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Hosted VoIP vs. On Premise VoIP – Which is Better for Your Business?

PBX phone systems give businesses a private telephone network that provides seamless management of internal and external communications through extensions, as well as VoIP. Today’s PBX phone systems are split into two groups: hosted VoIP and on premise VoIP.

Businesses of all sizes are taking sides in the growing hosted VoIP vs. on premise VoIP debate. While different in their setup, both PBX phone systems offer unique benefits, as well as drawbacks, which are important to consider if your company is planning to adopt either VoIP technology.

Hosted PBX

The newer of the two PBX systems is hosted PBX, which is a cloud-based phone system. Your hosted PBX provider supplies all the necessary software, hardware and maintenance for your system. Your responsibility is to purchase the appropriate number of handsets and connect them. Hosted PBX offers several benefits and drawbacks:

Pros of Hosted PBX

The most noted benefits of hosted VoIP include:

  • Zero maintenance fees
  • Low setup costs
  • Fast implementation
  • No onsite hardware to manage

Other substantial hosted BPX benefits include:

  • Requires minimal resources from your in-house IT staff
  • Scales to your company’s growth and preferences
  • Shifts full responsibility and system management to your provider

Hosted VoIP is also suitable for any business size, which makes it a sound choice for growing companies.


Possible drawbacks of hosted PBX include:

  • Service provider retains control of system
  • Staff needs on-site training
  • Handsets and network equipment requires purchasing
  • Call quality depends on network connection

One of the other drawbacks of hosted VoIP is that every handset requires a network cable and switch port, which could increase your installation costs depending on the number of phones desired.

On Premise PBX

Your traditional PBX phone system is commonly an on premise PBX. This phone system is location-based which means that all hardware are at your physical location. While calls through hosted VoIP systems pass through your provider’s server, a call made with on premise PBX goes through your Call server over a dedicated voice network connection.

On-premise PBX also has noted advantages and disadvantages depending on your needs:


Benefits of on premise VoIP include:

  • Zero risks of price hikes by service provider
  • Full control of PBX phone system
  • Complete customization of system

Another on premise PBX benefit is that adding more phones to your plan doesn’t result in a price increase from your service provider.


Possible on premise VoIP drawbacks may include:

  • Includes high installation expenses
  • Requires long-term commitment to maintenance
  • Needs service and support from in-house IT department

Additional on premise PBX drawbacks include the varying costs maintenance and support may incur on your company, as well as the potential evolution of your system, which may become complicated and unmanageable by your existing IT team.

Due to its commitment, on premise VoIP is recommended when you have extensive resources to manage it.

What to Ask When Comparing Hosted PBX vs. Traditional PBX

Deciding between hosted PBX and traditional PBX requires asking yourself and a service provider some questions:

  • What’s your budget?
  • What are the estimated costs of installing a hosted PBX vs. a traditional PBX?
  • Do you have a preference between capital expenditures (CAPEX) and operating expenditures (OPEX)?
  • How much do you want to spend in the long-term?
  • Does your IT team have the resources and skills to manage a phone system?
  • What’s your company’s predicted growth?
  • How will you handle redundancy and resiliency?

Evaluating the needs of your business provides you with valuable insight when weighing the benefits and drawbacks of hosted VoIP and on premise VoIP, which helps you make an educated decision on which one you’ll incorporate into your company.

Think hosted PBX may be the right move for your business? With decades of experience in both hosted and on premise voice, Consolidated Technoologies, Inc. is happy to help you find the solution that’s right for your SMB. Contact our experienced team for more information today.