The hosted vs on premise debate

By September 1, 2016 No Comments

Until recently, few small businesses could afford the feature-rich telecommunications systems used by their larger competitors. But much has changed in the past few years.

With the growing expanse of technology in telephony even the smallest businesses not only have access to all the features of a fancy private branch exchange, or PBX (extensions with transfers and direct internal dialling, conference calls, and auto attendants, to name just a few) but can fully customise them as well.

Educating yourself on the benefits and potential challenges that come with using either a premises-based or cloud phone system can help you make a good decision to ensure your business needs are met and you get the greatest value for your investment.

One decision that most businesses face;

Premises-based solution (in which the hardware appliance is kept on-site in your server closet),


Cloud phone system (where your phones connect through your Internet connection to a provider that maintains the equipment at an off-site cloud data centre)


Purchasing an on premise PBX phone system involves buying hardware, which includes a server with the proper number of interface cards (if needed) to be able to connect the telephone company with the phones. Hosted PBX only involves purchasing IP phones, though a router and network switch may be needed to ensure there is one specifically dedicated to VoIP.

Hosted PBX:

  • Lower initial equipment cost and set-up cost
  • Low monthly service cost
  • Easy to add extra lines
  • Upgrades and new features are included
  • Extended features, like conferencing, may come with additional costs
  • Network qualification is performed by the customer. Any upgrades could be at the customers expense
  • All IP-PBX feature programming is done by the customer
  • No maintenance costs of the IP-PBX, but all on-premise and remote phones and network devices are the responsibility of the customer
  • Staff training is the responsibility of the customer

On Premise PBX:

  • Higher initial cost and set-up cost
  • Potentially higher maintenance costs
  • On-premise IP-PBX provider will qualify network
  • On-premise IP-PBX provider will install and program IP-PBX
  • On-premise IP-PBX will train staff on feature use and “best practices”

Companies will also need to look into contract length with current supplier. Do you run the risk of having an outdated system waiting for the end of the current contract to expire?

Satisfaction is the most important aspect of choosing a system, regardless of whether it is hosted PBX or on-premise PBX. Positives and negatives for each system are:

Positives for Hosted PBX

  • Providers have more resources than users, so new feature sets are possible
  • New feature installation is handled by provider to avoid confusion
  • Picking and cancelling virtual numbers is easy and fast
  • Moving a phone system is easy. IP phone is plugged into a broadband connection.
  • Hosted provides edge border controllers or various other kinds of NAT software to help navigate routers
  • Patches and upgrades of the IP-PBX are handled by the provider
  • Loss of Internet or catastrophic event has no effect on operations because calls can be sent to voice mail or a mobile phone. This is because of redundancy within an off-site facility that has safeguards including back up power sources.

Positives for On-premise PBX

  • Having on premise PBX gives user control to create, adjust and delete users as desired
  • New open source feature sets can be added without any license fees
  • Current carrier does not have to be changed
  • VoIP trunks can be added to save on calling costs
  • Server ownership reduces expenses over time
  • Professional training of staff on new IP-PBX system is handled by the provider
  • With SIP trunking, loss of Internet or catastrophic event has reduced effect on operations because calls can be sent to another number or a mobile phone. This is because of failover within an off-site facility that has safeguards including back up power sources.

 Negatives for Hosted PBX

  • Connections and voice quality are a result of Internet connection
  • Loss of Internet results in loss of phone service (settings can be adjusted so that it goes to voice mail or routed to a mobile)
  • Flexibility of system is limited
  • Customisation of features may be slow or unavailable depending on provider
  • Fees can be increased and cancellation fees can be charged
  • Stability of provider may vary within operations and finance

Negatives for On-premise IP-PBX

  • On-premise IP-PBX needs a provider who can manage it properly
  • Expansions may result in complicated projects depending upon the provider
  • On premise IP-PBX manufacturer could go out of business, leaving problems with managing root problems
  • Technician may need to be called for upgrades and patches on software (and costs can be incurred)
  • Loss of power or PBX failure will result in callers not being able to get through, which stops business operations unless you have a SIP provider

For most small to medium businesses, as well as individuals and entrepreneurs, a hosted PBX phone system is the ideal choice. While some may require the purchase of provider specific phones, there is less overhead and maintenance. The lack of up-front costs and investment creates greater flexibility that allows you to grow or downgrade your services as needed to fit your business needs.

On-premise PBX systems are still useful, but are best suited for large businesses with resources and physical space on-hand. For companies with over 1000 handsets on site, broadband width just wouldn’t be able to cope with the amount of voice traffic.

At Raspberry Beret we pride ourselves on only offering genuinely good, simple advice.  We offer you pro’s and con’s for each solution we give you, believing in educating and empowering you to make the choice that’s right for you. We will even help with buying out contracts to aid you in your progression towards a better, more modern communications system. What are you waiting for?