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Hosted Phone Systems for SMBs Hosted vs. On-Premises Phone Systems? Routing calls: Open Internet Connection vs. T-1 Line How Much Does It Cost? Hosted VoIP Telephony Equipment and Setup Hosted VoIP PBX phone systems are growing fast among small and midsize businesses, but how can you tell if they're the right solution for your company? What's the point of small businesses running their own phone systems? According to researchers at Access Market International, not much. AMI predicts in 2010, SMBs will spend $1.56 billion on hosted VoIP communications services, some 7% share of the entire phone service market, compared to just $164.9 million in 2005. That kind of growth seems to indicate that hosted VoIP telephony has come a long way from the days when the technology was characterized by dropped calls, voice static and unreliable service. But where does hosted VoIP stand today, and has it improved enough for your business to rely on it for primary communications? Hosted vs. On-Premises Phone Systems? A hosted VoIP system, or "virtual PBX," works by having a provider company "host" the equipment (such as a phone cabinet and routing software) at its own data center, and connect calls to your office using a high-speed Internet connection or a T-1 phone line. Some local providers of hosted telephony use a combination approach: routing calls from the provider's location over "landline" phones as local calls. This eliminates the need for on-site phone equipment and an upgraded Internet connection, and allows users to use "regular" phones. But this service isn't available in all geographic areas, and can cost significantly more than services that route calls using an Internet connection or a T-1 line. Hosted PBX system software can be downloaded from a provider's Web site by the user or configured online by the provider (via remote access) in a process similar to installing any new computer application. Users can manage system settings and walk through tutorials on using system features on their own computers. Most "enterprise grade" phone systems require customers to use special VoIP phones or VoIP adapters to traditional phones, though some businesses choose to route calls through desktop computers using an attached headset and microphone. Enterprise-grade systems may also require a short site visit to connect, similar to getting basic cable installed at your home. As with typical on-site PBX systems, businesses can designate a certain amount of bandwidth for phone calls, data transfers, etc., in order to promote optimal call quality. One upside to using a hosted system is that the user-end management is fairly simple, and can be done online in real time. If getting the system installed is analogous to setting up basic cable, adding a new phone line, implementing tracking features, or making other changes is similar to ordering a pay-perview movie.

Routing calls: Open Internet Connection vs. T-1 Line How calls are routed is a very important consideration for hosted VoIP PBXs: Businesses must pay for the connection in addition to the phone service itself. Connecting over the open Internet can impact call quality and cause service interruptions or packet loss, which can lead to dropped calls, static, or hollow-sound voices on calls. Routing calls over the open Internet can also become a security problem. It's much easier to hack into an Internet call and eavesdrop on it. Routing calls using a "dedicated connection" or a T-1 line is more secure and produces better call quality. That's because it's easier to designate bandwidth and minimize packet loss using a dedicated connection. But T-1 lines for smaller offices (10 users or less) can run upwards of $500 each month, a figure that can break the phone system budget for many small businesses. At the very least it's likely to remove many of VoIP's cost advantages. Before choosing an open Internet connection for a hosted PBX system, make sure you take steps to address potential security breaches, such as setting up firewalls, separating data and voice traffic over your network (extra benefit -- isolating data and voice components delivers better call quality), and encrypting the signal for outgoing calls. Ask potential providers for local references who can give you an idea of the service quality you can expect. Hosted VoIP Telephony Equipment and Setup Hosted PBX systems don't require you to install a phone cabinet or routing software at your business. but depending on what level of system you choose, you may need to get new phones. Hosted systems come in two categories: Basic and Enterprise-grade. Basic systems, such as those from OneBox, Ring Central Online, or Skype, more closely resemble regular VoIP telephony than hosted PBXs, though they are often referred to as "hosted" systems. These systems provide features like auto attendant and voicemail, and usually supply fewer than 10 extensions. Beyond working phones and an Internet connection, you won't need any additional hardware. Any phone with a dial tone will work with the system once software is installed on your office computers. If you're using landline phones, calls can be routed from the local provider point of service as local calls, though you may pay more for this service. Setup is quick and easy: you go to the provider's Web site, click on the appropriate links for installation, and within an hour your new phone system is up and running. Many smaller businesses like basic hosted systems because they're easy, inexpensive, and require minimal equipment. The downside is that your calls are traveling over the Internet, where they could be intercepted, hacked into, and copied. These systems also don't typically let users designate bandwidth for calls and Internet traffic, which could impact call quality and Internet availability. Enterprise systems, like Ring Central Office, OnSIP, and 8x8 Virtual Office, are true PBX systems: You can designate bandwidth, maintain control of traffic on the system, and customize or add new features as needed. Enterprise PBX systems are installed much the same way as the more VoIP-like offerings: by

downloading system software from a provider's Web site to your computer. You'll need to decide how you want to route your calls, and enterprise-grade hosted PBX's do require VoIP phones, or at least VoIP adaptors to traditional phones. Most providers that allow you to purchase and download a system online can supply phones as well. They'll either be included in the quote for the system or added as a separate purchase. Some providers may allow you to use your own VoIP phones or purchase adaptors for your current landline equipment, but others will require you to purchase phones as part of your service package. Most companies provide live representatives that can walk you through the setup process. How Much Does It Cost? Hosted PBX providers bill in two ways: month-to-month or on contract. Contract services work like traditional phone system agreements: you agree to use the system for a specified period of time, and agree on features, maintenance, acceptable downtime, minute use, and other provisions in a Service Level Agreement (SLA), similar to a traditional phone system contract. For the more VoIP-like systems, month-to-month offerings are common, and service costs are low, sometimes less $20 per month total for a service package that features voicemail, call transfer, and other features. Enterprise-grade systems are more expensive, though costs vary depending on the number of extensions and the features you choose. Most systems with unlimited minute plans come in under $200 a month total. Some enterprise-grade solution providers also charge "per seat" or per user- costs that typically range from $30-$70 per person. Using a hosted phone system is like using hosted software, you pay these charges for as long as you use the system. Since you'll never "own" the equipment, hosted system costs can't be amortized or depreciated. Keep in mind that service costs cover only system service, you'll also need to pay for your connection (Internet connection or T-1 line) and any hardware the system requires, such as VoIP phones or adaptors. The costs of the service itself can also depend on your connection. For example, some providers carry calls over a managed IP network and then transfer them over the PSTN (Public Switched Telephone Network, the traditional landline phone network) as local calls. That lets businesses continue to use their traditional phones without adaptors. Not surprisingly, this option can add additional costs. If you're considering moving to a new phone system, make sure you know how you work with your providers to go through all the options. You can often drive down the monthly service costs significantly by making some simple changes, such as purchasing VoIP phones or upgrading your current internet connection. Of course, before you make a final decision, you'll want to get several different vendor quotes. Though hosted PBX phone system technology has come a long way in the past decade, hosted systems aren't necessarily the best fit or the most economical choice for every business. Make sure you do your research on all your available technology options and vendors in order to ensure the best results. Resource Nation provides how-to purchasing guides, tips for selecting business service providers, and a free quote-comparison service that allows business owners to compare price and service offerings in over 100 categories.