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What will my Cloud based VoIP phone system cost my business every month vs a premised VoIP phone system?

Learn the differences in costs between cloud based VoIP phone systems and premise based VoIP phone systems. When it comes to deciding between a cloud based or premise, on-site based VoIP phone system, one of the primary questions we get is ‘how much’. For businesses that are ready to pull the trigger on upgrading to any type of VoIP phone solution, understanding the costs is important to understand.

Fortunately, when it comes down to it, understanding the costs between both cloud and premise based VoIP systems, all it takes is a little explanation.

Cost differences between cloud & premise based VoIP phone systems.

Here’s the short, simple answer - it depends entirely on the size of your business and what specific applications, if any, you’ll need. Since VoIP phone systems come with a plethora of options, configurations, and costs depend on the specifics of your business, there really is no cut and dry way to identify the cost differences between cloud based VoIP & premise based VoIP.


What will my Cloud based VoIP phone system cost my business every month vs a premised VoIP phone system?


VoIP Phone Systems at Micro Small Businesses

When I say micro business, I mean operations with 10 or less users. If you’re a micro business, cloud based VoIP service is the best way to go. It’s likely to be more affordable and flexible when compared to premise based services.

Additionally, there’s much less upfront and out of pocket costs. Typically everything can be acquired on a low, monthly investment, which will be wrapped up in your monthly phone bill.

Here’s an example of a typical, 10 phone account.

  • A cloud based VoIP phone system could range between $25 up to $45 per user per month.
  • There’s very little money up front, if any, for phone hardware and installation services.
    • In this type of business, being so small, you can possibly get away with a remote installation package and plug in the phones to your existing IT network
  • Your business can share the phone and computer cabling but that can cause technical quality issues
  • All phone expenses in one invoice for your convenience.

Now here’s some details on a premise based system.

  • Your business would have to come up with several thousand dollars up front, ranging from somewhere between $3,000 to $7,000 depending on the specifics of your business. The main difference here is the complexity of the phones & the phone system itself. Simpler setups are cheaper, more complex setups are more expensive.
  • A premise based setup usually includes a 1 year warranty, followed by a $400 to $1500 a year extended hardware warranty with labor services included. Of course you can forgo the extended warranty and risk hardware failure. You’ll be rolling the dice and won’t be able to call the vendor for system maintenance and changes.
  • You’ll also need to pay a carrier separately for the “dial tone” per month for phone lines.

As you can see, we’re talking some huge differences here. But what about for larger organizations?

VoIP Phone Systems at Small but Scaled Businesses

Now here we’re talking about operations with 15 to 50 users or employees.

In this instance, it’s a little fuzzy to know which costs more and the lines are getting very blurry as to which is “better”. More time, resources, and money are being spent by organizations, and being put towards cloud based phone technology to adapt and stay relevant to the future. The trend keeps going cloud again and again as times goes on.

However, it really depends on your exact size, as well as the system, software, and the hardware needed. Remember, cloud based systems typically include phone hardware, software, installation, training, and phone lines in one monthly bill, where premise systems do not.

When comparing the two, it’s extremely critical to closely identify your carrier services connected to your premised based phone system. Look at your T1 phone charges, internet costs, 3rd party services like conferencing or fax, and analog phone lines such as fax, alarm, credit card, or back up phone lines.

Here’s an example of a 30-user account, comparing cloud & premised based VoIP service.

A ballpark estimate is $35 to $40 per user per month, meaning a cloud based phone system will cost between $1,050 to $1,200 per month. It could be higher or lower depending on variables like internet needs and wiring infrastructure. Remember, this price typically includes everything, such as phone hardware, software, applications, phone lines and usage.

Now let’s look at premise based service.

Consider $500 to $1,000 per user paid up front, meaning somewhere between $15,000 and $30,000. Very few smaller businesses will spend this upfront unless they are in a VERY bad situation and their old system is currently down and not functional (aka you are desperate).

Most businesses rent the phone technology through a leasing company, paying somewhere between $300 and $600 a month, again depending on the type of system, software applications and the type of VoIP dealer installing it.

Additionally, with a premise based system, you’ll still need to pay a phone carrier for inbound & outbound calls. You’ll also still need to invest in a maintenance plan on your premised based phone system, usually costing somewhere around 10% to 15% of system sell price. So, a $30,000 system would cost $3,000 a year to maintain the system properly.

Now depending on your situation and the specifics of your organization, cloud based VoIP phone service may reduce costs. However, if you’re in a contract with a T1 provider, early termination fees can be cost prohibitive. It may be cheaper to go with a premise based system due to this fact if you are indeed stuck in a contract for multiple years.

VoIP Phone Service at Scaled Businesses

Regardless of the size of your operation, whether you’re a 15-person company or 150-person company, the lines are becoming blurred between both cloud and premise based systems. Both are catching up and both are extremely capable. The truth is there is no right or wrong answer at this point. It depends more on your future needs as a company and what type of employees you have.

To learn more about what type of VoIP phone system is right for your business, you can click here to contact us online, give me a shout directly at or touch base with me at 908-378-1218.

By Vincent Finaldi
Vice-President, Tele-Data Solutions
E-mail: | Direct Line: (908) 378-1218
What brings me satisfaction is meeting with New Jersey–based businesses and genuinely helping them solve communication and business problems. As someone who has lived in New Jersey my entire life, I love working and playing here. I live in Morristown with my wife, Lisa, and root for the New York Giants.

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