On-Premise vs. Hosted

What is an On-Premise Phone System?

An on-premise telephone system is a private network known as a PBX or, Private Branch Exchange, that is used and controlled within a company or organization. Before hosted systems were readily available, many organizations were required to own and maintain PBXs in order to be able to communicate via telephones. Calls made within an on-premise system are routed through the PBX before getting sent out the service lines installed by the phone company and directed to their final destination.

What is a Hosted Phone System?

A hosted telephone system is a PBX that exists off-site that is owned and maintained by a company that provides service for a large number of organizations. With multiple institutions sharing the same PBX, hosted systems allow organizations to outsource upkeep and development of communication services and features. Hosted phone systems became much more accessible to the general public when Internet infrastructure became sufficient enough to support cost-effective telephony solutions.

What are the Differences between a Hosted and an On-Premise Phone System?

Now that you have a fundamental understanding of what each system is, let’s take a look at what each communication solution looks like for an organization. The graphic below offers an illustrative example of what an on-premise phone system looks like from a local perspective.

The dollar signs added to the different components of the picture represent what a customer needs to pay for with an on-premise system. Phone lines, contracts terms, security management, consultants, international capability, hardware maintenance, and IT specialists are all some examples in which an on-premise system can cost you money.

Now look at the next graphic to see what a hosted solution looks like from the perspective of your organization.

Much simpler right? A hosted solution places your phone system in the hands of a company that specializes in handling all the hassle involved with owning and running a PBX. Better yet, all you need is your existing Internet connection to make it possible.

A Hosted Solution Makes Fundamental Sense

Specialization was invented thousands of years ago. An ancient ancestor discovered farming and found that they had enough food to feed more than just their own family. That person made an agreement with another family to give them their extra food in exchange for tools. With one person making food and one person making tools, both were able to improve in their craft and make a vastly more efficient society with higher quality goods. (Note that this example may not be perfectly historically accurate, but you get the point.)

Fast forward to modern times where thousands of different crafts exist. Does it really make sense that a car dealership should allocate their time and money to maintaining telephone equipment instead of selling cars? Of course not! Making the decision to host your phone system allows your organization to focus on the services you’re providing and the hosted provider to focus on your phone system.

A Hosted Solution is More Cost Effective

A knee jerk reaction might be to think that outsourcing your phone system will cost your organization a little extra for the convenience. Fortunately, this isn’t the case. A hosted provider will provide service to numerous institutions which allows it to bring the overall cost per user down. This works in the same way that a manufacturing facility can make products cheaper per unit by producing many of them; the larger scale shrinks fixed costs. By sharing a PBX with many other organizations, you reap the benefits of a much more cost-effective solution.

You’re Likely Already Using Hosted Services

Imagine a world where email was only possible if you owned and maintained a private email server. There’d probably be a lot less emailing going on because there would be both a cost and technical expertise barrier to setting everything up. Luckily, companies like Google and Microsoft make creating an email account essentially free; all you need is an Internet connection and a computer. If you think of your phones in the same way, a hosted system makes sense for most organizations.

Hosted Allows for More Innovative Features

When you purchase an on-premise PBX, you’re pretty much locked-in to the feature set you paid for. Even if we were to assume your particular PBX had the capability for you to develop new features, it’s uncommon that an organization has the time, personnel, or know-how to properly do so. A hosted provider though actively works on creating and maintaining innovative features in order to maintain a competitive edge in the industry and implements them with seamless, remote software updates.

A Hosted Solution is More Reliable

Organizations unsure about change sometimes express worry about the reliability involved with a cloud-based system. To put this concern in perspective, think about how much time and effort IT personnel involved with your organization put into monitoring your PBX. In most cases, they either don’t have the technical knowledge to make sure everything is running smoothly all the time, or they simply have too much other work to place much emphasis on monitoring a system that isn’t currently failing.

With a hosted provider, the company has a lot to lose if service goes down for their customers. In the same way they have strong incentive to create the best and most innovative features, they have strong incentive to guarantee the maximum possible reliability to its customer base. Through years of trial and error, hosted providers have found best practices for monitoring potential issues before they arise and actively implement them every day to ensure client satisfaction.