By: Kelser on January 27, 2022
Traditional vs. VoIP Telephone Services: 3 Key Differences
There’s a lot of buzz when it comes to telephone service (and we don’t mean static on the line). Technology advances have made it possible to use the internet not only to call people but also to message and video chat for very little (if any) cost - even if the other person is in another state or country.
As telephone systems have gotten more high-tech, many IT organizations have assumed responsibility for this key business function. Whether that is the case in your organization or not, it’s important to understand the capabilities and efficiencies that technology advances provide.
As a managed services provider (MSP), Kelser Corporation supports VoIP technology for numerous clients and has helped many decide whether switching to VoIP makes sense for their organization. But we didn't write this article to sell you our services, we truly want to educate you about the differences between these two technologies.
We understand that VoIP may or may not be the right choice for you at this moment. We also understand the value of having the information you need to make an informed decision.
We sat down with Mike Tracey, owner of JAZE, LLC, a local technology solutions company and partner of Kelser, to get his honest take on key differences between traditional and VoIP telephone services.
Founded in 2008, JAZE offers more than 30 years of IT consulting experience focusing on the delivery of infrastructure services and cloud solutions.
Our goal in this article is to capitalize on Mike's experience and provide the information you need to make the best choice of telephone service for your organization.
It's important for us to share this knowledge so that every organization has what they need to make the choice that is right for them. It’s vital to be armed now with the latest information to make a smart decision for your business.
In this article, Mike will walk you through a brief description of what VoIP is and how it works. Then he’ll explore three key differences between VoIP and traditional telephone service.
For the purposes of this article, we are going to focus on cloud-based VoIP systems. We also are going to use a private branch exchange (PBX) as an example of traditional telephone technology.
By the end of this article, you’ll understand how technology advances have changed the landscape of communication and how that directly impacts the options available to you helping prepare you to decide which solution is the best suited to your specific needs.
What Is VoIP? How Does It Work?
VoIP technology provides the ability to initiate and receive phone calls, instant messages and video feeds over the Internet, rather than through traditional wires and cables used in analog phone systems or through cell phone optical fiber networks.
Similar to a traditional telephone number, every device that connects to an internet network has a unique internet protocol (or IP) address. Devices use IP addresses to connect with each other over the internet. (To find out your IP address, search “What is My IP Address” from your internet browser.)
VoIP converts voice signals to data and transmits the data via existing internet connections.
3 Important Differences Between VoIP and Traditional Telephone Technology
Everything in life has pros and cons. Outlined below are three important differences between VoIP and a traditional telephone option.
For clarity, we’ll use a private branch exchange (PBX) phone system as our example of traditional technology. PBX systems are in use in many organizations today.
We know that cost is top of mind, so let’s get to that first.
With cloud-based VoIP solutions, there is no need for wiring or installation because the system is designed to use existing network infrastructure to transmit voice signals as data.
On average, cloud-based VoIP subscriptions are widely reported to cost about $20 per seat (or user) per month. As the total number of employees rises or falls, the subscription cost increases or decreases proportionally.
There also may be associated costs for things like headsets and training for users.
VoIP providers typically allow customers to contract for the hardware as a predictable monthly expense rather than an upfront expenditure. Depending on the terms of the contract, equipment may be owned by the service provider or the customer.
When companies begin to evaluate VoIP solutions, they often find that they are paying for telephone lines that they don’t need. The money they will save by not paying for those lines often helps justify purchasing a new VoIP phone system.
Another way to control costs is to choose a provider that supports “softphones.” These are phones that are loaded onto a laptop or PC.
Softphones make it possible to use your mobile device as your handset, eliminating the expense of a traditional handset. While there is a cost associated with softphones, it is typically less expensive than a handset.
One other cost consideration is your internet bandwidth. If you use a DSL or slow cable modem for access, you may need to upgrade since your voice and data will travel on the same connection. Make sure to factor this in as another cost factor.
You don’t want to be surprised late in the game by additional costs.
A quick internet search estimates the cost of a PBX base system, actual phones, additional features, wiring and installation, and training and support to cost on average about $800 to $1,000 per employee.
This one-time cost is booked as a capital expense and is depreciated over several years.
Your business owns the equipment.
Unlimited long-distance calls are often included in the monthly subscription rate for cloud-based VoIP telephone services. It doesn’t matter if the call is to another state or another country, the calls are typically free or at a minimal cost.
Cloud-based VoIP service offers the ability to connect remotely through an application on your PC or mobile device and share information across any number of locations.
Features like mobile twinning (where both your office and cell phones ring simultaneously), re-routing calls with a few keystrokes in the event of an issue, and moving calls from a desk phone to a cell phone, define the truly on-the-go experience of a VoIP system.
When you have a remote workforce or a sales force on the road, these features are invaluable. If you want to be able to make and receive calls no matter where you are, a VoIP service is for you.
Another advantage of VoIP systems is that they can be deployed quickly and easily and management is a snap, making it possible to make most changes in real-time through a portal.
One of the advantages of traditional telephone systems, like PBX, is that they don’t rely on the internet. If your internet goes out, your phone lines still work, giving you the advantage of keeping the lines of communication open.
Some traditional services offer no-charge long-distance service. Pay attention to the terms. Some offer no charge to the lower 48 states. Others are no charge for calls to the US, Canada, and Mexico. Others are no charge to the US, Canada, Mexico, and the Caribbean. Know what to expect.
