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Phone Systems on a Shoestring

What's the best phone system – at the best price – to meet your organization's needs?

Phone Systems on a Shoestring 
Laura S. Quinn - November 23, 2010
Need a phone system but not sure if you should go for a traditional system or voice over Internet protocol (VoIP)? Or perhaps you're not sure what VoIP even means? When considering the right solution for your organization, it's important to understand how the choices you make can best meet your communication needs.

This article is courtesy of Idealware, which provides candid information to help nonprofits choose effective software. For more articles and reviews, go to

Despite the increase in popularity of email, social media, and other online networking tools, organizations still depend on the telephone for a good portion of their communications. But telephone service has gone through some dramatic changes, and the options for purchasing a new voice communications system are more numerous than ever before — and more confusing.

Should you go with a traditional phone system or voice over Internet protocol (VoIP)? What does VoIP mean in this context, anyway? Should you buy hardware to manage multiple phone lines, or one of the growing number of software solutions? Do you need to support both onsite and offsite employees?

We talked to a number of nonprofit IT specialists about the best choices for reliable phone systems that won't cost a fortune. When considering the right solution for your organization, it's important to understand how the choices you make can best meet your communication needs. Let's look at these factors one at a time.

Getting Connected: Phone Lines

These days digital telephone service — a telephone system that digitizes calls into data and sends them over data lines or the Internet instead of telephone lines — is almost as common as "plain old telephone service," or POTS, an actual and common acronym in an industry rife with acronyms. Exactly what it sounds like, POTS is a phone system that uses the same telephone lines strung between poles that have been delivering phone service for decades.

Even though the prices are nearly comparable (around $25 per line for a POTS line, compared to $35 for two digital lines), any sizable business is more likely to be using digital than POTS phone lines. Why? Because digital lines allow for more flexibility in allocating these lines, more advanced features, and sometimes reduced fees for long distance or international call charges. On the other hand, POTS lines are more straightforward for a small organization to understand, and a number of the inexpensive phone systems outlined below require a POTS line in order to work.

A digital line is likely to be voice over IP (VoIP) — meaning that the phone call audio is transmitted over the Internet rather than traditional phone lines. Distinct from home VoIP services like Vonage or magicJack, digital business lines can be just as reliable as a POTS line. It's important to make sure, however, that your VoIP phones don't use exactly the same connection as you rely on for browsing the Internet. Otherwise, if multiple people are using the phones or the Internet — especially for high-bandwidth activities, like downloading video — calls might get dropped or garbled. Most small organizations will want to use a different digital line altogether from the one they use to access the Internet. Unless you have substantial IT skills to setup routing hardware, combining Internet and phone through one digital connection is almost certainly not worth the savings.

It's also possible to get a digital line which doesn't go through the Internet — instead, it would go directly from you to the phone provider. A direct connection is likely to be more expensive, but won't be dependent on the quality of your Internet service, which could be a critical factor in more rural areas. You're not likely to notice a small millisecond outage in your Internet service when you're browsing the web, but that same outage would disconnect a phone call, creating havoc with your operations if it happens frequently.

How many phone lines do you need? The answer depends less on how many staff members you have than on how many are likely to be on the phone at the same time — potentially far fewer than you have extensions, or even phone numbers. For example, if you're a two-person organization, you'll likely need two lines, or you can't both use the phone at the same time, but a 10-person organization may only need five to seven lines. A 100-person organization could only need 20 lines or so. Don't underestimate, however — if you're a small organization, you'll also want an extra line to put people on hold, or if you have any kind of call waiting feature.

Routing Calls and Extensions

If you need to rout calls to different lines and extensions, you'll need a private branch exchange, or PBX. A PBX coordinates incoming and outgoing phone calls, helps to make transfers, and manages voicemail on different extensions within an organization. Traditionally a PBX was a box mounted to a wall in a utility closet with all the phone lines physically plugged into it, but these days a PBX is equally likely to be virtual (sometimes called a softswitch) — software that provides the same functionality as the hardware once did.

Do you need PBX call processing features? You do if you want to connect your phone numbers into one central phone system to do any of the following:

  • Route phone calls from a central "receptionist" — either a person or an automated system that helps callers dial the right extension for the person they're trying to reach.
  • Manage phone traffic so multiple people can use the same set of phone lines — for example, if a 10-person organization has five phone lines, the PBX plays "traffic cop" so each person (up to five at a time) can get phone calls.
  • Allow employees to forward calls, put them on hold, or dial each other with only an extension.

In addition to these routing features, many PBXs offer additional features like voicemail, caller ID, and call forward, as described below in the features section. Smaller organizations have four primary choices in PBXs. First, you could buy a small phone system with the equivalent of a PBX built in. For example, some cordless systems — like the Panasonic KX-TG450 — have a base station with inputs for up to four different lines that can be routed to remote units around the organization. This type of phone/PBX combination starts at about $300, plus about $80 per handset. These low-end models often require POTS lines. More complex and expensive models like those offered by BizFon can handle eight-to-12 users, but cost more. These phone/ PBX combos are better-suited to smaller organizations, as the phones offer limited range and can only expand to a certain, finite point

The second option is to use a low-end virtual PBX. This type of software, such as Onebox or VirtualPBX, acts as a "virtual receptionist" and connects extensions. For example, callers dial a central phone number for your organization and press 1, 2, or 3 for extensions mapped to specific phone numbers — an office phone, a cell phone, a home phone or a phone somewhere else entirely — and the PBX routes the call to the appropriate number.

