Businesses everywhere rely on quality phone systems to connect with clients, customers and business partners — but the type of system they use depends on their business needs. The two main choices are an analog phone system or an internet-enabled phone system, called VoIP.
Analog phones are synonymous with the landline phones most of us grew up with. They send voice signals along copper wires through a series of physical switch boxes to connect calls between two phones.
Businesses currently using analog phone technology often have had their system in place for many years. In most cases they also use a Private Branch Exchange (PBX) system. The PBX is a switching unit that connects the phones and extensions within the company to each other and to outside analog lines. This enables many employees to share a limited number of outside lines – potentially reducing costs.
VoIP (voice over internet protocol) technology, on the other hand, doesn’t involve any analog technology or switches. Instead, VoIP phone systems connect calls via the internet by converting calls into digital signals. VoIP systems don’t require anything beyond an internet connection and either a computer, an office phone, or a smartphone to make and receive calls.
Though the majority of businesses today use some type of internet-enabled telephone system, we’ll go over the cost, features, flexibility, hardware requirements, and reliability of each system to help you make the choice of what’s best for your business.
Analog Phone System Cost
The cost of an analog phone system depends on the size of the business and the additional features you want to have. Business owners need to consider both setup and maintenance costs, which vary depending on the number of employees and the type of system you select.
An analog phone system for a business using a PBX will incur setup costs around $500 to $2000 per user depending on the size of the system and the installation demands. Analog phone system setup requires the PBX switching system, phone handsets, add-on features, wiring and installation, and any training and support your company needs.
For analog PBX systems, you’ll need to consider the additional ongoing cost of configuration, maintenance, security patches and more as your company grows. According to 2017 data, those costs average about $7,600 a year. Individual handsets cost around $200 each, so you’ll also need to factor that in if you increase your headcount.
VoIP Phone System Cost
VoIP services are generally based on the number of users, number of extensions, and additional features. Many VoIP services will apply a per-user discount for larger teams, as well as discounts for yearly vs. monthly billing. Additional features like conferencing, text messaging support, app and cloud integrations, and custom greetings may add to monthly costs depending on the provider.
Installation – which includes phone, provisioning, power source, and router – will cost an average of $4,450. Note that you can save a significant amount by using software-based phones (softphones) rather than the usual handset. Many businesses, including call centers, now use softphones because of their low cost and flexibility.
VoIP costs range from $10 to $60 per user per month, and the amount you pay depends on the number of features you need beyond standard options like call forwarding, call waiting, business SMS, and basic teleconferencing.
RingCentral Office, for example, offers additional features like video conferencing, automatic call recording, CRM and software integrations, and advanced call analytics with higher pricing tiers.
Nextiva offers additional features like professionally recorded greetings, voicemail-to-text features, and voice analytics with higher price packages.
Compare Pricing for Popular VoIP providers
- RingCentral Office ($20 – $60 per user)
- 8X8 ($12 – $44 per user)
- Grasshopper ($26 for three extensions – $80 for unlimited)
- Nextiva ($20 – $30 per user)
- Avaya ($20 – $60 per user)
- Ooma Office ($20 – $25 per user)
Overall, VoIP promises significant cost savings over analog in almost every case. Landlines are more expensive than VoIP systems, even when you add basic services like call waiting, caller ID or voicemail. In fact, a business that adopts VoIP technology can expect to see between 50% and 75% cost reduction.
And as your business grows, VoIP is often the more cost-effective choice because adding new users doesn’t incur additional setup fees. To put it into perspective, a business with 30 users could see savings of up to $1200 per month with a new VoIP system.
VoIP systems can also help you save costs on teleconferencing, which is especially important if some or all of your workforce is remote. Integrating voice and online conferencing capabilities can mean a 30% reduction in teleconferencing expenses.
Lastly, the types of calls your employees make on a regular basis will have an impact on the overall cost, especially if you have clients and business partners further afield. Businesses that use softphones can save an average of $1727 per month on mobile phone and long distance costs. For local calls, a small business that moves to VoIP can expect to see 40% savings as compared to an analog phone system.
Analog Phone System Features
Most analog phone systems will only provide the basics like local and long-distance calling, along with standard PBX capabilities including:
Extensions allow users to reach specific people within a company without the need for a separate phone number. The ability to have multiple extensions connected to a single phone number or pool of numbers is one of the primary benefits of a PBX system.
