Hosted Voice vs. On-Premise Phone Systems: Which Is Better For Your Business?

By: Marco
April 8, 2022

When it comes to phone systems, these days there’s no shortage of options. However, if you’ve already been researching this topic, you probably know that deciphering which system is best for you isn’t always easy. The right phone system can save you money and drive productivity; the wrong one can cause a lot of frustration.

Five Questions You Should Ask Before You Decide

One of the choices you'll be faced with making is how your phone services are delivered. Ask yourself the following questions before you make any decision about your office phone system:

  • How do you want to pay for your phone system?
  • Where do you want to install it? 
  • Who do you want to manage it and handle end-user issues?
  • What carrier services are available at your location(s)?
  • Do you have a reliable infrastructure and the connections to support your entire company?


What Are Your Options?

When it comes to phone systems, you have two main options: hosted voice, which is cloud-based, and an on-premise phone system, which is infrastructure-based. Let’s explore each of these options in more detail.

Hosted Voice

In some respects, hosted voice phones work the same way traditional phones do -- with a handset, cradle, and buttons. But rather than relying on a standard phone line, these phones have an ethernet or internet connection that carries phone calls over an IP data network, and ultimately, the cloud. This configuration allows you to save money on phone services because your calls will travel over a data network or the internet, rather than requiring separate phone lines. 

These phone systems are easily scalable and feature-rich (without driving the cost up), and you have the option to own or rent the hardware from a hosted voice provider. 

Hosted PBX

Built-in DR and redundancy Detailed network requirements
Unlimited trunking Call quality issues (depending on your internet connection and provider)
Feature-rich – enterprise for SMB Integration complications
Flexible deployment options Out of the box solutions
Built-in multi-location capability Transient service providers
Flat rate operating expenditure Higher TCO over time
Always up to date and upgraded Internet outages could cause disruptions in service
Built-in maintenance Limited tech based on platform
Less staff required Learning curve
Purchase, lease, rent – lower Cap Ex Sharing voice and internet connection
Call Center Applications Extended features may mean extra cost
Quick deployment Cancellation fees, depending on your contract
Self-manage Doesn't accommodate simple phone needs
Easy to move Number portability challenges (depending on provider)

On-Premise Phone System

A PBX, or Private Branch Exchange, is the traditional phone system that has existed in offices since the telephone was introduced. The simplest PBX phone systems available feature a box in your office that connects the internal devices and lines within your office to external lines, and is capable of carrying out multiple functions such as call holding and forwarding.

VoIP (Voice over IP) is another on-premise phone solution that uses your network infrastructure to deliver voice service to end-users. 

Both on-premise phone systems are easy to use and manage. Your investment is made upfront, so the ROI over time is favorable, and you own all the hardware. However, these systems are less flexible as your company evolves.

Take a look at the pros and cons it has to offer below.

Hosted PBX

Ownership Capital expenditure
Financial Depreciation Lots of pre-planning scope
Favorable ROI over time Less flexible
Lower Total Cost of Ownership over time Customer managed tech curve
Admin Control – Internal Maintenance contracts and cost
Advanced Software Integration No built-in redundancy
Rental, Lease and Purchase options Capacity and size limits
Complex Call Centers Platform-specific technology
Long life expectancy Slow deployment
Flexible deployment options Limited trunking capacity
Self-manage Licensing management
Carrier neutral – no change needed End of life, support or manufacturer

The Winner: Hosted Voice…Usually

Both on-premise and hosted voice phone systems are effective and reliable phone systems that offer different benefits. These systems are compatible with different types of businesses, depending on what each business is looking for in a phone system. However, for most businesses, there is a clear winner, and that’s hosted voice.

Hosted voice offers a good deal more flexibility. Flexibility is listed as a single disadvantage of on-premise systems, but it’s a pretty big one. The pandemic highlighted how much our world can change in just a week or two, and how something that happens on another continent can have a rapid effect on businesses on ours. Those companies that weren’t able to adapt struggled, and many didn’t survive. Flexibility and adaptability are very important traits for businesses, as well as the systems they rely on. Hosted voice offers far more flexibility than an on-premise PBX system can.

Additionally, you’ll notice that many of the cons I listed for hosted voice depend on the provider, your internet connection, and the contract you choose. Therefore, many of these potential disadvantages can be minimized or even eliminated entirely if you find a good, reliable provider and your internet connection is strong.

If you’re thinking of upgrading your organization’s phone systems, Marco has put together a brief, ten-question survey to help you figure out which platform may be the best fit. However, the platform you choose is simply one of many decisions you’ll have to make about a provider, and which features you’ll need now and in the future. Our experts can help simplify what can be a challenging and complex topic, and make a recommendation that’s specific to your organization.

Contact a Phone System Specialist

Topics: Phone & Collaboration