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Hosted PBX vs. On-Premise PBX

There are pros and cons to both hosted PBX and on-premise PBX. Fundamental differences to each of the systems offer advantages that need to be known prior to making a decision on one over the other.

The move to an IP-PBX business phone system is beneficial regardless of whether you use hosted or on-premise. However, there are differences and knowing the differences leads to a better VoIP phone system and a higher level of satisfaction for your company, your employees and even your callers.

What Is Hosted PBX?

Hosted PBX or hosted VoIP, otherwise known as a “cloud” system, is one where the provider is responsible for providing, at their premises, the IP-PBX as well as handling the technology required to provide the services to the phone system. The desk sets at the customer’s premise will plug into a router and the calls, signaling, and features are handled through the IP-PBX server at the provider’s location. The provider of the hosted PBX charges a monthly fee for this. Oftentimes a hosted PBX can offer advanced enterprise level software, applications and features that would be cost-prohibitive if purchased by a small to medium-sized company. Taking advantage of these enterprise level applications may enhance the caller experience, improve customer and employee retention, while providing useful metrics and reports not normally available to small and medium-sized organizations.

When deploying a hosted PBX, the customer would port the main number(s) over to the hosting provider’s telco services (usually SIP trunks) and contract the provider to deliver a certain number of simultaneous calls to the company. Certain telephony features, applications and services such as fax to email, transcription (voice to text), voicemail to e-mail, contact centre, soft phones, mobility, collaboration etc. are available for which the customer pays a monthly fee to the provider. The phone sets themselves may be offered as a one-time purchase or included in the monthly payment to the hosting provider.

What Is an On-Premise PBX?

On-premise PBX is also known as an IP-PBX phone system. On-premise IP-PBX systems can be comprised of physical equipment, virtual machines and applications or a mix of both which are situated at a customer’s premise, usually in a server room.

Although there are many “do-it-yourself”, open source on-premise PBX, many companies are not comfortable with the possible risks associated with the open source products. Therefore companies often prefer to stay with main stream PBX providers, all of whom offer IP-PBX. Today many major VoIP system providers provide both cloud PBXs and on-premise PBXs. For example, Mitel (formerly ShoreTel) offers cloud, on-premise and hybrid models, with a consistent user interface across all platforms. Typically, the customer would purchase or lease the on-premise PBX and connect the PBX to on site telco services such as copper lines, digital (PRI) circuits or SIP trunks (or a combination of these telco services.)


Hosted PBX

  • Lower initial equipment cost and set-up cost

  • Fixed monthly payment

  • Easy to add extra lines, applications and features

  • Easy to bring on additional sites

  • Suitable for geographically diverse companies with multiple locations

  • Suitable for mobile workforce

  • Upgrades and new features are included

  • Provider is responsible for keeping the system current

  • Provider is responsible for performing moves, adds and changes on behalf of customer

  • Provider usually has multiple, extremely secure data centres which provide high-availability, redundancy and disaster or emergency failover/backups

On-Premise PBX

  • Higher initial cost and set-up cost

  • Potentially higher maintenance costs over time

  • Lower monthly cost after expenses are covered

  • Ability to maintain existing Telco contracts, or change to SIP trunks

  • IP-PBX provider will qualify network

  • IP-PBX provider will install and program PBX

  • IP-PBX provider will train administrators and general staff on feature use and "best practices"

  • Potential IT staffing cost to maintain and manage the on-premise PBX

  • Customer is responsible for redundancy, high-availability, emergency failover scenario and disaster recovery and back ups

  • Customer maintains complete control of the system

Flexibility and Scalability

Hosted PBX provides advantages for flexibility as the provider has more resources to support your system. With a hosted system additional phones, features and licenses can be quickly added and your monthly payment adjusted accordingly. Adding to an on-premise system may involve paying up front for the added components and waiting for delivery from your vendor.

As your business grows you may need to scale your VoIP system to support the business and new initiatives. Hosted VoIP solutions shine in this area because changes can be made quickly and the monthly payments adjusted according. With an on-premise system extra time and up-front costs may be required to adapt to your new business model.

Maintenance & Troubleshooting

With a hosted IP-PBX, software updates and scheduled maintenance are typically included in your monthly payment and your cloud provider keeps you up to date with a minimum of disruption.

With an on-premise PBX, your IP-PBX provider may offer a support agreement which includes updates and patches. Alternatively, your IT team would be responsible for procuring, installing, and maintaining both the hardware and software which may be time-consuming, disruptive and expensive.


Hosted providers will likely do a better job at keeping your data secure because these providers typically operate their services out of a highly secure data centre with dedicated resources to protect your data. That being said, your business must agree to abide by their security regulations.

Disaster Recovery

While hosted PBX providers make you reliant on your Internet link and hosting service, which providing reliable redundancy and high availability, you typically will not have direct access to your system programming and provisioning. On-premise VoIP can be expensive if you include redundancy, but you will have access to your equipment and applications.

Questions to Ask before Choosing

Before making your decision, there are some things you need to know about your own business. Here are some important questions to ask yourself prior to proceeding:

  • What are your current requirements?

  • How many employees do you have?

  • Do you intend to grow, expand, add more locations?

  • What features or integrations do you need now or would need in the future?

  • Do you have in-house IT technical expertise?

  • What is your budget?

What We Recommend

If you have a small business, a startup, or a business with multiple small locations, you might be a great candidate for hosted VoIP.

If your business needs full control of your system and advanced features such as integration with other business applications, customization, and flexibility, you may need to opt for on-premise VoIP.

How High Tech Communications Can Help

If your company is seeking to reduce costs, streamline operations, enhance customer experience, and improve employee productivity, cloud communications solutions can address these objectives and many more.

High Tech Communications, based in Aurora, Canada, has partnered with several first-rate service providers to bring excellent products and services to you. We offer a number of VoIP phone systems and data solutions (onsite or in the cloud) that can benefit a host of GTA sectors such as education, healthcare, hospitality, call centres, and countless types of businesses. We have integrated network partnerships and can offer dedicated communications support across regional, national, and international accounts.

For more information on our products and services contact us toll-free at 1-(800) 853-2335.

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