When Free is Not Free – Considering Phone System Total Cost of Ownership

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Some months ago, I was working with a church that was in the market for a new phone system. After I saved them a quote, a church member who was an employee of a large telecom company offered to give them a phone system, a model well beyond their needs. I did some quick calculations, and confirmed what my gut was telling me – their "free" phone system was in fact very expensive!

Most of us do not have the luxury of being offered a free phone system. The same considerations apply however when comparing one new phone system to another, or when making a decision about whether or not to replace the one you already have. You must look beyond the initial purchase price to the total cost of ownership (TCO), or in other words, how much all aspects of the system will cost you over the life of the system.
When considering TCO for a phone system, you should include the following factors:

1) Purchase Cost

While the initial cost of the system is far from the only factor, it is an important one. Purchase cost would include the cost of hardware, software, installation, and any related parts and services. If you look at the TCO for competing systems, the one with the higher initial price may be less expensive in the long run.

2) Yearly Maintenance or Repair Costs

If a maintenance contract is offered on the systems you are considering, make sure to include its cost in your calculations. You should expect that cost to escalate between 10 and 20% per year as your equipment ages. Also, make note of what the contract includes, or more importantly excludes. Many maintenance contracts only allow for a given number of support hours per month, and often do not include the cost of failed components or a trip charge for a technician visit. If a maintenance contract is not to be considered, then you should attempt to include the likely cost of repairing and supporting the system. Ask your vendors what their hourly rate is for support, and what the replacement cost is for typical components.

Do not ignore the first year. Not all systems come with an unlimited one year warranty. Even with those that do, the vendor may charge for a site visit, even if the replacement hardware is free.

Whether or not you have a maintenance contract, find out how much, if anything, the vendor will charge you for calling them with a simple question. Many start the clock as soon as you call, and surprise you with a big bill later for a small question.

Finally, if you are considering a PC-based phone system, make sure to include the cost of maintaining and supporting the under PC, which like any other Windows-based PC, can be expensive.

3) Moves, Adds, and Changes

For an organization that is growing or changing significantly, the cost of paying a vendor to move phones or change configurations can be very high. Understand what your vendor will charge for such changes, and attempt to ascertain how many such changes are likely in a given year.

Consider a system that provides easy-to-use management software and IP-based phones as an alternative. When moving an IP-based phone for example, you simply unplug the phone from one network jack, and plug it in another, with no vendor assistance required. These features can allow you to change configurations and move phones yourself, eliminating most or all of the related vendor costs.

4) Additional Equipment

You may be getting a sweet deal on a system up front, but consider how much it will cost to expand your system. Vendors often offer steep discounts to get your business initially, but seldom sell upgrades below list price. Use the Internet as a resource to get street pricing for components such as phones and expansion memory modules. Ask where your vendor will install components that you purchase elsewhere.

5) Vendor Lock-In

Most of the small-office phone systems sold today use digital phone sets which are proprietary to a single manufacturer, and in many cases, a specific family of phone systems. If you decide to upgrade or change systems and move away from a particular vendor or product family, you will in all likelihood need to replace your phones. Since the phones are often the bulk of the initial purchase price, this can be an expensive proposition.

A number of systems are available however that can use off-the-shelf IP and analog phones, and integrate them into the system well. If you select such a platform, you can continue to use the same phones even if you need to upgrade or replace your system in the future.

6) Phone Service Requirements

Some systems can not easily adapt to changes in phone services. For example, even if you do not plan to consider using Voice over IP at the time you purchase a system, you may wish to do so later. Make sure you consider the cost of adding such a capacity in the future, because in many cases it will involve replacing the system.

Also, note that some systems come equipped to handle T-1 lines. These lines are very expensive for a small organization. If you elect to use T-1 service initially, and then decide to switch to regular phone lines later, you may find the cost of the new hardware to be prohibitive.

In summary, there is much more involved in the cost of a phone system than the initial purchase price. Considering the TCO of any system can help you save a significant amount of money over the life of the system, and give you the flexibility to choose from a wide array of phone services that can save you money in the long run. As an example, a customer who purchased a Panasonic system a couple of years ago discovered that adding voicemail to his system was more expensive that buying a new system. Had he considered the cost of adding voicemail up front, he may well have avoided the need to replace his system.

Copyright 2009, eNable Business Solutions, LLC, All rights reserved

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Source by Robert Covington