Does Switching to VoIP Save Money?

Nadav Shemer
 saving money with enterprise tech
Cutting the cords in favor of a cloud-hosted VoIP system can benefit your company in many ways.

For example, it can unify different forms of communication, such as voice, messaging, and video, in one system. It encourages mobility, by letting employees connect to their office phone from anywhere in the world. And it can add plenty of features and third-party integrations such as Salesforce and Zendesk to your digital arsenal.

All of these amazing benefits must cost a lot, right? 


VoIP’s Business Benefits

Not only can a managed VoIP service do wonders for your business’s productivity, but it generally costs less than a traditional landline system. For medium-to-large businesses with hundreds or thousands of employees and complex software-integration needs, VoIP can have a significant impact on the bottom line.

Here are 4 ways that VoIP can save your business money:

saving money

1. Cordless Costs Less to Setup and Maintain

Whether you’re sticking with cable TV over Netflix or Hulu at home or a traditional landline over VoIP in the office, the same principle applies: cords and wires are hardware, and hardware costs extra. With a landline system, a medium or large business could easily pay tens of thousands of dollars on installing, setup, and licensing of a private branch exchange (PBX), thousands per month on line rental, and a great deal more on maintenance. With a managed VoIP there are no hardware requirements, so you can get by with only paying a simple monthly fee per user.

2. Remote Workforce = Reduced Overheads

One of the greatest benefits of having a VoIP for business is that it allows your employees to communicate through mobile phones—which makes it easier to orchestrate a remote workforce. The more employees you have working outside the office, the lower your overheads. Having fewer employees in the office on a full-time basis means you can cut back on furniture and equipment costs, air conditioning, office parties, rent, everything.

3. No Paying Through the Roof to Move or Expand

Using a traditional phone network—as opposed to VoIP—requires businesses to set up and maintain a PBX system at each office. Each time that those businesses upgrade their PBX, replace an aging system, move offices, or opened a new location requires a significant capital investment. With VoIP, on the other hand, businesses can take their audio communications with them wherever they go. Whether it’s one employee working from home or an entire company moving office, being mobile pays dividends.

4. One Communications Bill Instead of Many

The terms VoIP and unified communications (UC) go hand in hand, and that’s because VoIP lets you integrate all types of forms of communication–such as voice, text, fax, video, and conferencing–into one system. With unified communications, businesses don’t end up purchasing fax services, video conferencing, etc. from separate providers. With UC, it all falls under the one bill.

Calculating the Cost Savings of VoIP

How a VoIP phone system impacts your company’s bottom line depends on your needs. Variables include: number of users; features and third-party integrations; and optional equipment, such as hardphones. Choosing a hosted or managed VoIP solution is generally cheaper than having an on-premise VoIP, unless you prefer your IT team manage the system.

The following example is intended only as a general guide and not as a substitute for your own calculations. It is based on the RingCentral Office plan for 100-999 people, when compared to a cross-section of traditional landline plans for businesses of a similar size. Obviously, it doesn’t take into account how VoIP can enhance productivity and efficiency, further boosting the bottom line.

Upfront Costs
Setup & Installation
Approx. $5,000
PBX Hardware
Up to $8,000
PBX Software License
Up to $4,000 /year
$80 - $400 per user
$80 - $400 per user

*Optional accessory for VoIP users, requirement of traditional landline

Regular Costs
Per User / Per Month
Unlimited calls in US/Canada
~$800 per month
International calls#
$0.039 - $0.575 /minute
$0.08 - $3.25 /minute^
Unlimited video conferencing
Pay to third party
Unlimited texts
Pay to third party
Unlimited internet fax
Pay to third party
Third-party integrations
Limited, pay third parties

#Varies by country. For both VoIP and traditional, calls to mobile are more expensive than calls to landlines.

^Based on prices from Xfinity’s landline plan.

The Bottom Line

 No matter which way you look at it, VoIP systems are far cheaper than traditional business landlines. As the above table shows, VoIP has minimal setup costs. Traditional phone lines, in contrast, can cost up to $14,000 to setup, not to mention up to $4,000 per year in licensing fees. Small businesses that go down the traditional route can install a KSU-less system for less, although the costs of setting up the system can still reach up to $300 per user. 

The following table compares VoIP to traditional business lines by cost per user per month, including yearly software licenses, unlimited calls in the US and Canada, and the cost per user per month and  excluding setup costs. In both columns, cost per user falls as the number of user grows. Again, VoIP is clearly 

the cheaper option.

Number of Users
$20 - $50
~ $120
$25 - $50
~ $100
$23 - $23
~ $90
$20 - $40
~ $45

So, How Much Money Could Your Business Be Saving With VoIP?

As the above guide shows, VoIP providers aren’t cheaper than landline providers because of what they charge for–but rather, because of what they don’t charge for. In its most basic form, cloud-hosted VoIP for business is billed per user per month. The larger your business, the cheaper the per-user monthly cost. Traditional landlines, on the other hand, require significant startup costs and--if you’re looking to use multiple forms of communications--payments to multiple providers.

To find out more about VoIP providers check out this chart comparing the best VoIP providers of 2020.

Nadav Shemer
Nadav Shemer specializes in business, tech, and energy, with a background in financial journalism, hi-tech and startups. He enjoys writing about the latest innovations in financial services and products.