19.95/month.

However, the pricing of these solutions is not as simple as many providers make it appear.

How much you will end up paying for such a system will depend on many factors, such as a number of phones, users, and whether you need on-premise or cloud hardware.

To help you understand the pricing of these systems better, here is a breakdown of VoIP phone system pricing.

How Do VoIP Phone Systems Work?

Unlike conventional landline systems, VoIP systems calls are transmitted through an existing data network, such as an Internet connection.

This is why most VoIP providers will not charge you anything to make local calls. In such a case, you will only be required to pay your Internet Service Provider (ISP) for the connection.

Local VoIP calls with some of the leading providers are free because the provider does not incur any terminal changes. Again, the provider does not need to recover any infrastructure investment as is the case with traditional Landline phone systems.

If any of the communication has to go through a PSTN, you are more likely to be charged a termination fee by your provider. Some calls may also be charged, but you will find the rates to be lower than PSTN fees.

VoIP Cost Analysis – Main Cost Determinants

In order to accurately understand the cost of a VoIP system, there are a number of variables you will need to put into consideration. Here is a basic summary of the things that will affect VoIP pricing in your business:

• Implementation – basically, companies spend about 20% more in the first two years of their VOIP deployments on the actual implementation than they would have spent in TDM. After they gain expertise, implementation costs are equivalent to TDM rollouts.
• Switches – This includes the cost of IP PBXs or the cost to IP-enable an existing PBX.
• Gateways – Often, companies require gateways for TDM-to-IP traffic, unless they’re using SIP trunking throughout the organization (which is rare still).
• Handsets/End-Unit Devices or Applications– This includes IP headphones or softphonesPB
• Upgrades – VOIP requires Power-Over-Ethernet switches, and most companies provide Uninterrupted Power Supplies to provide for backup. In most organizations, upgrading LANs account for 32 to 47 percent of the total VoIP implementation cost.
• Training – Many vendors are including training with the sale of equipment. But when they don’t, companies spend between $1,000 and $5,000 per IT staff member for training, and they find the most success by training their end-users with internal IT staff.
• Management Tools – Many companies don’t budget for management and monitoring tools, which is a mistake. Acquisition costs range from free (with open-source tools) to several million dollars. On average, small and midsize businesses spend about $20,000 for each third-party monitoring tool, and large companies spend about $200,000 per tool.
• Equipment licensing and Maintenance – Vendors are shifting more to a software model in which the initial acquisition cost is lower, but maintenance and licensing are higher. Whereas vendors once charged about 10 to 14 percent for maintenance, those fees now are 16 to 22 percent.
• Operational Costs – This mainly includes the cost to manage and maintain the network from a staff perspective. In this case, you need to factor in compensation of internal staff members devoted to VOIP, and the cost of any third-party MSPs managing the VOIP system. Also included are power and cooling costs

So, How Much Will a VoIP Phone System Cost You?

As mentioned earlier in this guide, the much you will end up paying for your VoIP phone system will vary from one provider to another. Again, different users may end up paying different amounts with the same provider. This is mainly because of most providers with tailor the solution to your specific needs.

In this regard, here are some of the key things that will affect VoIP system pricing.

Hardware Costs

As compared to landline phones, VoIP systems require minimal hardware components. While this is the case, you will still be required to invest in a number of hardware components. Here is a breakdown of the main hardware components required by the system and their cost:

VoIP Phone

While implementing a VoIP system, you may choose to use your existing analog or digital phone or buy a specialized VoIP phone. Provided you have the right set of components, you will be able to use your current phone as an IP phone. This will save you a considerable amount of money when it comes to the purchase price.

In such a case, your provider will require you to pay a licensing fee for the softphones. The licensing fees for softphones will vary from one provider to another, ranging from $50 to $150. VoIP phones also referred to as IP phones are similar to conventional phones in appearance but are specifically designed for use on VoIP systems.

They feature a handset, keypad, Caller ID display and a keypad. As opposed to conventional phones, IP phones are capable of connecting to the internet through a built-in modem, Ethernet connector or Wi-Fi. Depending on the quality of the phone, you should expect to pay between $30 and $150.

Headset with Microphone

This is the more affordable option if you already own a PC. In order to receive and make phone calls from your computer, you only need to plug a pair of headsets that have a microphone on the computer.

The price of headsets varies from one make to another. The basic versions are available for as low as $20. However, the more advanced headsets come at a higher price point and may be sold for as high as $200.

