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The True Cost of Hosted vs. On-Premise PBX

By October 1, 2015Phone Systems

Deciding Between a Cloud-based and Premises-based Solution

In recent years, there has been an impetus towards hosted PBX solutions to replace legacy analog key system units.  The reasons cited are lower upfront costs and elimination of on-premise telephony infrastructure, in addition to a plethora of value-added features that all contribute to the sudden attraction hosted PBX has garnered.  Cost, future expansion, control, flexibility, range of features/options and implementation are all key factors which should be considered before implementing any telephony migration.

Let’s break each of these considerations down to evaluate the pro’s and con’s of each:

Cost. There is little argument that a hosted PBX solution provides a lower upfront cost, however, long term operating costs can mitigate these savings rapidly.  Many hosted PBX solutions make the integration of lower cost communications services (such as Skype, line2, etc.) difficult, if not impossible, to implement.  In most cases, you also forfeit the power to choose long distance providers or even basic VOIP carriers.

Future expansion. Hosted and on-premise PBX solutions both offer scalabilty, however, it’s more of a matter of timeframe and control that comes into play between the two options.  An on-premise solution provides you with complete control over any expansion, reduction or change of telephone network services, whereas a hosted solutions provider may not be able to make those changes as quickly (or at all).

Control. Establishing the hand-off of responsibility between your Internet and telephony providers can be vague, and while many hosted PBX providers provide both as a turnkey solution, managing your internal Internet resources can remain a challenge.  Some companies prefer to retain as much control within their organization as possible, while other companies prefer to outsource control in order to focus on their core business initiatives.

Flexibility. Hosted PBX providers often have a plethora of features and capabilities available to their customers, ready to implement on a moment’s notice.  However, these same providers can be reluctant (and subsequently slow) to develop or offer customized configurations.  On-premise solutions provide the ultimate in flexibility, provided that you have the resources to develop and implement these solutions.

Features and options. As with flexibility issues, the same pitfalls can be experienced with respect to features and options.  That is, a hosted provider may already have your desired features and options available, but likewise might be reluctant (if not adverse) to developing specific features and options.  On premise PBX’s provide the ultimate selection of features and options, provided you have the resources to develop and implement these features and options.

Implementation. A hosted PBX is the “hands down” winner in this respect. No question.  This is where the proverbial “tug of war” takes place when deciding between a hosted vs on-premise PBX solution, and one has to consider the five factors listed above in making the most suitable decision.

To summarize:

Hosted PBX
Pros Cons
lower setup cost potentially higher ongoing service provider costs
no maintenance costs potential lag in expansion or modification of service
your provider shoulders the risk and responsibility relinquishment of control and management of your service
features and options may be more readily available limitation of custom options and features
On-Premise PBX
Pros Cons
lower ongoing costs higher setup/initial costs
no risk of fee increases possible unknown long-term maintenance costs
complete control of service providers expansion/modification procedures have to be handled internally
complete knowledge of capabilities cost, speed and difficulty to manage on an on-going basis

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