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How Much Does a Virtual Phone System Cost?

This article was updated on November 6, 2023

Voice over internet protocol (VoIP) phone systems tend to be much more affordable than other phone systems. Plus, they come with other benefits, like being able to use them anywhere and offering additional features. In this article, we break down the costs associated with different phone systems and explain why VoIP is a great option for both conducting business and cost savings.

Illustration of a person wearing a headset sitting at a desk, seen from behind. In front of the person is an oversized laptop. On the screen is a keypad and an ongoing conversation, along with several pieces of paper money..

Weighing Small-Business Phone System Options

Before you switch or update your small-business phone system, you’ll probably look into prices, ratings for providers, features included, and more. This input will help you make a well-informed decision on which phone system will work best for your business. To help you out, we’ll discuss the prices of different phone systems. In particular, we’ll focus on traditional system costs, private branch exchange (PBX) costs, and (VoIP) phone costs, and whether a traditional or virtual phone system for business tends to be the more affordable option.

How Much Does a New Office Phone System Cost?

The price for a new office phone system will vary depending on several factors, including:

  • Provider

  • Type of phone system

  • Number of lines needed

  • Equipment needed and related installation fees

The costs to consider change based on whether you get a traditional phone system or VoIP. The traditional version is what you probably think of when you think of a phone system. It requires physical desk phones and phone lines to make it work. Average prices for this type, also known as an analog or a key service utility (KSU) system, are:

  • Line rental cost: $50-$100 a month for two lines

  • Physical phones: $50-$250 or more per phone, depending on the number of lines on each phone

  • Installation and configuration: $150-$250

A VoIP system differs from a traditional phone system in that it is a cloud-based phone system for your small business and doesn't require the use of desk phones, although you can still use compatible IP desk phones if desired. With VoIP, you can use any device with an internet connection to make calls,  and most VoIP providers offer mobile or desktop apps that you can install onto your computer or cell phone. (It's important to note that while you will be getting business calls on your personal device, all calls come through the apps themselves and provide a different phone number on outgoing calls.)

There are two different types of VoIP phone service you can choose from: on-premises (also known as a PBX system) or hosted. An on-premises VoIP phone system is kept on your own servers, whereas a hosted VoIP phone system allows you to keep your software on a system provider’s servers.

The costs associated with an on-premises VoIP system typically include:

  • PBX hardware: $6,000-$7,000

  • PBX software licenses: $4,000 for 20 users

  • Installation and configuration: $1,000

  • VoIP-compatible phones: $50-$500 per phone

Typical costs associated with a hosted VoIP system are:

  • Subscription fees: $15-$40 per user per month, although rates may decrease once you reach a certain number of users

  • Add-ons: $10 per user per month, although this will vary depending on the provider and the type of add-on

  • VoIP-compatible phones: $50-$500 per phone, but note that you don’t need phones for this VoIP system to work

To see how each of these phone systems stack up against one another, let’s say that your business has 20 employees.

  • Traditional phone system with two-line phones: $150-$250 for installation plus $2,000-$7,000 per month

  • VoIP on-premises (PBX) phone system: $12,000-$22,000 upfront

  • VoIP hosted phone system: $300-$800 per month (without add-ons) plus $1,000-$10,000 for phones (although physical phones may not be necessary)

When it comes down to it, the cost of VoIP for your small business, if hosted, can be significantly less expensive than a traditional or on-premises phone system. And that doesn’t include the added benefit of a hosted VoIP system — employees don’t have to be in the office to answer work calls. Instead, they can download a mobile app through which they can make and receive business calls while keeping their personal phone number private.

Why Is VoIP Cheaper Than a Normal Telephone Call?

Hosted VoIP phone service for business is often cheaper than a traditional phone system because you only need an internet connection, a device that connects to the internet (which your team will already have), and the VoIP software itself. You also don’t need to worry about paying for physical phone lines or installation costs with a hosted VoIP system. Plus, calls over the internet usually don’t require that you pay per minute; often, VoIP providers offer unlimited domestic calls with their plans.

Do You Need a Subscription for VoIP?

If you purchase a hosted VoIP phone system, you will probably need a subscription. That is because you store your software’s data on the servers of your provider. However, with a subscription you will also get regular updates on the software right through the cloud (which means no downtime or scheduling a maintenance visit!).  Plus, with many  VoIP subscriptions, you can make video calls in addition to regular phone calls.

Where Do You Get a Hosted VoIP Phone System?

If you’re ready to make the switch to a hosted VoIP phone system for your small business, turn to Vonage. We offer Unified Communications as a Service (UCaaS), so you’ll get more than just the ability to make phone calls via the internet. You’ll also be able to do things like communicate internally via messaging on our desktop and mobile  apps,  and send messages to customers via text message or Facebook Messenger.

And because all these features are available in our unified platform, you won’t have to pay for multiple platforms to access these features anymore (although some of our advanced features do cost extra) .

Check out our UCaaS pricing to see how Vonage can fit into — and likely help —your budget.

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