Analog Telephone Adapters (ATA)

The other options would be to use a conventional phone for your VoIP communications. You will find this option to be affordable as it cuts on hardware costs, allowing you to use existing components. However, you will be required to invest in the right ATA device.

An ATA is essentially a device that you plug into a conventional phone in order to transform it into a VoIP phone. The price of these devices also varies exponentially with the basic ones costing about $10. Advanced models cost about $50.

Required Cables

With VoIP telephony, you will not require three to four drops per desktop (two Ethernet; two RJ-11). This will help you save about 40% on cable costs. In other words, VoIP requires fewer connecting cables, which can save you up to $140 in hardware costs.

Management and Support

For a traditional PBX phone system, you need one staff to manage the telephony system and other staff to manage the data network. With a VoIP system, these tasks usually merge. The convergence of infrastructure may make it feasible to reduce the internal staff required for support and management of the two separate infrastructures.

However, these savings may come with a high initial cost for training. Managing a converged network requires consolidation of skills. VoIP requires significant training for the data-networking group learning telecom skills, or for the telephony group learning data-networking skills.

One way you can estimate the training cost associated with VoIP is to compare a VoIP deployment to the rollout of other business-critical technologies.

For instance, the move from office memos and “snail mail” to an e-mail system was quite a leap technologically and required extensive training to deploy and manage. A VoIP deployment has similar characteristics.

Upgrades, Additions, and Maintenance

Every time a new user is moved, changed, or added to the voice network, an organization incurs a cost. This cost can be as high as $150 per move, add, or change. In one estimate, these actions accounted for as much as 14% of an IT budget.

VoIP uses IP protocols such as Dynamic Host Control Protocol (DHCP) to allow IP phones to automatically reconfigure themselves when moved from one location to another. Employees can move their own phones, potentially saving thousands of dollars every year.

Additionally, adding and changing phones become simpler, because they can often be accomplished via a software application instead of a visit by a technician. The enhanced mobility associated with the VoIP system will allow you to move your employees frequently.

With such a solution, you will also be able to align your employees with the ever-changing dynamics of your business.

VoIP Software Charges

At its debut, a major enticement for VoIP technology was “free phone calls. Like many other business owners, you must be wondering whether there is such a thing as free calls, right. Well, sort of. In the PSTN, the network is owned by the telephone provider.

When you make a call, you will be billed for the usage of this network. Long-distance costs can vary depending on the distance and the time at which the call occurs. Long-distance telephone calls can be a major line item in your company’s budget.

In a VoIP implementation, the network is an IP network, and calling distance does not matter. If you own the IP or are paying an Internet service provider (ISP) for bandwidth, then your VoIP will employ an infrastructure that is already paid for, so VoIP calls could be considered free.

Additionally, there are other VoIP Cost factors you should consider:

Long Distance VoIP Service

For the period VoIP has been around, there has been a considerable reduction in PSTN rates. Like many other business owners, you may have a hard time assessing the cost of long-distance service. This is mainly because different rate structures apply to different types of calls. If you call inside your local area, one rate may apply, whereas a different rate may apply to calls beyond this area.

Another rate may also apply to calls that cross national boundaries. Considering that the myriad wireless calling plans have free long distance, you may find it difficult to asses VoIP cost saving in your business.

A Look into Interoffice Calls

Nowadays, large businesses find themselves with offices or supply chains spread out over many geographical locations, within the countries or even across the globe. How much will the communication between those offices or business locations cost you? In order to work out this cost, you need factor in the number of telephone lines or how much call bandwidth you have going in and out of each office.

You also need to factor in your average long-distance bill. Based on your network configuration and the locations of the calls you want to make, long-distance tolls could plummet once you have implemented VoIP. After all, there is no distinction to be made on a data network between an international link and regional links.

Bypassing PSTN, the Cost-Saving Solution

The process of bypassing PSTN and making IP network phone calls is commonly referred to as toll bypass. This occurs when an IP PBX or just a PBX is connected to a VoIP gateway, which is then connected to an IP network. In such a case, call traffic goes from the PBX to the VoIP gateway rather than from the PBX to a PSTN switch.

By so doing, you will end up avoiding the toll of using the PSTN. As a result of the PSTN toll rate structure, companies with numerous sites internationally are likely to see more cost savings from toll bypass than companies that have most of their locations within the United States. However, the savings as a result of toll bypassing may not be immediate or automatic.

