Sales Director
When business leaders consider upgrading their telephone system, the first question is often about cost. While modern phone systems typically cost 30-50% less than traditional systems over five years, understanding the specific financial case for your organisation is essential for securing budget approval and ensuring the investment delivers expected returns. For context on the broader features and capabilities these systems provide, review The Complete Guide to Modern Office Phone System Features: Everything You Need to Know in 2026.
This article explores both the direct financial benefits and the harder-to-quantify indirect benefits of phone system modernisation, provides a methodology for calculating ROI specific to your organisation, and offers frameworks for presenting the financial case to stakeholders.
Traditional phone systems include on-premise PBX hardware plus traditional phone lines (PSTN lines from the telephone company).
Year 1:
• PBX Hardware: £20,000-40,000
• Installation & Configuration: £2,000-5,000
• PSTN Phone Lines (25 lines × £40/month × 12): £12,000
• Ongoing Support & Maintenance Contract: £2,000-4,000
Year 1 Total: £36,000-61,000
Years 2-5 (annually):
5-Year Total: £36,000-61,000 + (4 × £15,000-19,000) = £96,000-137,000
Hidden Costs Not Included:
Realistic Total with IT Support: £96,000-137,000 + (4 × £15,000-25,000) = £156,000-237,000
Cloud phone systems rent rather than buy. Services are paid monthly.
Year 1:
• Monthly Service Fee (50 users × £25/month × 12): £15,000
• Initial Setup & Configuration: £500-2,000
• Optional Desk Phones (50 × £150): £7,500 (optional; can use softphones instead)
Year 1 Total: £23,000-24,500
Years 2-5 (annually):
5-Year Total: £23,000-24,500 + (4 × £15,000-17,000) = £83,000-92,000
No Additional Costs:
Total: £83,000-92,000
| Component | Traditional (5-Year) | Cloud/VoIP (5-Year) |
|---|---|---|
| Hardware | £20,000-40,000 | £0-7,500 |
| Installation/Setup | £2,000-5,000 | £500-2,000 |
| Monthly Service | £60,000 (PSTN lines) | £75,000 (VoIP service) |
| Maintenance/Support | £8,000-20,000 | £0 |
| IT Overhead | £0-100,000+ | £0 |
| Total | £156,000-237,000 | £83,000-92,000 |
| Savings with Cloud | £73,000-154,000 (47-65%) | |
Key Insight: Cloud systems are substantially cheaper, especially when you factor in IT overhead. For organisations without dedicated IT staff, the savings are even more dramatic because you eliminate the need to hire or contract IT expertise to maintain the system.
Traditional phone systems charge per-minute rates for long-distance calls. These charges accumulate.
Assumptions:
• 50 employees
• Average 2 long-distance calls per employee per day
• 50 employees × 2 calls × 22 working days = 2,200 long-distance calls monthly
• Average call duration: 12 minutes
• Long-distance rate: £0.05/minute
Annual Long-Distance Cost: 2,200 calls × 12 minutes × £0.05/minute × 12 months = £15,840 annually
With VoIP (calls over internet), long-distance is typically unlimited and included in the monthly fee.
Annual Savings from Eliminated Long-Distance: £15,840 annually, or £79,200 over 5 years
Reality Check: Not all organisations have this level of long-distance calling. Calculate your actual long-distance costs from your current phone bill.
Traditional systems require ongoing maintenance:
• Support contract: £2,000-5,000 annually
• Occasional hardware repairs: £500-2,000 annually
• Component replacement (failed parts): £1,000-3,000 annually
Total: £3,500-10,000 annually
VoIP systems eliminate these costs entirely. The provider maintains the infrastructure.
Annual Savings from Eliminated Maintenance: £3,500-10,000 annually, or £17,500-50,000 over 5 years
This depends on current phone lines:
Traditional System Monthly Costs:
VoIP System Monthly Costs:
Comparison: If you currently pay £1,200/month for phone lines and switch to £1,000/month for hosted service, you save £200/month or £2,400 annually.
