TCO for VoIP
The TCO equation for VoIP systems is simple as shown below:
TCO = (Acquisition Costs) + (Monthly Recurring Costs) + (Annual Maintenance Costs)
Let’s look at each element separately.
Acquisition Costs
An acquisition cost is any cost that is paid up front. For VoIP, acquisition costs are more than just equipment purchases. They include system installation and employee training. Remember that with VoIP, voice and data are carried over the same connection so there are usually charges related to the provisioning of that connection.
Simply put, ask your prospective VoIP vendor, “What do I need to write a check for up front to make a switch to VoIP?”
For IP PBX, Acquisition Costs will also include the cost of the IP PBX and any other equipment like routers, switches, phones, cabling, power supplies, etc. There will also be costs for shipping, installation, and configuration of the equipment. Sometimes there will also be a purchase cost for software that runs the IP PBX.
Hosted IP PBX has significantly lower Acquisition Costs because there is no IP PBX to purchase and little additional equipment required (usually a small device to ensure Quality of Service). Some Hosted IP PBX systems do require the purchase of new phones.
In both the premises-based and hosted scenarios, most vendors recommend a network assessment to ensure the LAN can handle voice traffic without degrading quality or reliability. The cost for performing that assessment and making recommended changes to the LAN need to be included in the calculation.
Monthly Recurring Costs
With VoIP, Monthly Recurring Costs are for both voice and data and can take several different forms. Some service providers charge per minute usage fees for local and long distance calls along with a fixed monthly cost for data. Others bundle these charges together into a single monthly fee that offer unlimited data access and either a block of voice minutes for shared use by everyone in your company or unlimited voice minutes.
Regardless of how the service provider constructs the charges, ask your prospective VoIP vendor, “What do I need to write a check for every month for my voice and data service?”
With most IP PBX solutions, your monthly charges will include a fixed charge for the data circuit. For IP PBX, your voice charges will vary from month to month because calls are charged for on a per minute basis. This means that you’ll need to make some estimates of your voice minute usage for local, long distance and local toll calls and multiply by the per minute charges.
If you have more than one business location, voice charges are waived for calls between your offices because the calls are never transferred to the PSTN but are carried across the service providers’ VoIP network. Calls from one office to another are sometimes referred to as “On Net” calls.
Often, SMBs will purchase an IP PBX as a managed service offering which means that the vendor will be responsible of all management and maintenance of the IP PBX and any other equipment that resides in your office. On the plus side, this means that you will not need to train and dedicate staff to system management but, the negative is that there will be monthly management charge to include in the TCO.
With Hosted IP PBX, monthly recurring voice charges are simpler. Normally, the service provider will charge a fixed monthly cost per telephone set. This fixed cost includes unlimited local, long distance and local toll calls and all fees related to system management and maintenance. Some Hosted IP PBX vendors even include the cost of the data circuit in the monthly cost per telephone set.
Annual Maintenance Costs
Annual maintenance costs have been a given in hardware or software purchases for years. Companies often charge 10-20 percent of the purchase cost of these products each year to guarantee technical support and product updates. The situation is no different with VoIP.
You will need to ask your VoIP vendor, “What do I need to write a check for at the end of each contract year for maintenance of my voice and data service?” For IP PBX, each vendor handles these costs a bit differently. Some will charge a single fee that is a percentage of the purchase price of the IP PBX.
Others will charge a fixed annual fee for each piece of equipment under management. Some offer different levels of support at different fee levels. They may charge one price for telephone-only support during regular business hours, or they may offer a higher price for premium support that includes technicians coming on site within two hours, seven days a week, to fix any problem that arises.
Again, Hosted IP PBX is simpler: there are no Annual Maintenance Costs.