Total Cost of Ownership Chart for Business Phone Services

TCO Question Mark On The Dollar Background

You know it’s time for a new phone system, but how to choose from the wide array of options available? Where do you start? Is a traditional on-premises business phone, cloud-based communications, or a hybrid solution right for your business?

Too often, new Unified Communications solutions are judged in terms of the cost of initial install. Hardware, service fees, software licensing and other system components become the basis for a bidding war. Additional expenses and operating costs – system maintenance and management, upgrades, infrastructure requirements – are frequently overlooked.

When making the decision between an on-premises traditional phone system versus a cloud-based communications service versus a hybrid solution, your due diligence should include an accurate total cost of ownership (TCO).

TCO Comparison Chart

  Cloud Traditional
Expense OPEX – lower cost, lower risk (future-proof) CAPEX – risk of obsolesce in rapidly changing technologies
Deployment Low initial cost with minimal hardware investment Higher install cost, risk of hardware malfunctions, quality of contractors employed
System Updates & Upgrades Easily add new features as acquired/developed without disrupting operations IT teams typically rip & replace existing systems – downtime & troubleshooting required
Infrastructure Requirements Responsibility of service provider Requires proprietary hardware, maintenance, management and administrative staff
Licensing Typically per-user charge; all inclusive in monthly fee Typically granular; OPEX costs for software licensing & upgrades
Flexibility & Scalability Typically per-user charge; easily add or remove seats as required; experiment with new features without risk Requires guesswork – typically results in paying for unused capacity or shortages during key events
Disaster Recovery Typically includes redundancy and multi-site backup. Internet access grants complete system access & capabilities On-premise redundancy is expensive & is not effective in the event of local disasters
Total Cost of Ownership Substantial savings Higher costs – especially considering the likelihood of unexpected installation difficulties and technology changes

True TCO

At the current pace of change in communications technology, buying a traditional phone system can be a risky proposition. If you do not want the risk and high capital expense of purchasing a traditional system, a cloud-based communication solution is a viable alternative. It removes the risk of early obsolesce for your investment.

With a cloud solution, the infrastructure investment is carried by the provider. Maintenance is handled in the background and included as part of your subscription price along with 24/7 support and system monitoring.

A cloud-based solution shifts the investment in a new phone system from a significant capital expense to a monthly operational expense. Cloud provides organizations with the ability to deploy advanced features – IVR, mobility, presence, conferencing, and even a contact center – with minimal initial capital expense. Cloud greatly reduces the upfront cost for both deployment and implementation.

Once all cost factors are included – carrier fees, power, insurance, maintenance, staffing requirements, etc. – a monthly cloud-based service can become surprisingly cost-effective compared to a traditional phone system.

Flexibility & Scalability

Unlike a traditional, on-premises solution, cloud offers flexibility. You can easily adjust the number of users, removing the guesswork of future requirements and thereby removing the expense of unused capacity. With a cloud solution, you only pay for the services you use, adding or removing users as your business requires.

Disaster Recovery and Business Continuity Built-in

Cloud communications solutions typically include geo-redundant data centers and multi-site backup as part of the service. Internet access throughout or after a disaster provides access to your communications system, complete with messaging, records and data. Similar capabilities with a traditional on-premises phone systems are cost-prohibitive for most businesses save the largest enterprises.

TCO – A 5 Year Plan

When comparing unified communication systems, be sure to include a comprehensive, multi-year TCO as part of your due diligence. What frequently seems like a bargain today, can become a burdensome, unnecessary business investment tomorrow.

Visit the UNIVERGE BLUE Resources webpage to discover more about cloud-based unified communications or download the free white paper: The Case for Cloud Communications.