moneyOne of the first questions decision-makers ask us is: How much should a hosted phone system cost?

This is a difficult question to answer and we will try our best to explain some general guidelines. Technology is in a state of constant change, making it very easy to get left in the dust of today’s business environment. Hosted technologies, “cloud” based services, are the new standard for managing technology, phone systems are no exception.

Let’s Make It Easy

Phone systems, including Hosted Voice over Internet Protocol, (we’ll call it VoIP), are incredibly complicated and can easily confuse individuals from IT right up through the C-Level. People are very busy and frankly don’t care to spend time learning the granular details of a phone system.

The purchase of a phone system is analogous to the purchase of a vehicle. With so many choices and features the price range can vary drastically. A basic Ford SUV can start at $22k versus a basic BMW SUV can cost $55k to $100K depending upon the options and capabilities. Considering the average person will trade-in or sell their car within the a few years of their purchase, why do so many elect to get a variety of options or upgrades? Most people know from their experience the importance of getting what they want the first time so they have no regrets in the future. According to the US Census the average American spends 25.5 minutes a day getting to work, that is a 112 hours a year in your car! Which makes them want the vehicle that will provide them with the comfort, reliability, ease of use and quality they require.

Many of these principles apply to the business shopping for a telephone system and service. The average worker spends 5 hours a month on the telephone. The average call center worker could spend 5 to 7 times that per month on the phone. The top two priorities for companies that have customer contact centers? Improving the customer experience and agent productivity. Decreasing cost is third on the list.

What is a Hosted Phone system?

Basically all the software and hardware required to make a phone system work is hosted outside of your office, in the service provider’s internet cloud. This includes the call control, call center application and voicemail system. Essentially making your hardware needs very minimal, an IP Phone, Internet Router and PoE switch. Since the service is accessible over the internet you can have phones most anywhere you have internet access.

What to Ask Yourself

Many people focus on the initial cost or finding the least cost provider. Decidedly, nobody should walk into a car dealership asking, “What does a blue one with 4 tires cost?” Similar to asking, “What does a phone with dial tone cost?”

Decision makers’ answers to the following will begin to clarify a budget for Hosted VoIP:

  • How critical are phones to our business?
  • Will they be available in the event of a natural or other disaster?
  • What does our business need from our phones?
  • How will a hosted phone system improve the business continuity?
  • How many users (multiple locations included) do I have that need a phone?
  • How will softphones help with efficiency and productivity?
  • Will having voicemail come to your email inbox create efficiency?
  • How fast can the system scale up or down to meet the growth needs of the business?
  • How many conference rooms do we have? Size? Do they need phones?
  • Will video calling play a role now or in the future for the business?
  • What type of functions do these users require? Example: Receptionist requires more features than a conference room phone.
  • How many people will be/are on the phone at the same time?
  • What is my call volume and how much is inbound vs. outbound calling?
  • Will there be a need for call center and reporting of agent productivity?
  • Is international calling business critical?
  • What is my current internet connectivity/bandwidth?
  • What is the age of my current network gear? Can it be reused?

Perhaps you are wondering about the questions regarding individual people. Hosted VoIP is very different from a conventional phone system in that it doesn’t use any phone lines. The phone calls are transformed into data and run over your business’ local area network (LAN) and internet connection. Phone calls are the same as uploading and downloading information from the internet, but the phone data gets secure immediate priority. This is to ensure perfect clarity and call continuity. Lastly, answering the bandwidth question is critical. If bandwidth is insufficient with web browsing it results in slow speeds, if it’s insufficient with Hosted VoIP, it can result in dropped calls. By answering these questions without becoming a phone system aficionado, we can laser in on a budgeting strategy.

Your Users & How They Differ

Each individual in an organization has a unique task to complete while their phone license types can be simply categorized. Those with the highest usage and feature requirements cost the most, example being a Call Center Supervisor or Call Center Agent and the road warrior or the general office personnel. Then, as functionality requirements lessen the software licensing prices moves down a sliding scale. A lower functioning user on the opposing end of the spectrum could be a “Break Room” user. This would cost much less as it’s essentially a phone with nothing but dial tone.

Brass Tacks


The licensing on the user types does vary quite dramatically from a high end call center user around $150/mo./user all the way down to $15/mo./user


Also known as “end-points”, vary just as much as user types. From colored video touch screen desk phones, to no screen at all, and conference room phones that vary to cover different sized spaces. The desktop phones we offer range from $150 to $625 with video capabilities and conference phones cover a gap between $500 and $1800.


These are the techno-goodies that protect your security, translate what you’re saying, into data, send it over the internet, and deliver it safe and sound at the intended destination. The typical solutions include an internet router that connects to the internet service and handles the security and quality of service at the location. The other component is the local area network switch which connects the phone and computers in your office. These switches include the ability to provide power to the phones and are referred to as “power over Ethernet” or PoE switches. The overall cost of hardware is determined by the number of users on the phone and data system. This cost can be expected from $75-$500 per individual.

Internet Connection

Back to the question concerning bandwidth and what is currently in place. Existing phone lines go away as the voice is turned into data traffic and now travels over the internet. We recommend Fiber Optic internet to all of our hosted clients along with a less expensive backup service to ensure a reliable and survivable service. Internet prices are the most variable of all things here and are determined by a mix of users, business requirements, availability, carrier, and geographic location. However, the majority of our clients have 2, sometimes 3 circuits ranging from $295/mo.-$3000/mo.

Making It Work

When buying, receiving, and implementing a new product or service there are always different schools of thought that define the process. The three we most commonly run into are as follows:

Fearless D.I.Y.

These are the individuals who feel they’ve gathered the facts about VoIP and can simply implement the system themselves. They are also most commonly the “commodity shopper” looking for a best price as they feel their knowledge and time are better used than investing in a third party resource. In this scenario, we provide the hardware, configure the software, and drop ship to a location where the individual who has taken the reins will perform their own installation, training, maintenance and management.

The Middle Man

The middle man has some knowledge of VoIP but understands the benefit of a third party resource. They know enough to understand what the system is capable of and their knowledge limitations. Here, we provide the planning, hardware, installation and training in this environment to help the customer ensure maximum efficiency from their employees and investment. The customer would manage their internet and connectivity.

Turn Key

This is the decision maker who wants the most reliable best fit solution; we excel in delivering to this profile. From the beginning, we are involved in architecting a solution to meet the clients’ current needs and future goals. We are considered a team member in this environment and build long-term personal business relationships. Aside from everything already described, this approach also includes current bill auditing, technology reviews, providing internet connectivity, and a management plan of action to ensure a reliable and survivable network.