IP PBX: Premise-Based or Cloud Hosted IP PBX?

When considering an IP PBX phone solution, there are two types of systems; premise-based and cloud Hosted IP PBX.

Thanks to advances in technology, IP PBX Phone Systems have become the industry standard for businesses of every size, offering incredible versatility and functionality to suit just about every conceivable business need from telecommuting to call center applications.

A premise-based, or IP PBX phone system houses the hardware appliance at your site in your server closet and although it operates much like traditional switched phone systems, the signaling is done with an IP (Internet protocol) phone to the IP PBX server using a LAN (Local Area Network).

Conversely, a Hosted PBX uses the Internet to connect you to a provider who operates and maintains equipment through an offsite cloud based data center. Understanding both will help you make the choice that best suits your business needs and IT capabilities insuring the best possible return on your investment.

Features and Functionality are No Longer an Advantage of Premise Based Systems

Features and functionality of your phone system are an important consideration, and up until recently were a key advantage of premise-based systems.

As Hosted IP PBX systems have matured, modern, robust Hosted PBX platforms now provide full key functionality, numerous calling features, as well as auto-attendant and call center capabilities.

Cost Considerations in Selecting an IP PBX

As you might expect, costs are a key factor in the decision making process, but they go way beyond the price alone.  You should consider, upfront cost, recurring cost, technology infrastructure, and Total Cost of Ownership (TCO).

  • Upfront Cost  A hosted phone system generally has a lower upfront cost as, other than the actual phones, there is no server / switching equipment to purchase, while a premise based system requires the purchase of that equipment in addition to the purchase of the phones.
  • Recurring Cost A hosted system will have a recurring monthly charge for each phone on the network, where a premise-based system will only have a cost for the SIP trunks required to connect the system.
  • Technology Infrastructure If you are using a legacy system to connect to Public Switched Telephone Network, you could see savings by switching to a VoIP Trunk or to a Hosted PBX.
  • TCO With a hosted system, your provider will configure, manage, and maintain the system, which will conserve IT resources and can reduce your TCO. A premise-based system, on the other hand, will require dedicated IT personnel and may increase the TCO.

Hosted IP PBX PhonesScalability Differences Between Premise-Based and Hosted IP PBX Systems

A premise-based IP-PBX provides for a finite number of users – depending on the capacity of the system you purchase, so expandability is limited. A cloud-hosted system allows the addition of users as needed.

Here’s a quick comparison of some of the most important aspects of IP PBX phone systems.

Consideration On-Premise PBX System Hosted PBX Solution
Features Yes, key functions etc. Yes with the right operating platform
Versatility / Expandability Yes, may require additional server equipment in additions to phones Yes, only additional phones
needed for expansion
Operation / Maintenance Need IT staff on site 24-7 monitoring and system redundancy is the responsibility of your hosted provider
Physical Resources Need a conditioned space for
server / appliance hardware
Needs no on-site conditioned space for equipment
Human Resources Need IT staff on-site Provider manages everything
Upfront Cost May be more due to server / hardware purchase, but offers little of no recurring monthly cost Initially may be less because no server equipment is purchased, but there will be a monthly recurring cost
(total cost of ownership)
May be more due to staff requirements and equipment purchases May be less expensive over time with less IT staff and equipment necessary
End-user Customer
Service and Training
Responsibility of Internal IT staff and equipment manufacturer Responsibility of hosted IP PBX provider

Even with a clear understanding of the differences between premise-based and Hosted IP PBX phone systems, the size of your company, the number of users, the duties they perform, and your growth projections and goals are critical to your decision. OTELCO has an excellent reputation of providing superior customer care – even before you’re a customer. We are happy to help you assess whether a IP PBX phone system is right for your company, and if it is, whether a premise-based or hosted system is the best solution for you.

Check Out Our Guide to Business Phone Systems