We understand that upgrading your business phone system is a huge decision. Our goal is to empower you with honest and reliable cost information to help you appropriately plan and budget for your project.
This UC / UCaaS Business Phone System cost and pricing guide will help you develop an initial budget and plan for the ownership costs associated with on-premise UC solutions, multi-tenant public cloud UCaaS solutions, and multi-instance private cloud UCaaS phone system configurations.
Want a comprehensive buying guide that answers the most common questions people have when upgrading their business phone system? Check out our FREE Whitepaper, “3 Steps for Planning and Executing your UC/UCaaS Digital Transformation Strategy in 2019.“
The True Cost of a Business Phone System: A Couple of Things to Consider
There are three key things to consider when researching the cost of a phone system upgrade:
- Upfront Costs
- Ongoing Costs
- Total Cost of Ownership
First, let’s take a look at the initial cost associated with each of the following three options: multi-tenant public cloud UCaaS, multi-instance private cloud UCaaS, and upgrading your on-premise UC phone system.
Defining the terms:
- On-premise UC: Traditional PBX with hardware hosted in a data center on-site.
- Public Cloud UCaaS: Traditional “cloud”
- Private Cloud UCaaS: Also called “hybrid cloud” or “multi-instance” this
Then we’ll look at the long-term cost associated with supporting each type of system. Finally, we’ll evaluate the factors that determine the TCO of each type of system.
Upfront Cost Comparison: Public Cloud UCaaS, Private Cloud UCaaS, and On-premise UC
On-premise deployments include infrastructure/hardware, software licenses, endpoints, and installation. Public cloud UCaaS solutions wrap the infrastructure/hardware, software licenses, and installation into one flat monthly license fee. Private cloud solutions also bundle fixed and variable costs into a single monthly fee. Assuming a 100 user environment, a rough estimate of the cost per user for the first year for each system would be:
- On-premise UC: You can expect to pay between $70,000-$90,0000 for hardware/infrastructure, software licenses, endpoints, and installation/deployment support.
- Public cloud solution: In a 100 user environment, in most cases the upfront costs are $0.
- Private cloud solution: Given the wide variety of providers in this space it is highly variable and provider dependent. Most providers are trending toward minimizing upfront costs.
Ongoing Cost Comparison: Multi-tenant Cloud UCaaS, Multi-instance Private Cloud UCaaS, and On-premise UC
For an on-premise UC system, a typical support contract averages 10% of the CAPEX for the solution over 5 years. But, this percentage could vary as much as +/- 5% depending on the value-added reseller and the service level agreement.
Assuming a 100 user environment, a rough estimate of the cost per user per year for each system would be:
- On-premise UC: $120-$145 per user / per year for ongiong maintenance, cost of upgrades and dialtone
- Public cloud UCaaS: Average between $360-$480 per user per year which includes the license cost per month and included deployment support. (This assumes an average of $30-$40 per user for licenses which includes renting the endpoints)
- Private cloud UCaaS: $250 – $350 per user/per year for financing and 3rd party maintenance
Total Cost of Ownership Comparison: Multi-tenant Cloud UCaaS, Multi-instance Private Cloud UCaaS, and On-premise UC
There are three important factors that determine the total cost of ownership (TCO), assuming feature/function is the same.
- The cost of managing the solution
- The life cycle of the solution
- The total number of users
A major benefit of the public cloud UCaaS model is the absolvement of responsibility for uptime, performance, and maintenance of the voice solution by the in-house IT staff. Typically the responsbility and expertise of the IT staff responsibility dramatically decreases This is, once again, built into the per user/per month licensing model.
On-premise UC solutions require in-house expertise to train, troubleshoot, move/add/change users, and guarantee uptime.
Privately managed cloud UCaaS solutions borrow the benefit of the public cloud model by offering the management-as-a-service (aaS). However, instead of pricing these costs as a correlation to the user, it is quite often a percentage of the cost of the hardware under management.
Life Cycle Duration
We are basing this model on the commonly held industry standard of a 5-year TCO life cycle.
Another major benefit of the public cloud solution is that upgrades are built into the licensing cost and are automatically added to the product roadmap. Because there is no equipment on-site that will need to be updated with the software, this ensures that the organization will be able to take advantage of future features as they become available.
On-premise UC solutions require support from a professional services company to assist in system upgrades. Some of which will require the purchase of new switches and servers to maintain compatibility.
Privately managed UCaaS solutions are built to take advantage of real-time expertise in the market to determine when upgrades are necessary to best align with the goals of the organization – whether they be TCO or feature focused.
In a multi-tenant public cloud UCaaS model, the cost is directly correlated with the number of users for the lifetime of the solution. The cost of a 25 user system will always be half the cost of a 50 user system because many of the hardware costs are rolled into the monthly license.
An on-premise UC solution has many individual hardware costs that do not directly correlate to the number of users. For comparison sake many fixed costs from year 1 could be spread out across the total user population, achieving very different per user/per month cost comparisons, thus providing a cost-benefit for environments with a larger population of user licenses.
A multi-instance private cloud solution offers the same cost-benefit of distribution as it relates to the total user population as an on-premise UC solution.
Total Cost of Ownership (TCO) Summary
The entire cost/price model hinges on the number of users in the system.
- Public Cloud UCaaS: For a relatively uncomplicated install, where feature/function can be eliminated as a differentiation point, the sub 20 user environments are very good candidates for a public cloud UCaaS solution due to the ability to distribute large capital hardware and management expenses across a relatively small user population.
- Private Cloud UCaaS: However, for environments that are over 20 users, a private cloud UCaaS solution allows the business to capture the capital cost distribution advantage (the economies of scale per user) of the UC options and the “as-a-service” advantage of the public cloud options. Often times, private cloud options allow the business to lease or finance the hardware as well. This creates a lower capital expense in year one than an on-premise UC deployment and the budget predictability of an operational expenditure over the life cycle of the solution.
- On-premise UC: Though the complexity of installation usually creates a difficult-to-compare use case for enterprise environments, on-premise UC solutions allow for maximum control over the upgrade cycles and management practices surrounding the phone system. Due to the volume of users, one-time hardware costs are distributed down to a modest cost at the “per user” unit cost. And, due to the size of the IT department, it is a relatively small percentage of the cost of the department to provide in-house support.
Assuming a 100 user environment and a 5-year life cycle, a rough estimate of the total cost of ownership divided per user/per year for each system would be:
- On-premise UC: $220-$240 per user per year
- Public cloud UCaaS: $360-$480 per user per year
- Private cloud UCaaS: $250-$350 per user per year
Keeping in mind your organization’s size, needs, and budget parameters, we hope that this summary is helpful in guiding your phone system upgrade decision. Want to talk through these options in more detail, or would you like us to build a model around your specific goals and use case? Schedule a free consultation with us!