If you’ve ever worked for any enterprise, you’ve used a private branch exchange (PBX). You’ve told people “dial 9 to get out” when making calls outside of your building. You’ve had a four digit extension that was connected to your desk after a caller dialed your business. You might not realize how much those PBXs cost to own and operate. They were labor intensive to maintain and weren’t cheap to acquire. In fact, most legacy PBX systems required a team of telecommunications leaders and maintenance staff to reorganize the system anytime a person moved desks.


Those hefty systems are quickly becoming obsolete. Now, most big businesses use hosted phone systems. In other words, the whole PBX is operated virtually, requiring no hardware costs on behalf of the business, other than the headset itself. It sounds like a perfect solution, but like every piece of the network infrastructure, hosted phone systems have their own strengths and weaknesses. To learn more, check out our list of pros and cons of hosted phone systems.


Pros of Hosted Phone Systems

• Upfront Costs. The cost of buying all of the PBX hardware and establishing a physical system is significant. In fact, it is so costly that most small businesses just can’t cough up the money. Many businesses forage on with highly unstable phone systems because of the cost of replacing it. On the other hand, hosted business phone systems do not require purchasing hardware and virtual phone system installation is often included in the service agreement, so they cost very little to get going.
• Flexibility. The cost of expanding hosted phone systems boils down to just the cost of the headset. If you are a startup, you can easily and inexpensively start with a few phones, and as your business grows, adding more lines is as easy as the click of a button, literally. When you relocate, nothing has to change about your PBX; when you plug your phone into your computer at your new desk, it functions exactly the way it did at the previous. You can even easily work from home while being plugged into the phone system.
• Ongoing Costs. When you use a hosted phone system, you don’t have to keep a phone guy around to run it. Maintenance and support are included in the service agreement with the provider. Also, since you are the end-user, and not the owner, of the phone system, if something breaks, it’s not money out of your pocket.




• Quality. If you’ve ever been on an international phone call, you know how poor the sound quality is. There is an echo and a delay and you can almost here the distance. Not so with a hosted system. Just as you can Skype, Google Hangout, or Facebook Chat with anyone all over the globe instantly, the sound quality of talking on the phone over the internet is equal to talking to your next door neighbor.

Cons of Hosted Phone Systems

• Reliability. When your phone is hosted online, you’re sort of putting all your eggs in one basket. If your internet goes down, your phone does also.




• Cost of Ownership. When you have a physical PBX, you have invested in an asset that you own. The longer you use it, the lower the cost of ownership is. For example (using make-believe round numbers), if the PBX cost you $1 million and you use it for 10 years, it cost of ownership is $100 thousand per year; after 20 years, it would be half that. However, since a hosted phone system is a service, it is an operational cost rather than an asset. If your fixed service rate is $100 thousand dollars per year, it doesn’t matter how long you have it, the annual cost of ownership isn’t changing.




• Locked-in Agreements. Many hosted system providers put terms for how long you have to use their systems in the contract. If you don’t like their service, you might be unhappy for a long time. It is important, before signing the dotted line on a hosted phone system, to interview several providers and put care into the one you choose.

Do you have any questions on hosted phone systems? Please share in the comment section below.