Note: VoIP services sometimes cost slightly more per line than traditional lines, but the total package (lines + features) is typically cheaper because cloud systems include many features (voicemail-to-email, call recording, auto-attendant) that are expensive add-ons or impossible with traditional systems.
Whilst direct savings are clear, several hidden costs can affect the financial case.
• Hardware installation: £2,000-5,000
• System configuration and programming: £1,000-3,000
• Testing and quality assurance: £500-1,000
Total: £3,500-9,000
• Account setup: Typically free or £100-200
• Configuration: Often included in service; £500-1,000 if customisation needed
• Testing: Included
Total: £100-1,000
Advantage: Cloud systems have much lower setup costs.
Employees need to learn how to use new systems.
• Group training sessions: 2-3 hours × number of sessions × trainer cost (£50-75/hour) = £500-2,000
• One-on-one coaching: £200-500 per person, more for power users
• Development of training materials: £500-2,000
Total: £1,200-4,500
• New hire onboarding: £100-200 per new employee
• Annual refresher training: £300-500
Total: £400-700 annually
Note: Cloud systems often have lower training burden because interfaces are simpler and more intuitive compared to traditional PBX systems.
VoIP depends on internet connectivity. If current internet is inadequate:
Current Internet: 10 Mbps broadband
Needed for VoIP: 25-50 Mbps business broadband
Upgrade Cost: From £30/month consumer to £80-150/month business broadband = £50-120/month additional = £600-1,440 annually
• New modem/router suitable for business: £300-500
Total: £300-500
Important: Modern internet is increasingly robust for business purposes. Many organisations already have adequate internet. Only factor this cost if you genuinely need upgrades.
Whilst cloud systems don't require central hardware, they might require endpoint hardware:
• No Additional Hardware: Use softphones on existing computers/phones = £0
• VoIP Desk Phones: Specialised phones for staff = £100-300 per phone × number needed
• Headsets: Professional headsets for comfort = £50-200 per headset
Example: 50 employees, 40 get VoIP desk phones (£150 each), 10 use softphones = £6,000 one-time cost
vs. Traditional System: Traditional system requires new phone handsets anyway = £50-100 per phone = £2,500-5,000
Net Cost: Cloud might have similar or higher hardware cost, but hardware depreciation is faster (phones might be outdated in 3-5 years, rather than the 7-10 year life of traditional systems).
Beyond direct financial savings, phone system upgrades provide indirect benefits that also affect ROI.
Modern phone systems enable remote work. Employees can work from anywhere without sacrificing phone functionality.
If 20% of your workforce (10 employees) could work from home one day weekly, resulting in one less day of office space per week:
• Office space cost per person annually: £3,000-5,000
• Savings from one day weekly home work: 20% × £3,000-5,000 = £600-1,000 per person
Total for 10 people: £6,000-10,000 annually
Call recording, automatic call logging, and CRM integration save time and reduce errors.
Support team handling 1,000 calls monthly
• Manual call logging: 30 minutes per day × 22 days = 11 hours monthly
• Automatic logging saves: 11 hours × £25/hour (loaded labour cost) = £275 monthly or £3,300 annually
For 50 employees with various productivity improvements:
• Estimated productivity gain: 5-10% through better tools
• Labour cost savings: 50 × £50,000 salary × 5-10% = £125,000-250,000 annually
Traditional systems require IT support for maintenance, troubleshooting, and management.
• Traditional system support: 5-10 hours weekly for a 50-person organisation
• Cloud system support: 0-2 hours weekly (mostly onboarding new employees)
• IT staff cost: £60,000-80,000 annually (loaded cost)
• Hourly cost: £30-40/hour
• 5-10 hours weekly reduction = 5-10 × 52 weeks = 260-520 hours annually
• Cost savings: 260-520 hours × £35/hour = £9,100-18,200 annually
Redeployment Benefit: Rather than losing IT staff, deploy them to higher-value activities (cybersecurity, business systems, strategic projects).
