Figuring out Total Cost of Ownership for an IP Phone solution

For more than a decade companies large and small have been taking advantage of the new IP-based communications solutions.  Being able to unify all your communications—voice, e-mail, Internet and more—delivers a wide range of advantages. But do those advantages really put dollars on your bottom line?  What is your true total cost of ownership (TCO)?

Using years of data to collect on thousands of IP implementations, the consulting firm Nemertes has come up with some answers.

Savings —IP telephony does produce some real hard dollar savings that you can take to the bank:

  • Wiring: By making it possible to consolidate Ethernet connections, IP systems typically deliver savings of about 40% on cabling costs in new buildings. Smart use of WiFi phones can cut the costs even further.
  • Administration: As a company grows and changes, the office communications system inevitably needs some TLC, e.g., moving, adding or changing extensions. IP-based systems are much less expensive when it comes to day-to-day administration. According to Nemertes, many companies have justified their entire IP telephony rollout on administrative savings alone.
  • Conferencing: Because IP systems have the ability to route a single call to multiple destinations simultaneously, this can eliminate the need for third-party conference call services, delivering a significant savings.
  • Centralizing servers:  By centralizing servers at the data center, organizations report savings in the number of servers they need to buy, along with reduced tools and resources to manage applications such as unified messaging, conferencing, and even the communications system itself.
  • Connecting offices: If you have multiple offices, linking them via SIP trunks as opposed to traditional PRI lines can save about 40% off the monthly circuit costs, though this varies based on calling requirements and the existing architecture.
  • Mobile costs: Companies with many mobile employees eliminate roaming charges by routing mobile calls through the IP system (typically this involves first calling a local number and routing the call from the IP PBX through the corporate WAN).
  • Staff: Many companies see savings in support staff, (i.e., using the automated attendant to replace a receptionist.)

Costs—IP systems aren’t all a one way street to savings—there are some extra costs.  According to Nemertes:

  • Getting started with IP telephony takes more effort—implementation costs during the first two years run higher than with traditional communications systems.
  • LAN upgrades –If you don’t have Power-Over-Ethernet switches on your LAN, you will need to get them. IP phone deployments typically require Power-Over-Ethernet switches to function in the event of a power failure. This can be an extra cost
  • Many companies don’t budget for voice quality management and monitoring tools, which Nemertes says is a mistake. These management and monitoring tools cost more upfront, but pay for themselves in efficiencies over the long run.

Softphones: A Killer App?
A key advantage of IP systems that is increasingly coming into focus is the ability to equip employees with a softphone. A softphone essentially duplicates the capabilities of a deskphone on the screen of a PC or laptop. You get a dialpad, buttons for Hold, Conference, Transfer, etc., plus you can easily see a directory of contacts. Add a USB headset and you have everything you need to handle all your calls—no need for a phone. In addition to being less expensive than a deskphone, the softphone/headset is ideal for employees who are on the move a lot and also makes it unnecessary to upgrade LAN switches for PoE. A big variable, however, is the cost of the headset. Some companies are fine with a $20 to $100 headset; others say they can only get by with a much more expensive model.

Which Vendor: 
The Nemertes report provided some vendor-specific cost data, primarily for Avaya and Cisco, the only two companies for which it had enough data. Based on several scenarios, Nemertes found Avaya’s annualized cost savings to be consistently higher than the competition. The Nemertes study is available at: We recommend trying both Allworx and SNET Hosted Solutions in calculating total cost of ownership. In case you’re interested, give us a call or send us an email – and we would be happy to work with you on your solution!

About Vic Levinson
Telecommunications and IT professional with over 27 years experience in Business Technology Solutions. Specializing in managed technologies solutions : hosted VoIP, cyber security, help desk, remote monitoring and maintenance, cloud work space and - the works. Founded Prime Telecommunications in 1993 and providing business communications solutions. Cloud Applications- everything from hosted network security, hosted Disaster Recovery, hosted printer management, data centers and colocation solutions for businesses.

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