SIP Trunk Additional Costs vs Hosted VoIP

Upgrading to VoIP is a major decision for most businesses. Some upgrade for the cost savings. Others want capabilities that are beyond analog systems. Yet others decide to switch because their current phones have reached their end of life. Whatever the reason, you must now deploy a new business class phone system. And in today’s world, that usually means VoIP.

SIP Trunks Vs. Hosted VoIP

This is the first of many decisions you have to make regarding your new phone system. The VoIP industry is filled with a sea of jargon. Almost anyone without a technical background will struggle to make heads or tails out of it. So before we dive in to compare costs, let’s understand what each term means.

SIP trunks are a way to connect your on-premise IP-PBX to the PSTN via an Internet Telephony Service Provider (ITSP). It is a virtual connection between your phone system and the service provider.

Hosted VoIP combine both PBX features and calling capabilities. Your service provider handles all the hardware and software needed for the phone system. All you need is an Internet connection and VoIP compatible phones.

What Does This Mean in Terms of Costs?

There are significant differences between the two solutions in terms of costs as well as non-financial aspects. Depending on your particular business circumstances, one option might be better than the other. But for now, let’s focus on what each solution will cost you.

Capital Expenses

Capital expenditure is one-time expenses that you incur at the start. Typically this category includes hardware, software licensing, set up fees, etc.

Deploying SIP trunks generally requires the following:

• An IP-PBX if you don’t already have one
• A VoIP gateway for your analog PBX if that’s what you have
• Set up costs for the SIP trunking service
• VoIP compatible handsets
• Network equipment like routers
• High-speed Internet connection

Hosted VoIP, on the other hand, needs only the last 3 items on the previous list. If you already have SIP-compatible handsets, upgraded network equipment, and a high-speed Internet connection, you’re good to go.

As you might guess, hardware and setup costs are much higher for SIP trunks.

Operational Costs

These are ongoing charges you incur on a recurring basis, most commonly each month. SIP trunking services can charge in one of two ways. The first option is a flat rate per channel each month. A single channel can support one simultaneous call. So if you need a dozen employees to use the phones at once, you will need 12 SIP channels. The second option is a per-minute payment plan. Quite a few providers offer such calling plans with no setup fees.

Your monthly bill for hosted VoIP depends on a number of factors. Providers can charge based on the number of users, calling minutes, and/or features. Depending on what you need, you may end up paying anywhere from $10 per user per month to $50 per user per month. With the right billing and call options, you might pay less with hosted VoIP.

But most commonly, businesses get better savings with SIP trunks on their monthly bills.

Labor Costs

This one is a biggie. As you might expect, hosted VoIP doesn’t need much maintenance at your end. Apart from internal housekeeping like assigning numbers, switching lines or deleting users, there’s not much to do. It means your IT department doesn’t have to waste time on troubleshooting common problems every day. It gives them free time to focus on more important issues.

But with SIP trunking you need professionals and it’s not just for the initial set up. Having an on-premise PBX gives you more control. But that also means configuring new features and maintaining the system is up to the IT team as well. Some companies already have VoIP experts on their team. Others will have to hire additional staff.

Costs and ROI

There are other cost differences between the two alternatives but these are the most common insignificant ones. So far it might seem that hosted VoIP wins out over SIP trunks, at least on price. So why do enterprises opt for SIP trunking?

The key thing to remember is that investing in SIP trunks and an on-premise PBX is exactly what it implies – an investment. It is not simply an expense. What’s the biggest factor to consider when making an investment? That’s right, the return on your investment. SIP trunk deployments generate positive ROI over the long-term.

Since you own the hardware and software, you decide when you should upgrade or not. You are in complete control of deploying new features, security, and customization. Larger organizations tend to have more varied requirements, need better security and have access to professionals. For a large business that can afford the investment, there is no better alternative than SIP trunks.