Exploring Hosted VoIP for the SMB in the new Economy


The economy really threw businesses for a loop. In our industry of network appliances and big hunks of telecom technology, moving metal is essential to the bottom line. In the end, however, many companies saw an opportunity to switch firms over to all-IP voice without having them buy up all that VoIP equipment we know and love. In a time when capital is hard to come by CAPEX savings are king. What better way to save on CAPEX than to go for a hosted solution?

Sure traditionally, premise-based VoIP meant more control and possibly long term savings, but most hosted VoIP solutions today are highly controllable from the home office and the speed at which upgrades to technology are taking place is beginning to negate the idea of long term cost savings. If you have a hosted solution, the company providing the hosting can upgrade the technology and pass those upgrades on to you without your company having to trade out its just paid for boxes every few years.

According to Frost and Sullivan's report "North American Hosted IP Telephony Service Markets," close to 1 million installed hosted IP telephony lines were installed at the end of 2008. The firm expects the number to grow to about 3.6 million lines in 2014. With numbers like that, it's worth looking into why some companies are pursuing this route into hosted-IP communications.

Equipment Cost Savings

On Premise VoIP means that a company needs to buy all its VoIP equipment upfront. In our on-demand culture, the sticker shock for getting started might be too much. The capital expense of this route is usually cost prohibitive for SMBs. Hosted systems usually require very minimal equipment and often run right through a company's existing network. Some systems are plug and play with all major hardware back at the host's facility configured and ready to go. The calls will be routed over the PSTN to the host's PBX system. Hosted VoIP means that SMBs once priced out of the enterprise VoIP market can now get a top of the line call (over even unified communications) system almost as instantaneously as a handshake.

Maintenance Savings

In addition to up front costs, there is the issue of man-power. On-premise systems need to be installed, configured properly and maintained on a day to day basis by an in-house IT staff. On-site experts who can deal with the equipment are usually needed to keep things running smoothly should anything go wrong. Usually for enterprises, this is not a problem. Additionally, some equipment providers will also offer service contracts to have their experts on call to fix issues. This of course might mean a delay in service as technicians need to get out to the premise to deal with any emergencies. Managed VoIP solutions could also offer a way to deal with this--being sort of a compromise between fully hosted and on-premise VoIP, a company can have some continued dealings with the VoIP equipment provider to help maintain and configure the system. With a hosted solution, paying a team of IT guys to keep the inhouse VoIP system running is no longer a concern. The host service provides all the man power and pays all the maintenance expenses you might normally accrue. Ideal for the SMB with a tiny or non-existent IT team, hosting puts all the maintenance costs into a manageable monthly subscription fee.


For the SMB, hosted VoIP has another added bonus as it means flexibility in the future. Spend a lot up front means sunk costs could sink your growth. Previous investment in a system that might now be too small for your growing company may lead to efficiency as the cost-savings of sticking with the paid-in-full system might impede the process to upgrade. Sadly, that long-term investment and cost savings perceived by buying a system up front might actually hold a company back when they really need to expand their capacity. As technology gets faster, more efficient and higher quality each year, the idea that something will be worth what you paid for it a few years from now might no longer hold water. With hosted VoIP, increasing capacity and growing in capabilities is often as easy as re-evaluating a contract or checking a few boxes in the configuration software. Need to add seats? Just notify the host and they'll make sure you have the capacity. Often all that will be involved is an proportional increase in the service bill.

This added flexibility is actually something most businesses could benefit from. As the economy fixes to recover (or falter again?) businesses need scalability to adapt based on whatever way their checkbooks will allow. If the economy gets tight they need to be able to cut back on bells and whistles or even cut back on seats due to downsizing. If the economy bounces back, they might hire more people and need to expand their VoIP system.

Matthias Machowinski an analyst for enterprise voice and data at Infonetics Research said of recent findings: "From our IP PBX survey, it appears that businesses are increasingly embracing a hosted services model, as their capacity needs will depend on how robust the economic recovery is, and hosted services allow them to more easily ramp their capacity needs up and down without a huge cash layout for equipment." Hosted VoIP provides this flexibility in uncertain times where the old CAPEX heavy on-premise system might just be a cumbersome burden when the economy calls for lean and mean companies that can adapt.