If you receive errors when attempting to view this white paper, please install the latest version of
systems provide an easy way for small to medium (and even some large) businesses
to move to VoIP and get a wide range of new features and capabilities for their phone systems."
Source : VoIP-News
Hosted PBX Buyer's Guide for Small and Medium Businesses
Small and Medium Businesses is also known as :
Small Medium Business,
Small Medium Enterprises,
Small Medium Business Center,
Small Medium Business Research,
Medium Business Network,
Small Medium Business Portfolio,
Solutions for Small Medium Business,
Medium Business Provide,
Small & Medium Business White Papers,
Small to Medium Sized,
Medium Business Solutions,
Development Small Business,
Small Business Virtualization,
Vmware Small Business,
Small & Medium Business Store,
Small Business Community,
Support for Small Medium,
Small Business Internet,
Business Internet Wireless,
Start-up Business Solutions,
Bundled Services Business,
Small Businesses Need,
Small Medium Business Program,
Manufacturers Small to Medium,
Toolkit Small Medium Business,
Running Small Medium Business,
Mid-sized Business Products,
Medium Business Administration,
Small Medium Business Support.
Hosted IP PBX systems have changed how small and medium businesses
use their voice communications. They are the modern heirs to the
historic Centrex (Centralized Exchange) systems that were the ultimate
in business communications for the past thirty years. But hosted IP PBX
systems are cheaper and far more capable than their predecessors.
Modern hosted IP PBX systems literally deliver multinational enterprise
capabilities to even the smallest of businesses, often at a cost lower
than the far more basic systems they are replacing. This Buyer’s Guide
explains the Hosted IP PBX market and tells you what to look for in a
The bottom line with hosted IP PBX systems is that they provide an easy
way for small to medium (and even some large) businesses to move to
VoIP and get a wide range of new features and capabilities for their phone
systems. If upgrading from a traditional phone system, the savings can
be substantial and the new service will pay for itself immediately.
In this Buyer’s Guide you will ind details on what to look for, how to
buy, what you can expect to pay, and how to get the most out of your
investment in VoIP.
New IP phones are getting
sleeker and more advanced.
Hosted PBX Overview
A PBX (Private Branch Exchange) is essentially an automatic switchboard
for telephone systems. It provides the same basic functions for any
business or enterprise that the ranks of telephone operators with
handfuls of wiring plugs did in old movies. Those essential features
are to provide switching and connection between any two (or more)
Any system that does this automatically for telephone calls within an
organization is a PBX. The reason businesses move to PBXs is to avoid
requiring that every employee have a direct line to the public telephone
system, each of which incurs a connection and line charge. Instead, a
smaller number of lines get shared by all the users and managed by the
PBX. This saves money and is more eicient.
All IP PBX (Internet Protocol Private Branch Exchange) systems are
basically exchange and extension managers for calls based on the
Internet protocol – also known as VoIP and Internet telephony. The
essential advantage they ofer to small- to medium-sized businesses is
the ability to add features that have only been afordable or available
to large businesses up to now. VoIP and Internet telephony are usually
also more cost efective when looking at long-term operating costs due
to lower monthly fees and much lower costs to connect and complete
Hosted vs. Premise PBX
There are two primary types of PBX solutions for business: hosted IP
PBX and premise-based IP PBX. Hosted systems take most of the
switching and intelligence of the system and move it ofsite to a remote
location where it is managed by the service provider. Equipment at an
organization’s site is limited to the phones themselves, some dedicated
routing equipment and perhaps a switch to provide emergency access
to the older traditional TDM (time-division multiplexing) telephone
The reason businesses
move to PBXs is to
avoid requiring that
every employee have a
direct line to the public
each of which incurs
a connection and line
As a result, hosted systems are usually quicker and cheaper to install
and set up. They ofer a standardized set of services. Because they are
hosted remotely, there is less maintenance for a business and no need to
perform upgrades. The downside is that upgrades often must wait until
the service provider is prepared to ofer them. There is less lexibility
and fewer options in coniguring the system.
In contrast, premise-based PBXs require servers and more switches to
be located at the business site. The organization also has to be prepared
to install, manage and upgrade them. The downside is a higher startup
cost, the need to manage and maintain the system, and more diiculty
growing the system in the future. On the other hand, the organization
can upgrade to new features at will and has full ability to conigure the
system any way it likes.
You’ll want to select a hosted IP PBX provider carefully. Some specialize
in organizations of a particular size and can turn out to be unable to
scale up beyond a certain number of users. On the other hand, others
are unable to provide afordable service for a very small organization.
