Implementing a hosted phone system is a viable alternative in some business cases. Offerings of unlimited lines, unlimited long distance, DIDs (virtual direct numbers), reporting, etc. to small companies makes for a compelling argument. I offer a hosted solution to our potential customers. For a small fast growing business this can be a fit. It’s a very dynamic solution and can give big business features inexpensively. There are some drawbacks however.

“Traditional business phone systems cost thousands of dollars to set up and maintain. By eliminating the need for complex hardware, lengthy installation and technical expertise, small businesses get the functionality and flexibility to easily connect with customers at a fraction of the cost of a traditional PBX phone system.”

The above quote was from a Fox News article. I have seen these arguments with other articles as well. Unfortunately they’re very misleading. What they don’t tell you is all this “revolutionary business phone technology” is riding on another provider’s network. I don’t care if its Cloud based, DSL based, MPLS based, or whatever based. That’s just how it works. So if they don’t pay their bills what happens to you locally?

Technical expertise is still needed locally. Either by the provider or your company. There simply is not a phone that is completely plug-n-play. What about QoS, LAN CPE (customer premise equipment), and so on? Heaven forbid you have a sound quality issue.

Buyer Beware
My market has experienced multiple hosted provider failures with one that “forgot” to pay Qwest millions of dollars for the right to ride over their network. Qwest pulled the plug and guess what… customers had few or no options. A large Realtor office was sitting there with phones they bought that were now useless. They didn’t own the phone system. No dial tone, No long distance, nothing. If that wasn’t bad enough… they also could not get their business critical numbers ported to another provider due to legal challenges. Bad for business.

To combat the upfront phone costs many hosted providers are “advising” their potential customers to buy them used off eBay. Now there’s a bit of sound business advice. Who’s going to support this customer with phone issues? I am pretty sure eBay won’t and it looks like the hosted provider is bailing as well.

My organization has been working with a large multi-site car dealer that for the last year has been trying to get hosted working from another provider. While originally they were told there would be “huge” cost savings they ended up buying a new fiber backbone and large broadband increases to make it work. The costs and quality have been so prohibitive that they are removing the solution and they are not alone. Many medium-large sized companies are re-evaluating their decisions to go hosted.

Ask these Questions
Here are some questions to ask before leaping into hosted…

1.) Do you have references using a broadband solution I would be using?
2.) What is needed on my LAN?
3.) Do you offer local support – not through the phone only?
4.) Are you a CLEC?
5.) If you go out of business what are my options?
6.) Do you offer a phone book listing?
7.) Is there an upgrade in phones?
8.) Who is responsible for the local data equipment needed and configured?

Hosted definitely has it’s place if thought out properly and implemented correctly. Partner with a reputable company. Don’t expect the quality to be as good as a CPE solution. Understand that your entire communications system is reliant on a WAN connection (i.e. DSL). If you can live with these items and are looking for a flexible, low-upfront cost, small solution then by all means go with hosted.

Copyright © 2010 Chris Lott and Lottspace. All rights reserved.