Does a Hosted PBX Make Sense for Your Business Phone System?

Updated: November 25, 2009

Two critical considerations for those considering hosted PBX solutions are voice quality and pricing. "The quality of hosted providers varies significantly and depends on how large the hosted company is [and] what regions are covered by the provider as well as the type of voice and data packages that are offered," according to Focus telephony analyst Carly Wild. "I suggest looking into hosted providers that offer nationwide support or are well known in a specific state or region" important to your business, Wild added.

Call quality also depends upon the provider's data infrastructure. "When evaluating different hosted PBX providers, it is important to ask about their data centers. Larger companies usually have several different data centers located in various areas of the state or the nation for redundancy purposes. If one of the servers fails, your service will be automatically routed to another up and running data center. Companies that are smaller sometimes don't have the infrastructure or money to support several different sites so making sure that they are both reliable and redundant is something to look out for, Wild said.

Voice quality also depends on how much bandwidth you have supporting your phones. "Companies [that] use hosted VoIP usually use [all or part of] a T1 [high-bandwidth connection] to run their phone lines over as it ensures there is enough bandwidth to support all of the phones. Whichever company you sign with will perform a speed test to make sure that the bandwidth you have at your company can support both data and voice traffic. If your bandwidth is insufficient, the hosted provider will make recommendations accordingly," Wild said.

Beyond call quality, cost is a key concern for those considering hosted PBX solutions. And as Focus community members have found out, pricing can vary considerably depending upon the features your company needs and wants.

Depending upon the chosen provider, "[quoted] prices will vary from [approximately] $19 to $45 per seat [but total] monthly costs could range from $150 to $300, give or take, plus hardware and set-up fees," according to Focus community member Lawrence GG Brown. Variables include calling plan options, desired features and whether a company chooses IP telephones or so-called "soft phone" client software running on users' computers, Brown added.

"Most [providers] offer unlimited domestic local and long distance calling plans. If you know your companies' calling plan needs or habits you can optimize your economics," Brown said. He added that prospective users should also "see if there are other applications that tie into the hosted PBX platform," such as hosted collaboration or CRM services, to further enhance the business value of the investment.

"Everyone has different pricing models, and varying ways to get you to spend more," said Focus community member Carlos Alvarez. "Besides different monthly packages, some charge more or less for the install then reflect that [in] the monthly charges."

Another factor affecting pricing is the type of Internet connectivity and who provides it. "For a small system, we almost always go with generic small-business Internet like DSL, and it works fine with 99% uptime and [acceptable] call quality. When a customer asks us for dedicated connectivity with [a service level agreement or SLA], it [adds] $190/month" to basic pricing for a 2-megabit-per-second symmetrical connection and a "100% [uptime] SLA," Alvarez said.

"As with everything, the devil is in the details," said Focus Expert and consultant Bil Moore. In addition to accurate determination of needs, users must also decide how much downtime their businesses can really tolerate or afford. "99% uptime sounds great, but on the flip side, 1% downtime equates to 87 hours of downtime per year. If those all happen during business hours, that's 10 full days per year that your customers can't get in touch with you," Moore warned.

After further review, you may decide that managing a hosted PBX, the required Internet connections and multiple telephone sets is more than your company wants or is able to do. In such a case, it may be worth considering so-called "virtual PBX" services or some other hosted solution managed by a provider. Such a company can be "a one-stop shop for all of your IT needs," including hardware and management, Focus analyst Wild said.

Focus community member Martin Sunstrum also suggests considering another "no-PBX" option from a company called Konnect. "[N]o PBX or hosted service is required. Just purchase the high-quality Konnect desk sets for $299 [each], and you can effortlessly tie multiple offices together." Sunstrum added that this solution supports both VoIP connections and landlines, which he still recommends to those who want "no-worry voice quality."