Do you still pay per user for telephony services?

Hosted PBX services allow a wealth of flexibility in billing models. Which is best?

Telephone services have transformed over the past few years with the advent of voice-over-IP. Once just an over-hyped promise of cheaper, high-tech telephony, VoIP is now a completely established technology that has run rampant in the market, displacing traditional TDM and ISDN systems.

VoIP has also allowed for many models of delivery of telephony services. Many telephone systems run as software applications on a server rather than as a traditional piece of proprietary tin. Any indeed, telephony has also joined the crowd of applications being served by cloud providers as a hosted service with all the usual benefits of scalability, feature set, reliability and on-demand billing.

The Billing Divide

At the same time a divide has opened up in billing models. Simply put, do you pay for per user, that is a monthly license for every user on the system, or do you pay for the number of calls you can make on the system?

In the past, with ISDN and TDM phones systems, traditional telecoms companies would have a discussion with the clients about the number of simultaneous outgoing calls the system needed to support. This would determine the type of ISDN technology that the customer would buy (ISDN2e vs ISDN30e) and the number of channels they would need – 1 channel per simultaneous call. They would then get the number of handsets and extensions required to spec up the scale of the system and the number of phones.

Being billed as if you are a call centre?

A key part of this discussion was about the call volumes in the business. At one extreme, if you are a call centre then you can expect a high proportion of your users would be on the phone at any one time, say, 1 in 2. At the other you might have a company like a design agency where most of the staff did not make or take external calls as they would be too busy creating and the ratio here might be 1 in 5. So, in a call centre business of 50 people, you would need 25 channels of ISDN and in the design company of 50 users, you would just need 10 channels.

This all seemed to work pretty well although unless you did your homework there would be a nagging feeling that you would either be paying for channels you weren’t ever using, or else that some of the time, you would actually run out of channels and you would get engaged tones for callers – not good.

Enter cloud hosted PBXs and per user charging. Suddenly a potentially complicated question becomes easy. I have 20 users. I pay for 20 extensions. I have 50 users, I pay for 50 extensions. Easy right? Well yes, easy. But is this actually the smartest way to do it in all cases?

Let’s remember that per-user is not the only model in the world of cloud hosted phone systems. Per-channel services are out there and they will persist. One size does not fit all. Why, and how to decide which suits you best? Well, let’s look at the pros and cons.

5 Phone users vs 100

If you are really small business, like under 10 users, the first thing to be aware of is that your numbers of simultaneous calls will vary wildly when looked at against your total number of users. A business of 5 users could quite conceivably have everyone on the phone at the same time when they are busy. However, a normal mid-size business of 100 users all being on the phone at the same time is just not something that will ever happen and you don’t have to plan for it. Basically, as you get bigger, then you can rely more and more on the ratios of 1 in 5 (or whatever is appropriate for you type of business) that I mentioned earlier. Per-user systems typically provide an available channel for every user so that works well for small organisations, but is really not required for larger ones.

The big thing to bear in mind is how the costs stack up in the 2 models. On a per-user model, the great attraction is the “pay as you grow” model. If you are small, you only pay a small rental and as you grow you charges grow with each user you add.

The numbers (and maybe a £50k saving)

So, let’s say you are paying the going rate of £15.00 per user per month for a decent package including UK calls. For 5 users then that is £75 a month for a fully maintained, high-capable phone system with call routing and voicemail that basically never goes wrong. That is a bargain that would have been a fantasy 10 years ago. At 25 users,it’s starting to look more expensive at £375 – but still better value than a traditional ISDN system over its lifetime.

On the flip side, if you are a business of 100 users, then the same service will cost you £1500 a month, or £99K over 5 years… Now that may still be something you can swallow but it compares with a traditional model where you would have spent, say, £10K on the phone system which lasted for 5-7 years, then maybe £600 a month on line rental and system maintenance, so sure, per user pricing is not crazy, but it probably not going to be delivering any savings – let’s put it that way.

So in this case, if you have visibility of the number of calls you will be making, then spending, say, £672 a month on a hosted 32 channel system probably makes a lot more sense commercially. In fact almost £50,000 saving over 5 years.

Next, you want to think about charges for user features such as soft-clients, call centre agents, call recording. Often with user-based pricing, these features are charged extra based on usage. On a per-channel model, they are either free or there is a per-system upgrade charge that is spread across all your users. So if you want “bolt-on” features, then that is often an incentive to go per-channel rather than per-user.

Are you likely to benefit?

Every company is different so you can’t make any blanket statements, and at the end of the day, there might be killer features in a system that is billed per-user that makes it worth paying more over a comparable system that is billed per-channel. However, in general, the fundamental factors point to the conclusion that bigger organisations should go for a per-channel model and smaller ones do better on per-user. It is tough to make a hard and fast rule but we would normally recommend per-user for businesses up to around 12 users, per-channel from 25 upwards and a grey area in the middle where you have to look at the features you need to do business day-to-day.

At the end of the day, it’s nice to have choice!