PBX systems allow users to transfer calls to other extensions, which can enhance productivity in offices where a receptionist is handling multiple incoming calls for various people. Some PBX systems may also support automatic call transfer.
Analog PBX systems have basic voicemail functionality. To access, users simply dial a code from their handset and a menu system will guide them through the options. Voicemail cannot be accessed off premises.
Overall, VoIP systems offer a wider range of standard features as part of their service packages. In addition to standard features offered by analog systems, features included in most standard VoIP plans include:
Desktop and Mobile “Softphone” Apps
Mobile and desktop apps eliminate the need for a handset, which can help business owners save costs. Users simply take calls on their computers or mobile phones, which offers more flexibility for remote workers or employees on-the-go.
Software and CRM integrations
VoIP systems can integrate with your existing business software, including your CRM, so you can easily manage and document communications with your customers and clients. Most providers have specific built-in integrations with popular software programs, but many also offer custom integrations with proprietary systems for an additional fee.
Virtual fax is a cloud-based service that allows business owners to receive faxes and view them as an email attachment without the need for a fax machine. Instead of providing a separate fax number, clients and business partners simply send a fax to a business phone number.
Analytics and Reporting
Many VoIP systems include call analytics that measures individual and aggregate data related to both incoming and outgoing calls, and includes metrics like inbound call volume, call time, hold time, speed of answer, and much more.
Audio and Video Conferencing
With remote working on the rise, audio and video conferencing is becoming a necessity for small businesses. VoIP providers often include unlimited audio and video conferencing as part of their higher pricing tiers, which allows your employees to connect with each other using the same app they use for business calls.
Since VoIP systems use your internet connection to connect calls, they offer much more flexibility for voicemails. Many VoIP systems can send written transcriptions for voicemails to an employee’s email, which can significantly enhance productivity and help ensure voicemails aren’t left unanswered.
Auto-attendants and Virtual Receptionists
The added flexibility of a VoIP system allows receptionists to be located anywhere in the world. In many cases, VoIP systems include virtual and automated receptionists in higher pricing tiers so your calls are consistently answered and directed, even outside of standard business hours.
Simultaneous Call Handling
Simultaneous call handling comes standard with most VoIP phone systems, and is a helpful feature for busy companies where multiple incoming calls need to be routed to available representatives. VoIP systems can forward a call to an available forwarding number if they reach a number that’s currently busy or not answering.
Some VoIP systems include call recording as a standard feature, while others include this in higher-tier packages or as an additional add-on service. By automatically recording calls, business owners can more easily manage quality assurance, reduce wait time, and gain insights that help with associate training.
Adding new users to a VoIP phone system is inherently simpler than adding a new user to an analog system because there is no additional hardware or rewiring needed. Enhanced scalability in VoIP systems makes them a better choice for growing businesses.
Analog Phone System Flexibility
Landlines are inherently limited in terms of flexibility because they cannot move from where they are. When you have an analog PBX phone system with an on-premise unit, you won’t be able to take calls from other places (like home or on the road) like you can with VoIP.
According to David Attias, Managing Partner of PennyTone, “Mobility and ‘remote working’ is the new workforce paradigm that an IP-based system can accommodate and analog phone systems lack. A cloud-based VoIP service means fast deployment with the ability to accommodate a geographically dispersed workforce and no maintenance costs or lengthy contracts.”
Since an estimated 42% of American employees now work remotely full-time, it’s hard to beat VoIP in terms of flexibility. Greater flexibility may also mean increased productivity as well. Since VoIP systems allow workers to do their jobs from virtually anywhere in the world, this type of flexibility can lead to a rise in productivity of nearly 20% and save workers an average of 32 minutes per day.
Analog Phone System Hardware
Businesses that use analog PBX systems can expect to have a considerable amount of hardware to install and manage for their phone system. Generally, analog phone systems for businesses include:
PBX Switch Unit
A PBX switch usually consists of the telephone cables and the switchboard itself, which is usually housed in a cabinet and installed on-premise at the business. Most units are about the size of a small refrigerator and must be located on premises (so be sure you have extra space available).
These systems require expert installation as well as on-going maintenance to ensure the system continues to operate correctly.
