In the not so distant past, on-premises communications solutions were the only option available.   With the proliferation of Internet bandwidth that is both more abundant and less expensive, it is now possible to get a full-featured UC solution hosted in the cloud.


A hosted VoIP solution is one in which the vendor physically houses the hardware. The solution may or may not be virtualized in the vendor datacenter. In either case the customer receives access over their broadband Internet connection. With hosted solutions, vendors often provide the majority, if not all of the IT services.


Technology solutions that are designated as “on-premises” are implementations that, not surprisingly, reside on the customer’s physical business location or premises. In the case of a business phone system this is typically a server or hardware appliance that is installed on-site and managed by customer IT resources.   A good example of this type of system is the SPX VoIP System.  If a business has multiple offices in different locations then each location usually has its own local server —but there are exceptions. Depending on the solution, some phone systems can serve remote (or off-site) workers from hardware that is physically located at the main office. This configuration is still referred to as “on-premises” because the customer, rather than the vendor, houses the server and provides IT support.


So which is right for your business?

Let’s consider the major factors in order of importance:

1.     Do you have a great Internet service?

In order to consider a hosted system – or use remote phones on a premise based system – you will need to have a solid Internet connection with adequate bandwidth.   Each call will use 85kbps both upload and download at a minimum, so plan on at least 1X1 Megs of bandwidth dedicated to voice for a 10 phone system.   In addition to bandwidth, you must consider latency and other issues of quality of the circuit – a qualified phone vendor can assist you with checking your Internet quality.

If you want to move to VoIP and have a DSL or other low quality circuit – then check with a company that can search multiple carriers for you and provide a guaranteed low-price quote for broadband.

If your business is located in an area where good quality high speed Internet is not available or is very expensive – then your best bet is to stick with a premise system and use dial tone that comes in over cable or copper –either T1 or analog (POTS) phone lines.

2.     Are you more interested in low up-front costs or low total cost of ownershiphosted vs premise?


If you want to minimize your upfront costs – there is nothing better than a hosted service with rented phones – these usually can be installed with zero up-front costs.   However, over the next 5 years you may have to spend double on a hosted service as compared to owning your own VoIP PBX.

Let’s take this quick example using average pricing for both options on a 10 phone system:

Hosted costs $1500 up front for the phones, then $300 per month.   In 5 years you spend $19,500

Owning your PBX – costs $4500 up front, then $89 per month for dial tone.   In 5 years you spend $9,840



So by owning your own PBX, you can save a lot of money in the long run – in this example you are cutting your telecom costs in half.  And if you have a leasing company that you work with, you can usually lease the equipment which will eliminate most or all of the up-front hit, and still take advantage of the cost savings over 3-5 years.



3.     Look at a hybrid solution provider that can start you hosted and migrate to a premise solution using the same phones with the same features.

The most flexible of all solutions are those that can work as both hosted and premise – using the same phones and the same features.   These hybrid solutions offer you the option of beginning with a hosted solution to start – taking advantage of the low upfront costs and quick startup – and then migrate later to a premise solution that allows you to cut your overall telecom costs.   There aren’t many of these hybrid solutions on the market and the very best one is Digium Switchvox.    You’ll need a good vendor that can assist you with both types of solutions and has the expertise to handle the migration –a vendor that operates nationally such as PhoneGuys Voice & Data Systems  and the Digium Switchvox system is one of the very best choices for a hybrid approach.


4.     Other Factors


Many hosted providers will tout the fact that you can quickly scale a hosted system as you grow.   The fact is that if you choose the right platform for your own VoIP system – it can be just as easy to scale with a premise based system.   All you do is cable the new workstations, add the new users through the web-based UI and you’re good to go.   The key is to work with a total VoIP solutions provider that has the flexibility and expertise to help you as you grow and your needs evolve.


You can have issues with security with any online system – and all VoIP systems are online by definition.   You can be most vulnerable in either a super low-priced hosted service from a no-name provider, or with an in-house VoIP solution that is either ‘do-it-yourself’ or sold and installed by someone that isn’t highly expert in voice & data systems.   Choose your telecom partner carefully – look for a business that’s been doing VoIP for over 10 years and has a solid track record.

Hip, Slick & Cool

All the business press is touting cloud based apps and services as the coolest technology choice that you can make.   Hosted may be “cool” but if you do it wrong or choose the wrong provider and you have poor call quality or your calls drop, you will regret going in that direction.   You can get all the same Unified Communications features and sometimes more in  a system that you own and keep in-house, so don’t be swayed by the “hip-ness” of going to the cloud.


Your VoIP phone system relies on your Internet connection, your Local Area Network (LAN), and the system itself – whether its in the Cloud or in your IT closet.   So if you have the best cloud service in the world, and you lose your Internet connection –you’re still going to have no phone service.   To be fully redundant you’d need two separate Internet connections for hosted, or two dial tone sources and hardware backup for premise.   If you buy good quality systems from a quality provider AND you have a good Internet Service Provider, your downtime should be very minimal – and its pretty easy to forward the calls to cell phones for those times when you are down.   If you run an ambulance service, or a large call center with 100 agents – you can’t afford to be down and should have redundancy in all the major system components – whether its hosted or premise based.   Again – work with experts – not IT guys who started doing voice in the past few years.

5.     Conclusion

The most important single factor is the vendor that you work with – a vendor such as PhoneGuys Voice & Data Systems offers all types of systems including cloud, premise, digital, new/refurbished, and a variety of telecom and data services including broadband and dial tone circuits.   They are experts that won’t try to jam you into a single solution because its all they offer – with their diverse catalogue they can match you up with the best solution for your unique needs.   And they provide both onsite installation and service, and toll-free help desk from experts based in the U.S.   You can call them today at (800) 322-5443 or visit them online at