The typical scenario for a hosted provider is that there are no or basic
ixed setup costs, then the company pays a monthly charge per user. In
contrast, premise-based systems feature a larger initial cost that covers
servers, software, switches and gateways. However, after the initial
setup, ongoing costs can be much lower. It is also easy to predict the
cost of growth with a hosted IP PBX, but scalability and expansion can
be much harder to predict with premise-based IP PBXs.
The bottom line: hosted PBXs are best for small businesses but good
for medium-size businesses as well. They’re also good for businesses
with a lot of remote users or those that anticipate rapid changes in size.
Premise systems are best for large, stable businesses with predictable
volume that need custom features or to integrate the phone system
into multiple business operations.
The hosted VoIP market is a proitable one for service providers because
they can take advantage of rapid technological advancements in
IP networks and in the software and services that can run across IP
networks. In particular, hosted IP PBX systems are easy to scale and add
new services to. Despite that, the primary reason that small and medium
businesses are attracted to VoIP in the irst place remains cost savings.
The inherent advantage of completing all pure VoIP calls (both ends of
the call are on a VoIP platform) for free means that basic phone service
is bound to cost less using VoIP. In combination with already heavy and
aggressive price cuts on traditional phone services, new hosted VoIP
systems provide immediate cost savings and ROI (Return on Investment)
when upgrading from a traditional phone system.
Other main reasons that small to medium businesses are adopting
VoIP include access to features that are either not available or at all or
cost-prohibitive on older phone systems. Examples of these include
integration with desktop and oice software like Outlook, call routing
features, and IVR (interactive voice response) features, all of which used
to be extremely hard to set up and prohibitively expensive for small
In addition, hosted IP PBX providers have also eliminated a previous
big criticism of hosted VoIP by often removing the need to purchase
equipment – even the phones themselves – and instead rolling a lease
cost into the monthly per-user fee. Market research and surveys indicate
that lower total cost of ownership and better system management are
the primary factors for small businesses moving to hosted VoIP, but that
the technology is still misunderstood and early miscues such as poor
voice quality have led to misperceptions in the market.
The perceived wisdom about VoIP is that call quality is poor and the
technology is diicult to implement. But the truth is that more than
80 percent of small businesses surveyed have responded that they are
satisied or highly satisied with their decision to make the change. In
fact, modern VoIP systems have better call quality than regular phones
and hosted IP PBX systems in particular are extremely easy to install.
New hosted VoIP
savings and ROI when
upgrading from a
According to a new study from market research irm ABI Research, the
global market for hosted services will exceed $34 billion in 2012, of
which the North American portion (where most of the cable operators
pursuing the small business market are located) will amount to $11.6
Another market research company, In-Stat, believes that strong growth
in hosted VoIP will remain steady and will exceed 3 million seats in
service by 2010. There are currently about 400,000 seats in service in
the U.S., the majority in the small and medium-sized market.
The Beneits of Hosted IP PBX
The beneits of an IP PBX to any enterprise are similar to and diferent from
the beneits of a VoIP system in general. Downsizing to one network of
communication instead of two creates clear cost savings and a reduction
in basic infrastructure wiring. Furthermore, there are signiicant savings
from the lower basic cost of completing external calls. But IP PBX goes
even further, bringing greater beneits to enterprises with increased
manageability, upgradeablity, and enhanced feature sets.
The speciic beneits of an IP PBX over traditional phone systems or PBXs
include the following :
- A cleaner and simpler infrastructure.
- Lower operating costs.
- Simpliied equipment and maintenance.
- Uniied communications.
- Improved scalability and growth.
- Improved features for business operations.
||Special equipment is
required for more than three
||Easily conference large
||Very diicult to set remote
users up in systems if they
||Easily add remote users of
||Can only provide traditional
phone services, albeit
||Can be programmed
to provide internal and
external apps of all kinds.
||Dedicated voice lines
provide known quality levels
but no lexibility.
||More eicient use of
Residential and very low-end VoIP providers often claim to ofer
business-class PBX services, but except for very small organizations,
that just isn’t the case. Even the most basic businesses now require a set
of capabilities that would not have been possible even for the largest
corporations 20 years ago.
In addition to the default PBX features like call switching, call completion,
call connection, call termination and accounting, the following should
also be found in any hosted IP PBX system:
Call Routing Features
- Automated Attendant: An automatic system to answer phones
with the ability to build phone menu systems, add call menus,
transfer to voice mail and create lexible and programmable rules
to handle all of these features.
- Call Menus: Flexible call management menus with user selectable
options – a more advanced version of the traditional phone tree/
menu systems. A better-quality system will let you have multiple
sets of menus and even change them based on time or on
information gleaned from caller ID.
- Managing Extensions: Features to help the phone system
administrator, such as the ability to add new extensions, remove
unneeded extensions, change extension locations and much more
from a Web-based control panel.
