Businesses can choose between buying an in-house IP PBX or renting a “Hosted” pbx service, or cloud-based service.  The business must be able to address Total Cost of Ownership (TCO) in a thorough and compelling way. A TCO comparison, to be comprehensive and balanced, must consider the widest range of relevant factors. Readily quantifiable cost factors related to an IP PBX in the context of a TCO analysis are:

  • Number of physical office locations
  • Number of employees and telephones
  • Capital cost for IP PBX equipment
  • Monthly telecom expenses, including long-distance service, equipment leases, software upgrades, and any in-house support labor cost
  • Monthly system maintenance cost,
  • Cost of required features

The cost associated with these factors must be compared with the cost of a Hosted IP service solution – on a cash flow or Net Present Value basis – taking care to ensure that the comparison is “apples-to-apples” to the extent possible.   Here is an example of such a comparison.


When Moves, Adds and Changes (MACs) are required in an IP PBX environment, a customer staff member will need to log onto the system to make necessary adjustments, or you will need to call the person who installed the system.  This is the case whether someone moves their office from one cubicle to another or wishes to change the number of times their phone rings before tripping to voicemail. Training to ensure that a system administrator is proficient can be intense and take considerable time (weeks or sometimes months).  Normally a small local reseller will install the IP PBX system and continue to support it.  That reseller may not be around in a few years.  With a Hosted IP solution end-users can typically call the hosted PBX vendor and get free on-line support.  Ask yourelf who will support the PBX and who do you trust to be available when problems arise.

Dealing with Obsolete PBX Technology

Most IP PBX vendors issue ‘dot’ releases at least every six-months, and sometimes much more frequently. Releases can require hardware upgrades as well, which add to the customer’s cost. (There is sometimes a need to replace processing components of the PBX, for example, to ensure compliance with new releases.) And, the business will need to complete maintenance on the IP PBX system, including disk clean-ups, filter changes, and so on. With a Hosted IP solution, the Service Provider is responsible for managing all software and hardware upgrades – business customers need only be aware of necessary maintenance windows to permit completion of this work, normally scheduled during nighttime hours. With upgrades, the Service Provider will even send their business customers updated configuration files for end-user devices.


The business case for an IP PBX or Hosted IP solution has many variables.   Ease of implementation and ongoing support favor a hosted PBX solution.  However, hands on control and in for large systems, a lower cost may favor an in-house IP PBX.