When it comes to telecommunications in your office, do you do-it-yourself or farm it out? Make or buy?

That’s basically the decision your small or mid-size business needs to make when it weighs the differences between new voice over Internet protocol (VoIP) private branch exchange (PBX) telecom services, experts say.

As telecom costs have come down due to the availability of VoIP services, small and mid-size businesses are faced with new options for configuring a VoIP PBX that connects office telephones, fax machines, and other connections to the public switched telephone network. About 30 percent of all North American businesses with fewer than 1,000 employees were using IP PBX systems in 2007, according to Forrester Research.

At present, there are basically two types of services available. Providers like Fonality and Talkswitch offer PBX products built on open-source software that requires firms to purchase on-site equipment. Others, such as Covad, Qwest, and Verizon, offer full-service hosted PBX services where they house the equipment and do the troubleshooting for you if things go wrong.  Fonality offers a “hybrid hosted” product as well that installs with an office’s existing switching.

Pros and cons of open source products

At first blush, PBX offerings that are based on Asterisk, the original open source PBX software, might seem inexpensive. They are, after all, based on something that’s free. Fonality and talkswitch charge between $2,000 and $3,000 for an 8-line and voice mail package.

But prices continue to rise with the number of employees. Also, there is maintenance and staffing to consider. “You have to have staff people that understand voice, and that’s becoming rarer and rarer,” notes Lisa Pierce, vice president with Forrester.

There is also the matter of line quality. Subject to echoes and garbling, a conversation over VOIP does not match the quality of a landline connection. “All [VoIP PBX-based] calls go over the Internet, even sales calls, and they suffer when it comes to quality,” admits Chris Lyman, chief executive officer of Fonality.

One advantage open-source-based products have, however, is that they are more easily customized. “With our hosted product, we only have three flavors,” notes Steve Robinson, spokesperson for Qwest, referring to the number of hosted packages the firm offers.

Pros and cons of hosted products

But for many, three flavors might be enough choice. With a hosted product, “everything’s managed from the cloud,” says Qwest’s Robinson. “If the system goes down, we have a 24X7 help desk,” he notes, and a full range of features is available, including forwarding messages to e-mail.

Moreover, service-level agreements on the lines can help speak to the issues of quality, maintenance, and security, notes Robinson. Qwest charges $35 per seat, including handset, as part of a three-year agreement.

Fonality’s “hybrid hosted” offering, at $5-$10/month/employee, offers hosting, but takes calls through the existing office network. Instead of installing traditional hardware, Fonality’s trixbox product provides a souped-up Dell computer that has been fitted with the necessary technology, explains Lyman. “This is a much, much cheaper option,” he notes, referring to standard hosted products as well as most open-source-based plans.

However, the service packages offered, equipment (if any) required, and service agreements can vary widely, making it difficult to compare these products by price. When looking at costs, “make sure you’re comparing apples to apples,” advises Qwest spokesman Jon Lentz.

Here's how to decide

By answering these questions, your company will be well-equipped to make the best choice.

  • Do you have the staff and know-how to install and maintain an open-source-based system?
  • Does your company need the customization that an open-source-based system could provide?
  • Would your company benefit more from having its system managed “from the cloud”?
  • How important is the superior line quality guarantees that hosted services can provide?


The choice between types of VoIP PBX solutions for business may ultimately come down to what type of resources your business has available. Web-hosted services are most often billed as monthly fees, you don't need to provide staff for maintenance, and your staff can concentrate on other aspects of business. If cost savings initially drove you to deploy VoIP, and you have the IT experts on staff, then an open source solution may make more sense for your business. Open source will allow more customization, but it will also require more tinkering on the part of your staff.

SIDEBAR: Web-hosted and Open Source PBX Providers

 Fonality: The company's open source VoIP-capable PBXtra phone system serves 53,000 business users in 50 countries who have placed more than 130 million calls. Recognized as an Editors' Choice by PC Magazine and product-of-the-year by Internet Telephony.

Talkswitch: The company, which designs and manufactures innovative telephone systems for the small and mid-size business sector in the U.S., the U.K. and Ireland, recently unveiled six new IP PBX systems ranging in capacity from 2 incoming lines to 8 incoming lines.

Qwest: Denver-based Qwest, a provider of telecommunications, video and Internet service, offers OneFlex hosted VOIP as a basic package, an enhanced package, and with optional features for small- and medium-sized businesses. Contracts run a minimum of two years.

Verizon: The nation’s second-largest telecom company (behind AT&T), Verizon offers two hosted VOIP products for smaller businesses: Hosted IP Centrex, for up to 325 employees, and Private IP.

Covad: The California-based telecom giant offers two VoIP products, ClearEdge Office and ClearEdge Pro, that service small- to mid-size businesses. Covad services, including VOIP, are available in 44 states, 235 major markets, and are used in 57 million U.S. homes and businesses.