- Call Forwarding: Automatic, programmed or manual call
forwarding to any number.
- Call Transfer: The ability to transfer calls between extensions
without going back to a central switchboard.
- Call Parking: Essentially a group hold – put the caller on hold in a
waiting area so that any other phone system user can pick the call
Messaging and Management Features
- Voice Mail and Voice Mailboxes: Any IP PBX should allow an
almost ininite number with far more lexibility than regular phone
systems – more advanced features would include the ability to
record all incoming and outgoing conversations automatically.
- Call Hold: Placing callers properly on hold with no drop of in
queues with user selectable hold music and programmable
options about handling hold time length.
- Conference Calling: Handling multiparty conference calls,
internally and externally.
- Web-Based Management and Administration: To make it quick
and easy to manage your phone system directly from a Web
browser – this can include the ability to add coniguration and
management functions as well.
- User Directory: Some form of user directory and address book
that is part of the phone system and is centrally updated.
Other IP PBX features can get extremely speciic, and the precise mix of
features can make a big diference to business operations. Most of these
advanced features come under areas like helping with remote oice and
remote users, or programmability and lexibility of the system.
- Scalability: The ability to rapidly grow or reduce the system under
your control. Better systems can scale to handle hundreds of users.
- Rights Management: Allowing diferent groups of employees
diferent rights within the phone system for management,
administration, usage and more.
- Group Management: Managing groups of callers and call
- Call Queue Management: Providing visibility into and the ability
to manage incoming call queues. This can include speciic call
management as well as general system management of rules and
varying loads, hold times and so on.
Programmable Routing and Scheduling
- Call Routing: Setting up programmed rules to route calls based
on lexible criteria like caller ID or time, or even next available
extension in the designated call management group.
- Scheduled Call Routing: Handling incoming calls diferently
based on time received – and even setting up several systems of
call management that are all diferent depending on time of day or
day of the week.
- Automatic Ring Back Features: Features to automatically return
calls based on various programmable criteria.
- Call Screening: The ability to routinely screen calls as they come
- Call Monitoring: The ability to silently monitor calls as they
progress for purposes like sales training and customer support.
- Barge in: The ability to break in to a call between two other people
– usually related to call monitoring.
Remote User Features
- Branch Oice Support: The ability to manage and remotely
administer extensions at other oices just as easily as if they were
- Features to Support Remote Users as if Local: One of the most
powerful features of IP telephony is the ability to have remotely
located employees work and appear to external and internal
callers as if they are local.
- Hoteling: Allowing users to make any physical phone in the
system act as if it were any other number, so that any user can
make any phone on the system act as if it were their own phone
for any period of time. This feature is particularly useful for
Unifying/Integrating Oice Systems
- Full Outlook/Email Integration: Incoming calls can be matched
with contact management records and outgoing calls can be
initiated from within Outlook so users can click on contact
management systems records and dial from within Outlook or
- Voice mail to Email: Sending all voice mail from a mailbox to an
email account where messages can be opened and listened to on a
PC – as well as stored and managed.
- Data Network Integration: Some form of integration into your
basic data network so that ‘click-to-call’ functionality, integration
with oice document, email systems, or even full blown CRM
systems can be added.
- Click-to-Dial: Some form of click-to-dial to go from a number
on a PC screen to a call on the phone without having to dial the
- Integrated Voice Response: The system includes the ability for
callers to navigate through menus using phone keypad or voice
- Analog and IP Handling: Many IP PBX systems can manage both
VoIP phone and regular telephone systems at the same time –
although not all functionality is available to regular phone users.
This feature is useful for managing merged groups or multiple
- IP Fax: A fax system integrated into the IP phone system. You
cannot use regular fax machines directly on IP phone networks
without some kind of interface.
- Presence Features and IM Integration: Presence features indicate
the status of a user of the phone system to all other users and even
to external callers if features are supported. These indications can
be as extensive as to indicate location, kind of devices by which
communication can take place, and transfer between routing
Hosted PBX systems vary considerably in cost but prices have been
coming down for the past couple of years due to rapidly increasing
competition in the small business market. Even so, costs are very unlikely
to dip below the current lower end of the price spectrum since that is
getting close to the low-end pricing for the most basic residential phone
systems. Prices typically range from about $35 per user per month to
as high as $300 per user, per month for expensive, high-end solutions.
There are often additional setup costs that are one-of and in addition,
the lower costs do not always include equipment. Some vendors rent
equipment separately, some include the rental in the monthly fee and
others require equipment to be purchased.
