Hosted Cloud Phones vs. Premise Based Phone System

September 16th, 2013 by admin

I met with a medical design and development company that is relocating and wishing to upgrade their phone system. During the discovery phase we learned that the new office only has one Cat5e cable to each location and due to the environment they will not be adding any additional cable. For this reason they were strongly considering moving forward with a hosted solution using cable internet. I met with their IT personnel and principle partners coming in at the 11th hour. I explained that using cable internet for voice is risky as it does not provide QOS (Quality of Service) and while it does sometimes work without issue, there is no way to know this until service is installed. Due to only one data cable at each work station I proposed an IP solution using NEC hardware and Cox Communications SIP trunks. This will enable them to daisy chain their computers and handsets together using the one available cable. In addition they were wishing to implement DID (Direct Inward Dial) phone numbers. By moving forward with SIP trunks they can choose how many voice lines they require and it keeps the price point down unlike a PRI. Features they were wishing to have voicemail to email and conference calling both of which the NEC SV8100 provides. We broke down the monthly cash output of owning verses hosting (renting) as keeping monthly cost to a minimum is mandatory to the client. We determined by financing the NEC IP phone solution they will pay less each month then hosting a phone system. In addition in a few years time, they will own the system outright, eliminating the monthly charge completely.

What is a Hosted Solution?

As the name itself suggests, Hosted, Cloud or VoIP phone systems use a third party to provide 'hosting' capabilities. You need not worry about the space and cost of installing the PBX system in your office. The greatest advantage of hosted solutions is that they have minimal setup and activation costs. Hosted phone services are considered as the perfect business solution for small companies but that can scale up to 200 phones depending on the cost analysis.

What do we mean by Premise Based PBX?

Premise Based PBX can either be traditional phone system or one that incorporates VoIP technology. As a business, you have to purchase the hardware and the PBX hardware resides in your premise. Since a third party does not host it, an premise based PBX has implications related to cost and space and you are responsible for the maintenance of the PBX system as well.

Cost Comparison

Hosted, Cloud Phone Systems have much lower setup and operational costs as compared to the one that takes up space in your office. ATEL and CloudConnect Hosted VoIP services can be extremely affordable with a low up front cost. In contrast, there's a major up-front cost involved with a Premise Based PBX, often in the tens of thousands of dollars. Furthermore, you will likely need to incur additional maintenance expenses on a periodic basis as well.v Premise Based PBX can be more expensive in the short run compared to hosted system.


Most Hosted VoIP providers can scale your VoIP system in a matter of seconds. User administrators are often given access to easy-to-use web interfaces that allow them to add additional users and extensions. Contrary to this, PBXes can be a nightmare in terms of scalability, depending on what type of hardware you have. You may need to buy additional lines, get them configured to work with your VoIP PBX and even test them before you can use them. This means that you will likely need someone to come in to do all this work for you, meaning you will fork over more money every time you add/subtract users. Hosted VoIP solutions can be scaled in hassle-free manner by contacting your hosting provider. Scaling an on-premise PBX can sometimes be a daunting task.


Since there is no on-premise equipment for a Hosted VoIP solution, it has minimal (often zero) maintenance costs. You not only save on money but also on space and time as well. Maintainability is a challenge for regular PBX solutions. You need to hire a dedicated PBX Administrator to manage the PBX solution if you don't already have an IT person. Furthermore, you need to ensure that there are no downtimes and outages/ issues must be fixed quickly.

Posted in: Business Phone Systems, Business Solutions, Cloud Computing (Hosting & Colocation), Communications, Hosted System, Phone System, Technology, Telecommunications, VoIP