Old School Local PBXs Speeding Towards Obsolescence with Hosted VoIP

Author: Rosa Lear, Director of Marketing, Edgewater Networks

EWN_Logo_1SEP11When the internet came of age in the mid 90’s, speculation on its ability to disrupt the business landscape was rampant. The potential of this global network to change the way we communicated, shopped, and watched movies and television was impossible to ignore.

At the same time, there was concern over a coming digital divide—those who could afford high speed access vs. those who couldn’t—and how that divide would impact small businesses and consumers. But the story of any technology’s high cost has been the same one throughout history: what goes up must come down. And so it went with computers and digital connections.

Today, most teenagers have a computer in their pocket more powerful than the one Bill Gates had on his desk in 1995, and they don’t even need wires to download at speeds up to 10 times faster than an old-school T1 internet line from the phone company. Even the smallest of businesses (to say nothing of home connections) can get cable connections with speeds 25 to 100 times faster than the $1,000 a month T1 connections of yesteryear, and for less than 10% of the cost. More than any single protocol or app or website, the ubiquity of high speed connections has completely changed everything.

Everything, that is, except telephone service. For any number of reasons—cost, complexity, or simply complacency—an estimated half of all small to mid-sized businesses are hanging on to their legacy phone systems like PBX (private branch exchange), or even POTS (plain old telephone service). For many, that still means RJ45 connections for each phone, which then feeds the proverbial rat’s nest of wires terminating at a punchdown connecting block. That last sentence was boring and jargon-y enough for the average business owner to cover their ears until a new topic comes up, which may explain why there’s still such resistance to newer VOIP systems.

The idea of ripping one set of wires out of the wall to replace with another set definitely sounds like a  costly and time consuming project. And as various PBX systems hit their end-of-service-life, small business owners are wary of investing in an entirely new batch of replacement hardware that will also be obsolete one day. And this where the disruptive power of low-cost, high-speed internet access comes in.

The fact is: most businesses already have the bandwidth to support switching over to a thoroughly modern, hosted-in-the-cloud Voice Over IP system. A lower tier of cable service, say around 25 Mbps for upload and download, is fast enough to support 20 – 25 concurrent phone calls with enough speed left to endlessly loop cat videos via YouTube. This is only the beginning of the impact.

Local PBX vs. Hosted VoIP – Significantly Lower Costs

 It’s hard to draw a direct comparison between the monthly costs of a local PBX vs. a hosted VOIP solution, as it all depends on the features, service agreements, and the provider of each service. In general, hosted VOIP involves a lower monthly fee, but—just to be fair—let’s call it equal. When it comes to upfront costs, though, VOIP-as-a-service blows away the competition.

Factoring in hardware costs (the hardware itself, plus the installation), along with the wiring and the man-hours to run and terminate all those cables, plus the new phones to work with the system you’ve bought, you’re looking at costs between $500 and $800 per user. For a 25 user installation, that’s between $12,500 and $20,000 before you’ve made a single phone call. With the VOIP option, the phones are all you buy, which will run you between $100 and $250 each.

 Even More Savings

 Technology is a double edged sword: it makes day-to-day operations easier, but when something goes wrong the fix can get complicated. And that’s assuming you already know what the problem is; troubleshooting weird issues can be a real time-sink.

With a locally installed PBX, the problem might be anywhere: bad wires in your walls, broken handsets, server errors, problems at the telephone company itself—the list goes on. If you’re big enough to have IT staff, they can probably diagnose and fix internal issues, but anything else is going to require a service call from an outside technician. If you have no IT staff, everything requires an outside technician—and outside technicians cost money. If the problem exists somewhere in your friendly local telecom multinational giant, expect to spend hours to days trying to get in touch with someone who can diagnose and fix the problem and remember that outages can end up costing you more than just what you paid to a technician to fix it.

With hosted VOIP, all you need to worry about is your internet connection and phones. Everything else is being run at a datacenter somewhere else, where problems are often transparent to the user. Without getting too technical, the transparency to users is enabled through the portability of software that is housed on servers in the providers’ data center, allowing providers to quickly move over to a working backup server if the existing one goes down with little to no downtime. It’s entirely possible to have a complete system failure and never know it happened, since a new instance of your virtual PBX will pop up somewhere else in seconds to minutes.


 The virtual nature of your telephony infrastructure means it’s simple to add more features as you need them, without requiring downtime or hardware upgrades. You can sign up for a service with minimal features and then grow into the system you need as necessary.

 Happier IT Staff

 It’s not a big secret that IT folks aren’t crazy about dealing with phones. That’s because, with a local PBX, much of the system could be out of their control, so they’re the ones that have to sit on hold waiting to talk to someone at the phone company. The other reason is that no one ever goes into an IT career to monkey around with old technology. Asking an IT person to fix a phone system is like asking a Porsche mechanic to fix your two stroke weed-wacker.  Sure, he can figure it out, but he doesn’t really want to.

In certain cases, there can also be a domino effect to the efficiencies and savings with a hosted VoIP. For sales-based businesses, for example, a large portion of the staff (the sales team) is seldom ever at the office. They’re on the road, meeting with clients and prospects alike, and when they’re not traveling they can cold call or follow up with their emails from anywhere.

If a large portion of your workforce isn’t in the office, it doesn’t make sense to lease a space with enough room to accommodate them all. They can set up their phones at home, or in Starbucks, and always be reachable through your company’s main switchboard. Someone in the office can transfer a call to them with just a extension number, and the right phone will ring no matter where it’s connected. It’s actually difficult to call hosted VoIP a disruption, a word which implies some kind of status quo has been disturbed.

The implementation of this technology is, if anything, facilitating better and more efficient ways to communicate, leaving more time and money to focus on the core business.

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