ROI can be very diicult to estimate since it depends mostly on the
system being replaced. If you are upgrading from an old legacy system,
then a hosted IP PBX is going to save you a considerable amount in
operating costs, depending entirely on your current call costs. It is easy
to look at the future costs of a system for hosted IP PBXs because pricing
for these systems is ixed per user and is entirely predictable. Get quotes
for installation, setup and equipment costs. These should either be ‘free’
(which means rolled into the monthly cost) or a ixed fee for installation,
setup, and a ixed fee for the cost of equipment. Monthly costs are
always a lat fee per user per month.
The diiculty comes if you are comparing hosted IP PBX with a premisebased
IP PBX because predicting costs on premise-based equipment
is much harder. Purchase and installation costs can be diicult to
determine precisely until full engagement on a purchase, and ongoing
maintenance and call charge costs can be hard to determine. The typical
scenario is that the longer you keep a system and the more users you
have, the more likely it is that a premise-based solution will compare
Hosted IP PBX pricing
is ixed per user and
Monthly costs are
always a lat fee per user
The bottom line: if you are upgrading from an old phone system,
you will save money with a hosted solution no matter what. If there is
any uncertainty in terms of call volume, growth, scalability and usage
pattern, you are likely to be better of with a hosted solution. If you are
a small business (20 people or less) you are also better of with a hosted
Hosted PBX Service Plan Checklist
What to ask before you buy.
Before you begin to negotiate with a hosted PBX provider, you’ll want
to gather some basic information about your current situation. Use this
checklist to get organized:
- How many employees are in your organization?
- How many locations do you have that need VoIP service?
- How many remote or mobile users do you have that will not
have a local oice?
- What are your current broadband connection details —
bandwidth, type, lines and so on? Make sure to have as much
information available as possible, including current supplier
and level of service.
- What is your current network load and available unused
bandwidth? Your provider may want to test your network to
determine this information for themselves, and if you don’t
have enough you may need a network or broadband upgrade.
- What type of servers does your system run on? Your service
provider may need the manufacturer name, model number
and, most importantly, operating system details.
- What are your existing phone system details? Manufacturer,
number of lines, connections and so on.
- Do you have any need or desire to keep existing lines?
- Will you only be upgrading part of your organization?
- What is your budget? Your total project cost limits and target
cost per month per user?
- What is your mix of calling? Average amount of internal, local,
long-distance and international calls per month. If you don’t
know, have a few months of recent phone bills handy.
- What is your percentage of inbound versus outbound calls?
Once you have this information, you’re ready to begin talking to a hosted
PBX service provider. Specify your business requirements up front and
make sure you know which you are prepared to drop in return for a
lower cost. In practice, you are likely to have a few business features in
mind that, along with basic phone features, are must haves. Everything
else will be optional, but keep an eye to the future if possible.
Typical issues that can change costs involve:
- Do you need an incoming 800 number?
- Do you have a receptionist/phone operator or do you want an
- Do you need to be able to make conference calls? How large,
how many and across how many locations?
- Do you need a call center?
- Do you need integrated voice response (voice menus)?
- Do you have someone available to manage the system for your
employees or are they going to have to do it themselves?
- Do you need to integrate with Outlook or other oice systems?
- How fast are you going to need to grow the system and how
- What level of service and SLAs (service level agreements) do
Hosted IP PBX systems provide small- to medium-sized businesses
with abilities and features that are available to large enterprises,
while providing the potential to reduce long-term operating costs
considerably. As with any rapidly growing technology, there is a wide
variety of providers and a range of features at widely varying prices.
Hosted IP PBX systems can cost as little $35 per month per user (or even
less in large installations) with no setup costs, but the costs can increase
as required features and the complexity of a system grows. It is more
important to make sure that your system has the basic features that
you require now for the operation of your enterprise and for its future
growth than to drive the cost to the absolute bare minimum. Unless you
are already using an eicient IP telephony system, you will save money
no matter what.
You should look for the following in any upgrade to hosted IP PBX:
- Basic operating cost reductions due to lower call charges, the need
for only one communications network and lower maintenance
- A minimal investment risk, because your enterprise data network
is your new backbone and it is already in place and functioning
- Straightforward installation costs based on tested, reliable
components connecting to a system your IT personnel already
- Improved eiciency and operations within your organization.
- New features that can improve your business’s efectiveness.
It is the last of these points that is most important and critical to the
success of the upgrade. This is where the power of converged networks
– combined voice and data networks – really comes into its own in terms
of providing your enterprise with more tools, capabilities and options
than it previously had. The cost savings are essentially a bonus.
You can ind out more about who ofers what features using our Hosted
IP PBX Comparison Guide.
- Executive Summary
- Hosted PBX Overview
- Market Overview
- The Beneits of Hosted IP PBX
- Basic FeaturesAdvanced Features