PBX Showdown: Choosing Between Hosted and On Premise IP PBX Systems

Business communication tools have come and gone, but the one that has endured the changing times is the telephone system. In larger organizations, phone systems (specifically the PBX or private branch exchange) play a crucial role in ensuring smooth and efficient business communications. But as phone technologies evolve, companies must also adapt in order to stay competitive.

One key decision companies face today is whether or not to upgrade their traditional PBX system to a hosted or an on-premise IP PBX system. Moving to an IP PBX system offers numerous benefits (regardless of which type is chosen). But in order to tap the full potential of the phone system and ensure the complete satisfaction of users, it pays to learn more about each type, as well as examine its strengths and weaknesses.

Hosted IP PBX
Hosted IP PBX refers to the service where the call platform (as well as the PBX features and capabilities) are hosted and delivered by a third-party service provider. A hosted PBX system frees companies from the hassle and expenses of investing in and maintaining onsite equipment. The service provider maintains the equipment, hosts the software, and makes the upgrades. A company and its employees simply use the phone system as usual, and can see their changes in real-time.

On Premise IP PBX
As the name implies, with an on-premise IP PBX system, all components of the system are located on site. The business shoulders the cost of the equipment as well as the maintenance and upkeep. This type of PBX is a common choice for larger enterprises who have robust PBX needs and employed IT personnel responsible for the monitoring, maintenance, and upgrades of the system.

There are various factors that will drive a company to choose between a hosted and on-premise IP PBX system. These factors include:

  • Cost

Hosted PBX offers lower upfront costs, which is highly attractive for new businesses or those that are strapped for cash. You only need to pay a flat subscription rate, which covers the equipment, IT support, and maintenance costs.

An on-premise PBX system requires a higher startup cost since you’ll have to purchase the phone equipment yourself. And while you won’t have to deal with monthly service fees, there are hardware expenses and ongoing operational and maintenance fees that you have to take into account.

  • Scalability

Another thing to consider is scalability, or the ability to scale up (or down) depending on your business’ demands. With a hosted PBX, it’s easy to add or remove lines and features without experiencing disruption in one’s service; however, do be aware that adding users will increase your monthly costs. Adding and subtracting users can usually be done through a self-service web portal, which is offered by the provider. With a hosted PBX, it does not require an on-site visit by a technician. As long as you aren’t locked into a contract that limits or penalizes you adding or subtracting users, then you’re all set.

On the other hand, with on-premise PBX businesses must buy the equipment based on the projected or estimated number of users. If the number of users or employees grows beyond the scale of your phone system, you will have to invest in more capacity (or if it decreases, you may have no choice but to eat the cost).

  • Mobility

For companies that employ remote workers or road warriors, a hosted PBX solution is a great option because you can access your business phone system and all its features from any device as long as you have an internet connection.

But an on-premise system can be limiting because it only supports wired phones in a physical office.

  • Control

Also consider the level of management and control you desire. Businesses that opt for a hosted PBX solution often choose the system because they want to focus on their core business–and they can’t do this if they spend significant time and resources on making sure their phone system is up and running. By outsourcing tech and upkeep responsibilities (such as managing their phone system), organizations can better attend to profit-boosting activities.

Meanwhile, an on-premise PBX solution enables businesses to control every technical and operational detail of their phone system. Because they have a clear understanding of their business’ requirements and capacities, they are able to develop a phone system that perfectly suits their needs. The catch is you need to have skilled and qualified staff to exercise that control.

The Bottom Line
Each system has its strengths and weaknesses, so ultimately the choice boils down to the priorities and preferences of your business. A hosted PBX is a suitable choice for organizations that value mobility and cost-efficiency. An on-premise system, meanwhile, is more ideal for companies that have the capacity to update and maintain the system, and seek greater control over it.

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