VoIP Phone Systems vs. TDM: Who Really Wins on Cost?

The cost savings of a hosted VoIP phone system often comes under scrutiny from some of the remaining providers of TDM, or “traditional”, phone systems. You know the kind, those broom closet phone boxes of yore. Through the use of a narrow lens, they push out misinformation that may lead small business owners to think that a TDM solution will somehow save them money over VoIP.

This is, however, an act of desperation on their part – not a reflection of reality. By choosing the scope of their argument, they can stack Apples v. Oranges and shine a deceptively attractive light on their systems. Zoom the camera out a bit, get the whole picture, and you’ll see why smart businesses have been abandoning TDM solutions in droves for the advantages of hosted VoIP.

The Classic TDM Cost Savings Argument

Let’s start with the argument for a TDM phone system. In a nutshell, these providers cite the benefit of their systems as being the fixed cost to own, e.g. pay for the PBX equipment and the installation, and it’s yours to own for life. They then compare that high fixed cost to a month-to-month hosted VoIP service like FreedomIQ over some extended period, say, 24 months, to say the TDM phone system carries a smaller price tag in the long run. Conversation over, right?

Not even close.

Where the TDM Argument Falls Apart

Hosted VoIP is a managed service, and much of the cost savings is abstract from the direct cost of equipment and ongoing service. Any savvy business owner knows that the price tag they should care about, the real price tag, is one that includes both direct and indirect costs to get the Total Cost of Ownership (TCO). With that in mind, here’s what you’re not seeing with a direct business VoIP vs. TDM cost-of-service comparison:

1. Deprecation of Hardware

TDM PBX equipment, like a car, loses value the minute you deploy it. The notion that you’re going to “own” your PBX isn’t exactly exciting if it doesn’t hold any value 6 – 12 months down the road and you’re back in the market. Worse still, if it breaks down while you “own” it, that means it’s your responsibility to pay to have it fixed or to buy a replacement. Even if you’re covered by a hardware warranty you’ve purchased, that cost needs to be a part of their big picture comparison.

With a hosted VoIP phone system, you’re not dropping capital into hardware that’s going to become obsolete. There’s no buying replacement parts for your wall switch and no risk that a year from now you’re going to be stuck with a 5-figure paperweight. Not to mention the fact that the equipment delivering your hosted service from remote is enterprise-grade and fully-redundant, something you’re not going to get from a comparable TDM solution.

2. Scaling Up Your Business

TDM phone systems are notoriously inflexible to the growing needs of your business. With this kind of phone solution, you’re likely to fall into one of two camps: the over-paying, or the under-provisioning. That is, you either buy a PBX that is too big for you right now, thinking that you’ll eventually grow into it, or you buy a PBX that meets your short-term needs, understanding that you’ll have to figure something else out should your needs change. Result? You’re paying more than advertised, either right now for the privilege of future expansion, or down the road when the necessity to upgrade your PBX hits you like a ton of bricks.

Hosted VoIP phone systems are scalability machines. By taking your hardware off-premise and having phones interconnect and transmit calls via the Internet, you’re removing the limitation on what size of PBX you can have. You won’t need to overpay for more phones and capacity than you need or buy a brand new PBX within a year because your staff size has grown by 20%. With hosted VoIP, you can add phones to your system at any time and from anywhere with no extra costs to scale.

3. Paying IT Staff / Maintenance

The coup de grâce. Owning your own TDM PBX again brings the responsibility of management, maintenance, and configuration in-house. That means some percentage of your IT staff budget is getting allocated to making sure your phones are always up-to-date and in working order. Even if you’re talking a tiny fraction (5%) of just one IT employee’s time, you’re talking about thousands of dollars each year to manage your own PBX.

Part of what you’re paying for with a hosted VoIP PBX is, essentially, the outsourcing of this responsibility. We maintain the equipment that provides you with service. We keep your phones updated to the latest firmware. We help you configure your service and troubleshoot your setup with free U.S. technical support. Meanwhile, your IT staff gets to focus on issues more critical to advancing your business, and the money you save (or make) by keeping them on task all but pays for your hosted VoIP phone system.

Be sure to do plenty of research and look at the big picture when considering what type of phone system is right for your business. Look beyond the price tag to what a system provides in flexibility and time saved, as those ultimately lead to keeping dollars in your pocket.

This blog post was written by Nick Grady and the original source can be found on the FreedomIQ website by clicking the link.