On-Premise vs. Hosted IP PBX- Which One is Right for You?

Posted by Dorothy Murach, Marketing Manager on Apr 10, 2018
Dorothy Murach, Marketing Manager

en español

The on-premise vs. hosted IP PBX battle continues, which to choose? Each IP PBX option comes with its own characteristics and benefits, and the key is to determine which works best for your business’s unique needs. While it may seem that everything is moving to the Cloud, hosted IP PBX options are not right for everyone. I’ll help you navigate through the details of each to see which IP PBX is the right choice for you.


Everyone likes being in control, right? By providing users with complete ownership of their communications solution, on-premise IP PBXs (commonly known as on-prem) offer a higher level of control, customization and responsiveness. When using a hosted service, the user has no control over the IP PBX, as everything is handled through the hosted provider. For example, simple tasks like adding a new user can be done quickly, no need to contact your service provider and wait for them to make the change (typically at an extra recurring cost). With on-prem IP PBXs users can also build integrations with software such as CRM systems for a fully unified communications solution. With hosted, stronger integrations with other systems is often not an option, or is not customizable enough to target a business’s specific needs.
However with great power comes great responsibility, and in order to achieve this level of control and integration, on-prem IP PBXs typically involve an IT team or system administrator to manage maintenance,  growth, updates and enhancements. If you’re a business that is more hands-off with your technology, on-premise may not be the best choice, and a hosted option would allow the management to be offloaded to the service provider. Hosted options let organizations add new features and users by simply contacting the service provider. Although this comes at an additional subscription cost, it is done without the need for investment in an IT team, thus lighter updates and enhancements can be done with little stress on the user’s side.
One of the major differences between hosted and on-premise solutions is the type of monetary investment it takes to implement and run these systems. Hosted services don’t typically require an IT team as most of its set up and management is done by the service provider, so businesses often have a low initial cost of ownership. A hosted service is less expensive in the short term, with lower initial equipment and set-up cost. However with monthly subscription fees and fees for added capacity and special features, hosted becomes more expensive over time. Typically, hosted services are a great choice for smaller businesses or start-ups that need to deploy a system quickly and do not have the IT staff to manage an in-house system.
On-premise solutions come with higher initial investment, but lower cost over the life of the system. The hardware cost for the IP PBX and associated devices is your upfront cost, but there are no monthly service fees beyond what you pay for the phone or SIP lines. You can also find hardware options that do not require licensing costs per feature, and you can grow into the system without additional fees, furthering your savings over hosted. This is a great option for enterprises or SMB’s with a dedicated IT department to manage the on-premise solution and allow easy expansion, control and third-party integrations.
It’s hard to go a day without reading about a new hack or cyber-attack, so understandably security is a top priority. On-premise solutions offer greater protection for your communications network over hosted, due to the nature of controlling, monitoring and securing your own network. Instead of putting security in the hands of your hosted provider, you’re able to maintain control over your system and network, thus the security as well.
Size matters – it’s one of the top determinants for hosted versus on-premise. Depending on the size of your organization your needs surrounding features, cost and control will vary. Hosted IP PBXs are often good for smaller businesses who don’t have an IT team or system administrator readily available, and when the recurring costs per user won’t snowball into an unmanageable amount. For businesses with simpler feature needs, hosted solutions would be a good fit, as you won’t be needing as many customized features and integrations. While medium to larger businesses often require more control, more customizations and higher capacity, which makes an on-prem solution advantageous.
As is the nature with VoIP technology, we rely on a stable internet connection to keep our communication systems running. Both hosted and on-premise offer different continuity features to make this possible. With hosted, if your internet goes out so does your phone system, although calls can be forwarded to voicemail or mobile phones, as the hosted provider keeps the system running on their servers. If your service provider is experiencing issues, you’re at their whim waiting to get service back up. With an on-prem solution you have multiple options if your internet connection goes out. First, incorporating PSTN lines means calls can still be made, and to avoid hardware downtime from other causes, you can incorporate a redundant or high-availability solution.


On-premise IP PBXs are best for:
  • Saving money over time with less recurring fees and more features and customizations
  • SMBs and enterprises with the technical resources to manage the system and take full advantage of premium features and integrations
  • Organizations where uptime is of utmost importance, deploy a redundant or high availability solution
  • When you want full control over your security, an on-prem IP PBX will let you manage, monitor and control the security of your system
  • Integrated UC deployments that include systems such as CRM, hotel management, call center etc.
Hosted IP PBXs are best for:
  • Businesses who need a low cost of ownership and low upfront costs
  • When a IP PBX deployment needs to happen quickly, the hosted provider will take the majority of the setup tasks
  • Small businesses or start-ups without readily available IT staff for system updates and maintenance
  • Organizations that use out-of-the-box solutions and won’t need customized integrations with third-party systems
  • Companies who want simple maintenance, as the hosted provider takes on maintenance and upgrades


Topics: Unified Communications, IP PBX