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What are the cost benefits of SIP trunking?

Gartner analyst Sorell Slaymaker explains the cost benefits of SIP trunking for enterprises that make the migration from a legacy telephony system.

With SIP trunking, organizations can reap some cost savings since they no longer need to pay to support hardware...

like PBXs and copper lines. But the savings that come with SIP trunking go beyond just moving hardware to software.

Gartner Research Director Sorell Slaymaker explained the cost benefits of SIP trunking at the Enterprise Connect panel "Maximizing SIP trunking cost savings."

One cost benefit of SIP trunking is new tariffs. Slaymaker said with traditional phone lines, businesses would have to pay two rates for interstate and intrastate calling. For many organizations, intrastate calling rates were often more expensive than interstate rates, he said. Because SIP trunking is IP-based, carriers are not subject to the same rate regulations as traditional phone lines and instead charge a single rate.

The taxes organizations pay are lower when they migrate to SIP trunking.

"For some organizations, that's a big deal," Slaymaker said.

The taxes organizations pay are also lower when they migrate to SIP trunking. Slaymaker said Gartner found that for organizations that are still on the PSTN, around 20% of their bill is taxes and fees. For organizations that migrate to SIP trunking, around 10% of their bill is taxes. However, carriers have different interpretations of rates and regulations, Slaymaker said. He cautioned that organizations looking to migrate to SIP trunking should discuss taxes with their carriers during negotiations.

The second cost benefit of SIP trunking is aggregation. Enterprises can pool SIP trunk capacity across the entire organization so they pay only for the concurrent sessions they use. Many organizations buy more capacity than they need as a method of disaster recovery. With a traditional telephony system, organizations have to pay for T1 access and PRI ports regardless of whether the organization used them, Slaymaker said.

The third cost benefit of SIP trunking is competition. Slaymaker said he believes organizations in the U.S. can save up to 50% on SIP trunking because of high competition among carriers, like XO, Windstream and Comcast.

"We have a lot of hungry and aggressive Tier 2 and Tier 3 carriers," he said. "They're going after the larger enterprises and taking business away from incumbent players."

Enterprises can take advantage of this competition if their incumbent telephony provider also offers SIP services by using the aggressive competition from Tier 2 and 3 carriers as leverage during negotiations. Slaymaker said incumbent carriers are now more willing to negotiate a deal to keep customers.

"They'll give you pricing and it will look attractive, but the message is if you actually go out to bid, they're going to sharpen their pencil," he said.

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Next Steps

Taking advantage of SIP trunking cost savings

The barriers to deploying SIP trunks

The major advantages of SIP trunking

This was last published in June 2015

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