For small-business owners concerned about communications costs, we’ll get straight to the point. You can improve call quality and save 68 percent over two years by using a virtual PBX system.
Upfront costs: Traditional vs. virtual PBX system
In upfront costs alone, the savings are staggering. For a business with 20 users, when you add up hardware ($6,500), setup and implementation ($1,000), phone costs ($3,000), and software licenses ($4,000), an on-premises PBX system will set you back as much as $14,500. With a virtual system, you only have to pay a one-time phone cost of approximately $2,000.
Approximate total upfront cost savings: $12,500.
On-premises hardware for PBX system
Let’s break it down even further and look at the individual estimated startup costs, starting with hardware.
Because virtual PBX systems are cloud-based, you don’t have to pay anything for PBX hardware or ancillary pieces such as server cards. (And you don’t have to wait for equipment to be shipped and installed, either.) The cost of a traditional system for 20 users is roughly $6,500. So you can keep that money in the bank as well.
Eliminating on-premises PBX hardware also eliminates long-term maintenance. Because you’re served from the cloud, your phone solutions are continually updated to take advantage of the latest technologies and additional features.
Approximate savings: $6,500.
One-time phone cost for PBX systems
For a business with 20 users, an on-premises PBX system costs an estimated $3,000 for phones and other equipment. Additionally, businesses are forced to anticipate future needs and pay for more capacity than they currently need.
By contrast, a business with 20 users using a cloud-based system can expect to pay no more than $2,000 for handsets and one-time licensing costs. VoIP systems are also eminently scalable, so if you need new phone numbers, lines, and extensions, expansion is easy and painless, and you can usually get them the same day you need them.
Approximate savings: $1,000.
PBX system setup and implementation
Here’s another $1,000 savings right off the bat. In a virtual PBX system hosted in the cloud, all of the work dealing with implementing a business communications solution moves off your plate and onto that of your provider. The only thing you may need to do is to install a new router. And because it’s hosted in the cloud, your new system can be up and running in minutes.
Approximate savings: $1,000.
PBX software licenses
More big savings here. You don’t have to pay for software licenses – which can cost as much as $4,000 per year for an on-premises solution.
Approximate savings: $4,000.
Monthly costs: Traditional vs. virtual PBX system
The following shows a sampling of the most common items that small businesses have to pay for on a monthly basis with a traditional, on-premises PBX system:
- Phone lines (internal and external)
- PBX server
- Management console
These and other assorted elements can cost a business with 20 users approximately $1,400 a month.
Cloud-based, virtual PBX systems require none of those expenses and are generally priced on a per-user basis. If you need 20 phone lines, then you will be billed for 20 users.
And most services also have tiered pricing based on the needs of each user. A typical provider will charge roughly $30 per month per user for standard service, which includes unlimited calls, unlimited text messages, phone rental, mobile apps, storage, customer support, and more. That’s $600 a month.
Approximate savings: $800 per month.
Business-class features for a PBX system
Virtual PBX solutions are essentially all-in-one bundled solutions, offering great convenience and ease of deployment. That means instead of having to adopt and pay for key features on a piecemeal basis, you get instant access to an entire suite of features. A typical cloud-based communications system will include:
- Unlimited local and long distance calling
- Unlimited internet fax
- Local numbers for each user
- Toll-free number and minutes
- Feature and functionality updates and upgrades
- 24/7 customer support
- Business SMS (not available in an on-premises PBX system)
- Audio conferencing
- Phone service
Ongoing PBX system management and configuration
Simply put, virtual PBX systems are designed for easy, cost-efficient self-management. On-premises solutions require IT support, which can be expensive if you don’t have these capabilities in-house.
Service contract for PBX systems
Cloud-based PBX solution providers typically don’t require service contracts. But with an on-premises PBX system, not only are long-term contracts obligatory – customers face paying extra fees for early termination.
Total costs: Traditional vs. virtual PBX system
When you calculate the estimated costs, there really is no argument about which is the right choice.
It all comes down to the bottom line: Over the course of two years, small businesses with 20 users can expect to pay approximately $16,400 for a cloud-based communications system – with the price of phones factored in. A traditional PBX system would cost you about $48,000.
Approximate total savings across two years: $31,600.
On-premises PBX system = $48K for 2 years vs. cloud PBX system = $16K for 2 years. See why small businesses are making the switch to cloud communications: Share on X
The future of small-business communications: Virtual PBX system
The benefits that traditional PBX systems once provided are now outweighed by major cost drawbacks and limited functionality.
Virtual PBX offers all of the benefits of on-premises PBX – including voice, fax, voicemail, conference call services, messaging, storage, etc. – along with complete mobile integration, business SMS, and online meetings with screen sharing. And as you can see, the cost savings are dramatic.
Learn more about virtual PBX from RingCentral and see how much your business could save using our phone solutions savings calculator.
(Additional RingCentral features include virtual call center, workforce management and IVR (interactive voice response).)
Originally published Aug 06, 2018, updated Aug 27, 2024