These systems typically offer voicemail (often with transcription to email), dial-by-name directories, and other features, all of which are managed through an online dashboard. They're reasonably priced, ranging from $10-$30 per month for the most affordable services, but charge by the minute for incoming calls. You're allotted a fixed number of minutes per month, and overages can cost from $.04-$.06 per minute, which adds up fast.

As a third option, larger organizations might consider a virtual PBX package (sometimes called hosted VoIP) like those offered by business-focused phone and digital services companies, which lump digital phone service (remember to make sure it's separate from the Internet line) with a managed-PBX service. Packages are customizable, so you'd work with the provider to define the number of lines and phones for your organization, and they'd quote you a price. Some let you access functions through an online dashboard, but many require that you go through the company for such changes as adding an extension for a new employee. More sophisticated virtual PBXs may also allow you to integrate your computers and phones — to for instance show the right record from your constituent database for the person calling, or transfer a call to another extension through a drag-and-drop interface.

If you have dependable IT support, you might consider the fourth option: a hardware PBX, also called a "switch." These days, if you're going to buy a physical, premises-based PBX, it almost certainly makes sense to buy an "IP switch," which routes calls using the same Ethernet cables that you use to wire your network. You could also buy a server to act as your switch and install open-source PBX software, like Asterisk, on it. The software is free to download, but you'll need to buy the server, and it will take someone skilled with phone systems to get it up and running. This third option is not for the technically timid.

A Phone for Every Desk

You'll need a phone for each employee's desk, and the options available to your organization vary widely — you can find entire stores dedicated to phones. Decent consumer-level models start around $40. A phone is a phone, and if all you need is two phone lines for your staff members, there's no reason not to just buy the same type of phone you might use at your house.

If you're shopping for a combined phone system and PBX, as discussed earlier, you'll just need to buy a phone handset for each staff member — in many cases, a cordless unit. However, these systems tend to support only four to 12 lines, and won't expand to support more than 10-25 people.

Business-class phones are often intended for use with digital phone lines and specific virtual PBX systems; before you invest in them make sure they will work with your infrastructure. Most provide features that make it easy to transfer, put someone on hold, and access other PBX functions. For these types of systems, buying a phone per staff member can be quite an investment at retail prices — potentially $200 to $300 per phone. However, the recession has an up-side when it comes to buying office equipment: check out to buy sophisticated phones for cents on the dollar.

Phone Features

Finally, there are a certain number of features that people have come to expect in their phone — for instance, a voicemail box, and the ability to see who's calling. Perhaps you'll want to forward your calls to a cell phone, or have it ring a colleague's desk if you're not there.

These types of features are often provided by the company that provides the phone line, the PBX, AND the physical phone itself. Think through what you need in this area — for instance, would your staff like to get voicemail transcribed and sent to their email? Do you want to integrate faxing? Features that integrate voicemail messages and faxes with email are many times called UC — unified communications. (For more information on unified communications, see TechSoup's article Unified Communications Options for Nonprofits.) Check to see what's offered by the systems and services you're already considering.

Choosing the Right System

To choose the right phone system for your organization, you need to mix and match from the available options. Different configurations offer different advantages; choose the one that meets most of your needs and your budget. Take in mind the long term costs of managing the system, training your staff, and paying ongoing fees — the Total Cost of Ownership — as well as the immediate up-front costs.

For a small organization, it may well make sense to use POTS phone lines and a low-end phone/PBX combo. This is a bulletproof and familiar solution that's not going to require much support or knowledge. For four lines — sufficient for six or seven employees — you might pay around $700 for a base unit and cordless handsets, plus about $100 monthly for four POTS phone lines (at $25 per month for each line).

Another option would be to have a POTS or digital line for each employee, and use consumer-level phones connected to a virtual PBX, like the one offered by Onebox. For a six-employee office, expect to pay about $240 up front for phones, plus about $190 per month ($40 per month for the PBX, $25 per month for each line). This virtual PBX, cloud-based system could handle remote employees as easily as those onsite.

[Editor's note: Also consider BetterWorld Telecom, a new TechSoup partner, which offers nonprofits a discount on a VoIP, virtual PBX, and hardware package.]

Before you make a decision, check with your local phone and broadband providers. Chances are they offer packages that include digital phone service and a virtual PBX. This will probably be more expensive, but also more robust, than the first two options. Again, make sure your digital phone lines are separate from the line you're using to access the Internet.

Setting up an office phone system is deceptively complicated. While we're all familiar with phones, as soon as you want to support more than a couple of employees, you quickly enter a baffling realm of acronyms and options. Some options will require both IT and telecom skills. If you don't have ongoing support from someone who really knows phone systems, keep it simple. Phone systems shouldn't be exciting, just dependable.

Many thanks to the IT professionals who helped with this article: Peter Campbell of EarthJustice, Gavin Clabaugh of the Charles Stewart Mott Foundation, Matthew Latterell of Netcorps, and Larry Velez of Sinu.

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Image: Tin can phone, Shutterstock