When the telephone was introduced in the 1870s, it changed the world. By opening the universe of communication, it made the world smaller and more connected. Imagine hearing the voice of someone in another city, state or country over the telephone for the first time. It must have seemed like a miracle!
Since then, telecommunications have continued to evolve rapidly, from switchboards and direct lines to massive networks, and from landlines to cell phones. And now, the Internet and cloud-based systems make communication and the instant transfer of information possible with a mouse click.
Can You Hear Me Now?
While personal communication has been enhanced, businesses have been the primary beneficiary of developments in communications. In fact, most of the early users of phones were businesses. It allowed companies to expand their customer bases and locations. Although some people may curse the advent of telemarketing, it gave businesses the ability to reach a wider audience and sell products directly to customers. These days, businesses and their employees and customers can be located anywhere in the world, making a global economy possible.
Of course, like all technology, business communications are accelerating at lightning speed. Today there are a vast array of telephony solutions on the market, making it more complicated to choose the most economical and practical solution for your business. To help you decide, let’s start with some basics.
What’s the Difference Between Onsite and Hosted Phone Systems?
Onsite or on-premise PBX (private branch exchange) refers to a system where hardware such as desk sets and computer equipment resides at your office. With an IP-PBX, the IP routing is done with more current technology, but the hardware remains on-premises. The signaling is done with an IP phone to the IP-PBX server using a LAN. Calls can go through a traditional phone company as well as voice over Internet (VoIP).
A hosted PBX or hosted VoIP, also known as an Internet phone system, is one where the provider is responsible for housing the IP-PBX, as well as handling the technology required to provide the services to the phone system. The desk sets will plug into a router and the calls, signaling and features are handled through an IP-PBX server at the provider’s location. The provider charges a monthly fee that includes a package of minutes and certain features. Charges can also be at a per minute calling cost.
There are pros and cons of both systems. Before making a decision, it’s wise to compare the fundamental differences and advantages and disadvantages of each.
Show Me the Money
In order to compare the cost of onsite vs. hosted systems, you must first determine whether a CAPEX or OPEX model best suits your business. A hosted PBX solution requires minimal CAPEX compared to an onsite system. Purchasing an onsite phone system involves buying hardware, which includes a server with the proper interface cards to be able to connect the telephone company with the IP phones. In contrast, a hosted IP-PBX only requires purchasing IP phones, although a router and network switch may be needed to ensure there is one specifically dedicated to VoIP. This is great for businesses that want to minimize upfront expenditures and spread the cost out over monthly payments.
Meanwhile, onsite systems are perfect for companies who want full ownership of their telephone solution and would rather pay more upfront than over a monthly period.
Cost comparisons to consider include:
Onsite PBX –
- Higher initial cost and set-up cost
- Potentially higher maintenance costs
- Lower monthly cost after expenses are covered
- Ability to SIP trunk to get lower cost calls
- On-premise IP-PBX provider will qualify network
- On-premise IP-PBX provider will install and program IP-PBX
- On-premise IP-PBX will train staff on feature use and “best practices”
- IP phones can be identical regardless of layout.
- The other equipment, such as server, software, routers, switches and battery backup can be very specific for the individual system. $3,000 to $5,000 is typical for purchasing a server with the necessary software and cards. Ongoing server maintenance with hosted PBX will be the responsibility of the provider.
Hosted PBX –
- Lower initial equipment cost and set-up cost
- Network qualification is performed by the customer. Any upgrades are at the customers expense
- All IP-PBX feature programming is done by the customer
- No maintenance costs of the IP-PBX, but all on-premise and remote phones and network devices are the responsibility of the customer
- Staff training is the responsibility of the customer
- Low monthly service cost
- Easy to add extra lines
- Upgrades and new features are included
- Extended features, like conferencing, may come with additional costs
What about expansion costs?
There are also costs to consider for expanding. Adding more phones to an on-premise PBX is as simple as purchasing more IP phones, unless any kind of additional licensing is required. With hosted PBX, however, additional IP phones are purchased and added to the service plan requiring additional programming time by the customer. This can also increase the monthly cost, depending on how the company sets up the plan.
Besides costs, there are other factors to consider when choosing a system, such as business growth, number of sites, control over your system and overall satisfaction.
For instance, scalability is one of the most important factors to consider when choosing between hosted and traditional PBX systems. If your business is growing rapidly and you expect continued expansion, then you should probably take your system to the cloud as it’s easy to scale up users, handsets or features when necessary to accommodate that growth.
While IP-based onsite PBX also allows you to add more users as your business grows, you will be responsible for the additional hardware costs and any necessary system upgrades.
Let’s take a look at the other pros and cons of each type of system:
Pros of Onsite PBX –
- Having on premise PBX gives user control to create, adjust and delete users as desired
- New open source feature sets can be added without any license fees
- Current carrier does not have to be changed
- VoIP trunks can be added to save on calling costs
- Server ownership reduces expenses over time
- No DIY time on the part of the customer
- Professional training of staff on new IP-PBX system is handled by the provider
- With SIP trunking, loss of Internet or catastrophic event has a reduced effect on operations because calls can be sent to another number or a mobile phone.
Cons of Onsite PBX –
- On-premise IP-PBX needs a provider who can manage it properly
- Expansions may result in complicated projects depending upon the provider
- On premise IP-PBX manufacturer could go out of business, leaving problems with managing problems
Pros of Hosted PBX –
- Providers have more resources than users, so new feature sets are possible
- New feature installation is handled by provider to avoid confusion
- Picking and canceling virtual numbers is easy and fast
- Moving a phone system is easy. IP phone is plugged into a broadband connection.
- Patches and upgrades of the IP-PBX are handled by the provider
- Loss of Internet or catastrophic event has no effect on operations if calls are sent to voice mail or a mobile phone. This is because of redundancy within an off-site facility that has safeguards including back up power sources.
Cons of Hosted PBX –
- Connections and voice quality are a result of Internet connection
- Loss of Internet results in loss of phone service (settings can be adjusted so that it goes to voice mail or routed to a cellphone)
- Flexibility of system is limited
- Customization of features may be slow or unavailable depending on provider
- Fees can be increased and cancellation fees can be charged
- Stability of provider may vary within operations and finance
- Technician may need to be called for upgrades and patches on software (and costs can be incurred)
A Quick Recap
In general, a hosted system is considered the best solution for small to mid-sized businesses that don’t have in-house IT resources and want to save money on capital expenditures. In contrast, an onsite system may be a better choice for larger companies with IT resources, want control over their phone systems and data, and need a customized solution.
Choosing a telephony system is really a matter of determining which system fits best your company’s setup, cost structure, necessary features and what risks you’re willing to assume.
If you’d like to learn more about onsite or hosted systems, give us a call at (616) 249-9599. Millennia Technologies is a full-service voice and data solutions company. Our primary focus is to help our customers design solutions with stability and longevity by helping future-proof their LAN and WAN voice and data networks.
- “Hosted PBX vs. On-Premise PBX,” VoIP-info.org – www.voip-info.org/hosted-pbx-vs-on-premise-pbx/
- “What’s the difference between hosted and onsite phone systems,” DuoCall Communications, October 21, 2016.