Most businesses want the same thing when it comes to their phone system: quality phones, reliable service and helpful features, designed with flexibility in mind and fitting neatly within their budget.

To achieve those things, some companies are letting their service provider do the heavy lifting. A hosted IP private branch exchange (PBX) solution integrates multiple locations in a feature-rich package, while eliminating the upfront costs that often make businesses reluctant to upgrade.

“The premise behind hosted IP PBX is that your company will run its phones off the hosting company’s switch — a large, expensive piece of equipment that you are sharing with a bunch of other companies,” says John Putnam, national sales director for PowerNet Global. “The only equipment in your building is the phone handsets themselves.”

Smart Business spoke with Putnam about the advantages of switching to a hosted phone system and how to determine if doing so could help your company.

Why are companies moving to a hosted IP solution?

It comes down to a couple of different reasons. Obviously, financial reasons play a major part, but also, companies are looking for features that allow them to run their business better.

Many organizations upgraded their phone systems for the year 2000. Those systems don’t have the features and capabilities that companies want, but the capital expenditure of buying a new system in today’s economy makes them uncomfortable.

However, if they choose a hosted solution, the capital expenditure is much less because they are running their system off the hosting company’s phone switch. With some of the handset leasing programs available, companies can get by without a large capital expenditure up front.

What types of features are available?

Aside from financial concerns, many companies decide to switch to a hosted solution because they want features their current system is unable to provide, such as caller ID, individual voice mail for everyone in the company and the ability to forward calls to cell phones. If your phone system is missing these features, but you don’t want to write a check for $30,000 to $60,000 for a new phone system, a hosted solution is ideal. Even for smaller companies, a $5,000 capital expenditure for a new phone system is daunting given the uncertainties in today’s economy.

Now those features are available without a huge upfront capital expenditure. For a small business with 10 handsets, you may be looking at $60 a month versus a $5,000 to $10,000 capital expenditure.

What are the benefits of integrating multiple sites through hosted telephony?

Multisite companies with premise-based PBX systems have to maintain, upgrade and support those systems at each site. Sending someone out to make the necessary changes to each system is costly and is not the most effective use of resources. With a hosted solution, companies can make a change at one location to update the phone systems at each of their sites, reducing their continuing cost. Each phone handset is running off the hosting company’s equipment, so they are all integrated.

That allows you to treat the customer in a different manner. For example, if a customer calls one store and it doesn’t have the item he or she is looking for in stock, the hosted system can transfer the customer to another store without requiring that person to call another number. If someone at one store doesn’t answer, the system can automatically dial another store. If a store needs to transfer a customer back to the corporate headquarters for centralized billing functions, the customer is transferred, not called back from a different number.

What are the other advantages of using a VoIP system for telecommunications?

Typically, if you are using VoIP technology, there is a lower cost for the service itself. Companies can take advantage of VoIP services that are normally less expensive than traditional services. The cost per line is lower, the cost for long distance is lower and the continuing costs are lower. And because it is an IT-based solution, if you call from one store to another, there is no long distance involved at all. A Milwaukee store calls a Chicago store, and because all phones are on the same switch, that is now a zero-cost call.

For what type of companies does this strategy makes sense?

Smaller businesses, the three to 20 handset market, have been the early adopters. Now, larger corporations are adopting this strategy, as well, as this technology is particularly well suited for large companies with 200 small sites. These enterprise clients have recognized that they aren’t necessarily an enterprise; they are a bunch of small businesses.

For example, if a business has 1,000 sites and each of those sites has five to 10 phones, this strategy becomes very attractive. It looks like an enterprise play, but, in fact, it’s a small business play multiplied a thousand times.

What kind of results can companies expect from a switch to a hosted IP phone solution?

A number of clients have been able to take advantage of a new phone solution for either the same price or less than they were paying for service before. So, in essence, it is a free service, because if you paid $500 for service before and save enough on the service that, when taken in conjunction with the handset leasing program, your total spending is about the same as it was before. However, you’re getting all these new features and capabilities with the service.

John Putnam is national sales director for PowerNet Global. Reach him at (866) 764-7329 or

Insights Technology is brought to you by PowerNet Global

Published in Cincinnati