Better phone system features enable faster problem resolution, reducing repeat calls and customer dissatisfaction.
Currently: 20% of customers need callback/repeat contact to resolve issues = 1,000 calls monthly require follow-up
With better system features: 10% need follow-up = 500 calls monthly saved
• Cost per call handled: £15-25 (agent time, overhead)
• Monthly savings: 500 calls × £20 = £10,000
• Annual savings: £120,000
ROI = (Total Benefits - Total Costs) / Total Costs × 100%
Interpretation:
• 50-person organisation
• Current: Traditional phone system in year 5 of life (costs £15,000 annually)
• Considering: Cloud phone system costing £15,000 annually
Total Year 1 Cost: £24,100
Total Year 1 Benefits: £87,090
Year 1 ROI: (£87,090 - £24,100) / £24,100 = 261% (exceptional!)
Annual Cost: £15,500
Same as Year 1 (minus initial setup): £87,090 - £2,500 (training, setup) = £84,590
Annual ROI (Years 2-5): (£84,590 - £15,500) / £15,500 = 446% (exceptional!)
5-Year ROI: 394%
If you're uncomfortable estimating productivity benefits, a conservative calculation considers only direct, quantifiable savings:
£24,100 (same as above)
Total: £24,590
Year 1 ROI: (£24,590 - £24,100) / £24,100 = 2% (break-even)
Same as Year 1: £24,590
Years 2-5 ROI: (£24,590 - £15,500) / £15,500 = 58.6% annually (solid)
5-Year ROI: 43%
Insight: Even with conservative assumptions, the investment breaks even in Year 1 and provides strong positive ROI thereafter.
Break-even is when cumulative benefits equal cumulative costs.
| Period | Cumulative Costs | Cumulative Benefits | Net Position |
|---|---|---|---|
| Year 1 | £24,100 | £87,090 | +£62,990 (positive) |
| Year 2 | £39,600 | £171,680 | +£132,080 (positive) |
Break-Even Timeline: Year 1 (investment pays for itself within first 12 months)
Important Note: Break-even timeline varies significantly based on:
• Current system costs (if current system is expensive, savings are higher)
• Organisation size (larger organisations see more total benefits)
• Remote work potential (if remote work is valuable for your org, benefits are higher)
• Productivity improvements (if you can quantify these, ROI is better; if you're conservative, ROI is still positive)
Rather than just year 1 vs. later years, it's useful to show ROI by year:
| Year | Annual ROI | Cumulative ROI | Payback Period |
|---|---|---|---|
| Year 1 | 261% | 261% | <1 year |
| Year 2 | 446% | 333% | <1 year |
| Year 3 | 446% | 373% | <1 year |
| Year 4 | 446% | 389% | <1 year |
| Year 5 | 446% | 394% | <1 year |
Key Takeaway: Investment in modern phone systems typically pays for itself within 12 months and provides strong ongoing returns.
"Upgrading to a cloud phone system will cost £24,100 in Year 1 and deliver £87,090 in benefits, resulting in 261% ROI. The investment pays for itself in approximately 3-4 months and saves approximately £339,000 over 5 years."
Acknowledge that ROI depends on assumptions. Show what happens if assumptions change:
Result: Still 58.6% annual ROI, break-even in Year 1
Result: 450%+ annual ROI
Message: "Even in conservative scenarios, ROI is strong and positive."
Present a realistic implementation timeline:
Timeline to ROI: Benefits start accruing immediately (maintenance savings from day 1). Full benefit realisation by end of Month 3-4.
Our team can help you build a customised ROI analysis based on your current costs and specific business needs. Get a detailed financial case tailored to your organisation.
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With over 25 years’ experience at T2k, Lee began his career as a telecoms engineer before progressing to Sales Director. He leverages his foundational technical knowledge to provide businesses with impartial, expert advice on modern communications, specialising in VoIP and cloud telephony. As a primary author for T2k, Lee is dedicated to demystifying complex technology for businesses of all sizes.
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