Again, it may not be advisable for your business to transit to VoIP entirely, or all at once. The PSTN lines may still be needed for some time during the migration phase. In some cases, you may need PSTN as your main fallback network. All in all, the long-distance costs associated with PSTN usage should decrease following the VoIP implementation.

Single Network Infrastructure

Maintaining separate network infrastructures will neither be simple nor cheap for your business. VoIP offers a single network infrastructure solution built within an IP network. So, how exactly does this result in cost savings?

• Reduced Network Ownership Cost

Rather than buying or leasing PBX and network infrastructure for PSTN calls, you may decide to spend the money on IP network infrastructure. Both voice and data traffic can take advantage of such enhancements. These savings allow VoIP to offer you a lower total cost of network ownership.

• Flexible Network Solution

You will find a single network is easier to expand and alter. For instance, you have 10 T1 links for your PSTN traffic, which can support up to 240 calls and a DS3 link for the data traffic. As you may be aware, a DS0 link that has 64-kbps capacity is the standard building block of your PSTN. A DS3 link, on the other hand, has a capacity of 44.736 Mbps

Supposing that the T1 links are operating at maximum capacity, but the DS3 link still has plenty of bandwidth available. As the business grows, purchasing another T1 link for the increased call volume may not be the right solution. Instead, you should consider implementing VoIP. This will allow you to use the available capacity on the DS3 link for additional voice traffic.

• Reduced Network Ownership Cost

VoIP implementation has been proven to lower the cost of network ownership. For instance, what is your current per-user cost for phone service? How will adding a new user affect this rate? In order to add an additional user to a traditional PBX system, you may have to upgrade to a new PBX with a bigger capacity.

This may, in turn, increase your per-user cost of the system. By contrast, most campus LANs have nearly unlimited capacity, allowing you to add new VoIP users at a reduced per-user cost. Incremental costs also extend to the addition of new corporate offices, which can often be easily and cheaply added to a VoIP-enabled data network.

• Reduced Wiring Costs

By allowing you to use a single network, this solution allows for reduced wiring costs. This is particularly the case for new constructions. Instead of wiring for both data and voice, will only need one set of wiring. Wiring for both voice and data may be accomplished in different ways, so you will need to proceed carefully.

For example, you do not want your IP phone and computer to share a hub; in the event that you run a database query while you are on the phone. This may result in reduced call quality.

• Centralized Call-Processing

Centralized call processing enables a business to consolidate its core call-processing equipment into one or several sites. Afterward, you will be capable of extending voice services to each site within the organization. For many firms, this enables them to remove PBX and key systems from each site. It will also allow you to provide similar and often superior features and functionality to the branch sites.

Centralized call processing is a compelling method to reduce equipment, maintenance, and support costs. It also enables many organizations to standardize the voice services that they deliver to their employees. Instead of requiring internal or outsourced resources to manage each PBX or key system, a centralized team can now manage the entire organization’s voice.

• Wireless Infrastructure

A single network makes it easier for you to incorporate wireless infrastructures. Because wiring a home or office for a data network can be expensive, many organizations are opting for wireless networks that apply 802.11 technology.

These wireless LANs support IP network applications readily, making VoIP easy to implement in this type of environment, but there are tradeoffs with regard to security and potential performance issues.

Number of Features and Capabilities

As you may have realized, most of the best VoIP vendors offer different pricing structures, featuring a number of pricing plans. In addition to calls and messaging, VoIP networks are known to support a myriad of other capabilities.

The more the advanced the functionality of your preferred VoIP plan, the costlier it will be. In order to save more on your VoIP implementation, it is advisable to go for just the features you need. You may then scale the system up as your business grows.

Ready to Get a VoIP Phone System?

In order to understand how much you will pay for migrating to a VoIP phone system, you need to factor in the various costs.

In this case, you need to consider the software, hardware, headcount and associated costs into the process.

While this is the case, VoIP phone systems are known to be an affordable option, allowing small businesses to save about $5,000 every year.

Based on statistical findings, implementing VoIP can result in annual productivity gains of $480 per user.

With such cost savings, a business with about 50 employees can save up to $24,000 a year by switching to VoIP.

While the initial cost of implementation may be relatively high for medium-sized to large companies, VoIP offers a great ROI in the long run.

However, if you need a traditional business phone system, check out our buyer’s guide.