The two most common types of VoIP Phone Systems for Small and Medium sized businesses are Hosted and Premise based. The key difference between these two solutions is as follows. With Hosted VoIP Phone Systems, the brains of the system reside in “the cloud”, whereas with Premise based VoIP Phone Systems, the brains of the system reside at the customer’s location. This article provides an in-depth comparison of Hosted and On Premise VoIP Phone Systems for Small and Medium businesses.
Hosted Phone Systems
Hosted Phone Systems are also often referred to as Hosted VoIP Systems, Cloud Phone Systems, Cloud Communication or IP Centrex. Hosted Phone Systems usually provide a turnkey communication service that is fully managed, maintained, backed-up and kept running smoothly by the service provider in a secure data center, With hosted or cloud based communication there is little to no initial investment required in the system and no need to subscribe to phone lines separately. Everything is bundled into a simple monthly subscription.
Pros: Hosted Phone System
– No need to purchase costly equipment. Only VoIP Phones are required by the customer.
– No Maintenance since all maintenance is done by the service provider.
– Setup is relatively easy and is usually done by the service provider.
– Web based management allowing you to edit user extensions, manage features, view call logs.
– Employees in remote locations can be easily connected to the system by simply plugging in VoIP phones.
– All upgrades, bug fixes, and new features are handled by the service provider.
– Mobile follow me and failover call forwarding allow you to take calls on cellphones mobile or in the chance of an Internet disruption
– Loss of Internet or other catastrophic event at your premise will have almost no effect on business operations as calls will still go to voicemail or to mobile phones. This is because the phone system equipment is hosted in a collocation facility with redundancy, backup power and other special safeguards.
Cons: Hosted Phone System
– Features are limited to what your provider offers with little room for customization
– Limited flexibility to integrate the phone system with other software applications
– If your Internet provider is down, your office phones will be down since all calls are routed via your Internet connection
– As number of extensions grows, monthly fees can add up.
Hosted Phone Systems are recommended especially for small business, start-ups and any business that may have a distributed workforce such as teleworkers, mobile sales people, independent affiliates/consultants, many small branches, etc. VoIP Superstore offers RingOffice Cloud Hosted Phone Systems.
On-Premise Phone Systems
Premise based or On-Premise Small Business Phones Systems offer a more traditional approach with a richer feature set as compared to hosted. In this model, you buy, own, manage and maintain your own system and simply subscribe to phone lines from your local Telco or a VoIP provider. This solution can be more cost effective and/or flexible for larger deployments or when customization or integration with other business applications is required. In this solution, you purchase the complete VoIP Phone System solution and have it installed in your office premises. Installation can be done either by your own employees or by the vendor. Your VoIP Phone System will be connected to the local Telco service provider for incoming and outgoing phone calls over the PSTN (Public Switched Telephone Network). Your VoIP Phone System can also be connected through the Internet to an ITSP (Internet Telephony Service Provider) to enable you to make VoIP calls.
Pros: On-Premise Phone System
– More in-depth management controls allowing you more authority over features and functionality you can offer to users.
– Flexibility to create custom applications and reporting tools and integrate these with your other business applications such as CRM.
– Lower ongoing monthly costs once the system is completely paid for.
– Flexibility to add VoIP Lines or SIP trunks from multiple VoIP providers.
– Ability to create redundancy on phone lines by using a combination of land line and VoIP
Cons: On-Premise Phone System
– Higher upfront cost to purchase, install and configure the solution.
– System must be maintained and support either by staff or an outsourced vendor, resulting in higher long-term maintenance costs.
– If your Phone System becomes obsolete or is discontinued, you may be left with a dead investment
– Upgrades such as adding capacity or features often requires purchasing extra licenses or hardware.
– If your VoIP Phone System is down or Internet connectivity is lost, your entire system could go down unless you have a backup system with some failover solution. Failover and redundancy further add to the cost of acquisition and maintenance of this solution.
On Premise Phone Systems are recommended for any business that wants the flexibility to customize and control the system, integrate it with other business applications, or set-up on-site line or system redundancy. Premise based phone systems are also recommended for businesses with economies of scale for whom the cost to acquire and maintain the solution on a per user basis remains a more attractive proposition. Some popular on premise VoIP phone systems that we offer are 3CX, Elastix and Asterisk.
Kashan Chaudhry is a senior telecom consultant and partner in VoIP Superstore and RingOffice. He is based in Toronto, Ontario and enjoys helping businesses communicate better and save money. If you need help determining which solution would be the best fit for you, contact us for a free consultation.