What is more cost efficient -- VoIP or an IP telephony system?

What is more cost efficient -- VoIP or an IP telephony system?

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This depends on what the business is using today. For the service element, VoIP will almost always be more cost efficient that TDM-based telephony. There will be less benefit for businesses that make few international calls, as domestic long distance rates have fallen so much with TDM, that VoIP offers only nominal savings. However, many VoIP offerings have flat rate plans for domestic LD, so there will still be savings. Plus, international VoIP rates will almost always be less than TDM. More importantly, though, the monthly line charge will be less than TDM, Furthermore, many features that businesses currently pay for on an a la carte basis will be included with VoIP, so there could be considerable savings here depending on the existing plan.

The IP telephony system will almost always be more cost effective than what preceded it, although in this case, the benefit comes from the upfront cost, as opposed to the ongoing savings from the VoIP service. An IP telephony system will typically be an IP PBX for enterprises, while smaller businesses are more likely to use SIP-based handsets that emulate the PBX feature set via software or web-based VoIP solutions. The scale of cost efficiency is usually greater for the telephony system since the investment can be relatively large, and if the system is being purchased, it only occurs upfront. In cases where the system is leased or financed, then the cost efficiencies recur over time.

As such, the nature of these cost efficiencies is different for each element. To further complicate matters, some providers will bundle the telephony system with their VoIP service, and blend both items into a single monthly price. In those scenarios, it will be very difficult to truly say which element is more cost effective.

This was first published in August 2009

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