Most traditional telephone systems, like PBX, can’t communicate with other devices, making them an ineffective choice for organizations with remote sites and a remote workforce.
Some providers offer options for a hybrid system, which allows for a combination of on-premise (traditional) and cloud services, providing a redundant solution.
3. Ongoing Maintenance/Support Cost
With cloud-based VoIP service, an organization’s monthly fee includes upgrades to the service.
This concept bears repeating:
With cloud-based VoIP, you never have to touch your phone system. You never have to worry about additional maintenance or upgrade costs.
Since the server is in the cloud, there is not a physical server that needs to be maintained and there are no wires to worry about. Maintenance and upgrades are seamlessly installed on devices via the cloud.
It’s important to look at the total cost of ownership with each option.
With on-premise systems aging and cloud-based systems becoming the norm, moving away from capital expenses and toward operational expenses is something to think about when considering taking the leap to a VoIP system.
Budgeting will become easier because you will have a reliable ongoing regular expense, while maintenance contracts and costs for individual phone lines disappear. This factor alone often helps justify the cost of moving to VoIP.
Because the organization owns the equipment, they are responsible for maintenance and upkeep. Whether the server is on-prem or co-located, there are elements of these systems that need to be maintained and upgrades that need to be installed.
In the same way as a car, as traditional telephone equipment gets older, parts get harder to find and more expensive. At some point the cost of maintenance and upgrades outpaces the value of the telephone system, leading to a complete replacement.
For example, as the technology landscape changes, we’re already seeing increased costs for copper lines used in traditional phone systems which will lead to a decrease in availability.
As this happens and the traditional infrastructure ages, there will be less need (or desire) to manage on-site hardware, making maintenance a costly and difficult prospect.
At some point, copper phone lines will be a thing of the past, potentially making traditional on-premise phone systems obsolete.
People often think their phone system is paid for and they forget about the ongoing cost of ownership (maintenance and upgrades).
There is an ongoing cost for the circuits, the support, and the long-distance service. You may have paid for the hardware, but the rest of the costs are ongoing.
9 Things To Consider When Deciding Between A VoIP Or Traditional Phone System
Ultimately, the decision about which phone system is right for your organization comes down to the features you want and need.
I’ve seen people opt for features that sound fantastic, only to realize later that they don’t really use them. Other times, people have opted for the cheapest solution, only to realize that with a little bit bigger investment, they could have added more flexibility.
Here are some questions to think about when you are considering a new phone system:
1. First, take a hard look at your current system. What capabilities do you wish it had? What is your total cost of ownership (including maintenance and upgrades)?
2. Do you use software applications that might come into play? Do you have a customer relationship management (CRM) tool that you want to populate when customers call?
3. Do you want calendar integration?
4. Do you have a receptionist? Do you want customers to have the option of either calling the main company number or dialing an employee directly?
5. Do you want to be able to forward calls to your cell?
6. Do you use pagers?
7. Is on-demand recording important?
8. Do you want the option to have voicemail messages transcribed and sent to your email? This can be a great feature when you are out of the office. Voicemail messages from your office phone are put into a WAV file and sent to you as an email that you can listen to directly from your mobile device. No more dialing into the phone system and entering passwords from the road!
9. Consider how different VoIP providers handle power outages. Some will predictably forward the main business telephone number to an alternate number.
Many offer a portal that an administrator can log into from a mobile device to re-route calls to another number with just a few keystrokes. There are also options to be notified via text message when your calls are being forwarded to your mobile devices.
The important takeaway is: don’t approach the process of choosing a new phone system with a particular solution in mind.
Each business has different needs. No one phone system is going to be the perfect fit for every business.
The good news is that in today’s world there are likely a few options that will meet the needs of your organization. Sometimes weighing the pros and cons of different options may mean you a little bit of extra help from an outside expert, like an MSP, to determine which one is best for you.
What’s The Next Step In Choosing Between Traditional Telephone Service and VoIP?
Every business knows their phone system is important. It has always been the lifeline to customers, but now we can integrate it with other business processes and functions to increase overall connection to customers and efficiency.
After reading this article, you have a better understanding of the differences between VoIP and traditional telephone services. Each option has a place in the conversation.
If we look at how Covid-19 has changed the way businesses operate, the need to be flexible and scalable on-demand has never been more important.
But the reality is this: If your workforce is all located in one building and the majority of your business is local, the features of a VoIP system may be more than you need.
On the other hand, if you make international calls and have multiple (and/or mobile) offices, maybe a VoIP system can help make things more efficient and cost-effective.
Some organizations may make a purely cost-based decision. My only caution with that approach is to make sure you understand the services and functionality you are sacrificing to get that lower cost.
Armed with this additional information, you may see a clear path forward for your organization.
If you still have questions, many MSPs will work with you to figure out which telephone solution makes the most sense for your organization. At Kelser, we work closely with our clients, often providing cost/benefit analysis services that make it easy to compare your current telephone system with other options. We also provide demonstrations of different telephone options for customers.
This article likely has you wondering what else MSPs do. Read this article: What Does A Managed Services Provider (MSP) Do? (Essential & Premium Services).
Or if you'd like to talk with Kelser about helping with your telephone selection process, fill out the form below and one of our dedicated team members will contact you.