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Wholesale VoIP Feature Article

Do the Economics of VoIP Work for All SMEs?

August 24, 2011
By David Sims, TMCnet Contributing Editor

Noting that it’s expensive for an SME to move from a legacy PBX (News - Alert) to a completely new VoIP system, author William Flanagan explains in a recent article on Telecom Reseller (News - Alert) that according to research he’s seen, saving money in such an undertaking happens under certain conditions, not in all cases.

Don’t listen to anybody who tells you that ripping out what you have now and replacing it with VoIP is a no-brainer, money-saver. It could very well not be, if the economics don’t work for you.

The economics often don’t work for you if you’re operating your own servers for VoIP, if you have a fairly large number of users – “more than 1,000 makes the economics work better” as it pushes the upper edge of SMEs – and, among other conditions, if you have frequent use of outside conference bridges, “which can cost $3 to $10 per hour for each participant.”

Flanagan does a good job breaking it down to the hard numbers. Using his own experience, he says that 10 years ago their PBX cost about $5,000, “that included the switch, which powers 12 telephones and two door boxes, hands-free intercom service to outside doors. Oh, and installation, too.

Putting his finger on what’s wonderful about such a setup, and why many companies are unwilling to change, as Flanagan says, “the old PBX just sits there and works.” With VoIP, yeah it’s the latest ‘n’ greatest but “software needs regular updates, both operating systems and applications.  When some moving part breaks (expected life of a continuously run hard drive is about three years, right?), you need someone who can fix it fast.  That’s what the annual support contract does – for $700 to $1,000 per year in our case.”

And PBXs rarely have trouble with malware, right?

In fact, Flanagan figures the price of the new VoIP system “more than doubles.”  So why would anybody do it? “For the features,” he says.

Invoking Moore’s law, Flanagan notes that processor capacity increased by a factor of more than 30, perhaps 60, and while “voice mail and auto attendant were options with the PBX, too expensive to justify at the time, both features are included in almost every VoIP system at little or no additional cost.”

Features such as presence, unified messaging, and mobility “favor VoIP” as well, and there are ways to generate savings and improve productivity using VoIP, which you really can’t with your traditional phone service.


Want to learn more about the latest in communications and technology? Then be sure to attend ITEXPO West 2011, taking place Sept. 13-15, 2011, in Austin, Texas. ITEXPO (News - Alert) offers an educational program to help corporate decision makers select the right IP-based voice, video, fax and unified communications solutions to improve their operations. It's also where service providers learn how to profitably roll out the services their subscribers are clamoring for – and where resellers can learn about new growth opportunities. To register, click here.


David Sims is a contributing editor for TMCnet. To read more of David’s articles, please visit his columnist page. He also blogs for TMCnet here.

Edited by Carrie Schmelkin
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