Analog phone systems require an individual handset for each employee, which integrate with the larger PBX system to allow for call transfers between extensions and business phone numbers.
When you have an analog PBX phone system, you own all of the hardware. Though this increases the upfront costs significantly, it does offer more control over the system and how it works, including proprietary integrations and customizations.
Strictly speaking, a VoIP phone system only requires a computer or smartphone and a stable internet connection. Businesses also have the option to add additional hardware to make the use of their VoIP phone system easier for employees.
Typical hardware included with a VoIP system include:
Many VoIP service providers have specialized handsets that allow employees to use a VoIP phone service while still having a phone at their desk. Most VoIP service providers sell specialized handsets in addition to their desktop and mobile apps. For instance, basic Ooma Office handsets cost around $60 whereas more advanced handsets cost upwards of $150.
Employees who use a VoIP softphone app on their computer use a headset to make managing incoming calls easier. VoIP-compatible headset can cost anywhere from $10 to over $400, depending on the model and features.
VoIP adapters can connect your VoIP system with existing analog office phones. If you’re just getting started with VoIP or simply want to keep your existing office hardware, VoIP adapters can be a helpful tool for making the switch.
Analog Phone System Reliability
Overall, analog phone systems tend to have better call quality because they do not rely on an internet connection. The reliability of an analog phone system can provide peace of mind for business owners who do not have a particularly fast or reliable internet connection.
However, analog phone systems are vulnerable to landline outages caused by inclement weather, power outages, and downed wires. In some cases, it can take hours or even days for a phone company to restore service and the root cause of these issues is not always clear.
Lastly, PBX systems aren’t immune to hardware issues and disruptions, so keep this in mind in terms of reliability. Equipment failures and other equipment problems contributed close to 40% of all reported downtime, one study found.
Though a reliable internet connection is crucial for VoIP phone systems, most VoIP providers feature “mobile VoIP”, which enables businesses and their employees to access the VoIP system via whatever kind of mobile device they desire, whether a smartphone or tablet. If the internet goes out, calls are forwarded to mobile devices to ensure continuity.
Businesses handling mission-critical issues via phone can avoid the issue of internet outages entirely by taking advantage of a backup or alternative ISP, though there is an additional cost associated with these redundancies.
VoIP reliability also depends on the provider’s reliability. To offer maximum uptime, VoIP providers often leverage a redundant network of data centers. Many VoIP providers also offer fully-managed services that include setup, system configuration, and ongoing maintenance for competitive rates around $20 per user, per month.
How To Switch To VoIP
Switching to VoIP can reduce costs, increase flexibility and boost productivity in the long-run. To make the switch, you’ll need:
The speed and quality of your internet connection will impact the quality of calls made through a VoIP system. VoIP Review recommends that you have an available bandwidth of at least 100 Kbps for each concurrent VoIP call.
IP-enabled Phones or Softphone App
You have the option to use IP-enabled phones (which resemble and operate much like a traditional analog office phone) or a VoIP adapter designed to bridge the gap between your VoIP system and your existing office phone.
You can also use softphone apps that allow employees to manage incoming and outgoing calls right from their computer or mobile phone. If you do opt for a softphone app, consider investing in a VoIP-compatible headset to make managing calls easier.
Last but not least, you’ll need a VoIP provider to make the switch from your landline phone system. Before you choose a VoIP provider for your business, make sure you consider your current and future business needs. Most providers clearly list which features are included in each pricing tier, so make sure you compare VoIP providers before making a choice.
Final Thoughts On Analog vs VoIP Phone System
Overall, VoIP offers much more to business owners in terms of features, flexibility, cost and reliability. These internet-enabled phone systems are better-suited for an increasingly remote workforce and allow your team to get more done in less time.
Plus, VoIP phone systems offer features like call analytics and video conferencing that play an increasingly important role in the success of businesses today.
Though making the switch to VoIP takes time and planning, the decision will set your business up for success in the long term and future-proof the way your employees connect with customers and business partners.
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Blake Bobit has been an entrepreneur and business owner for over 25 years. He founded Solution Scout to provide the most helpful answers to questions about business solutions. Blake provides strategic advisory services to businesses in many industries nationwide and enjoys the challenge of staying up-to-date on all things HubSpot.