Hosted Phone System vs On-Premise Phone System

When looking for a business phone system, one can find it to be a challenging experience. There are various things to take into consideration, so you make the right decision. Here we take a look at both hosted phone systems and on-premise phone systems, delving into each’s cost, along with who should use both of them.

Before considering if a hosted phone system or an on-premise phone system is right for your business, you will want to answer the following questions:

  1. How much can you afford to spend?
  2. How much will a VoIP phone system cost?
  3. Will you be expanding your team in the future?
  4. How much control do you need?

When purchasing a business phone system, a pivotal point to think about is how many phones your company requires. Ask yourself if all employees need a phone. While specific employees such as those in your sales department require a business phone to conduct the business, other employees might not need one.

Think about the future of your company phone system as well. If your business projects an expansion or moving offices, your phone system requirements may vary as well. Always confirm that your company phone provider can help you with your needs.

What is a Hosted Phone System?

Hosted phone systems, also known as a virtual phone system, is a cloud-based phone system. The only devices on-site are the physical phones and a system PoE (Power over Ethernet) switch. The hosted phone system is traditionally comprehensive in a data centre divided into smaller subsections for users. The end-user area is correlated to the virtual phone system through the internet. The dial tone is administered by the hosting or the phone provider and delivered over the internet.

You will also see advanced features, such as a voice menucall control, Messages on Hold, and more. With this choice in communication, one can see an increase in redundancy with dedicated resources and servers. Instead of copper wire, redundant routes are utilized.

With a hosted phone system, there is more security. Should the local network be compromised, policies are in place by your VoIP Services to stop large amounts of unauthorized calls.

Related: IP Business Phone System Buyers Guide 2021

Who Should Use a Hosted Phone System?

Small office team

A hosted phone system is perfect for a small office team. Benefits of this would include no need for capital outlay, free calls between offices, and exceptional voice quality. You will find that you can make additions and changes as needed.

Local Shops with multiple handsets

Local shops with multiple handsets will also benefit from using a hosted phone system. As it is hosted online, there is not a need for physical infrastructure. Everything will be stored, managed, and maintained remotely. Hosted phone systems can also allow the local shop to grow, so if you need more handsets and add more users, the process will be simple to add them.

With hosted phone systems, the most recent updates will be provided for you. You will never have to install an update manually yourself.

Cost of Hosted Phone System

Generally, you can expect the cost of a hosted phone system to be $50 – $70 per user. Your business will pay a monthly fee to be connected to the internet via a private or public internet connection. Typically you will only need to have desk phones, but some providers allow these to be rented.

Related: Upfront And Ongoing Costs Of An Ip Business Phone System

What is an On-Premise Phone System?

An on-premise phone system is a phone system where all the hardware required to manage the system are physically positioned in a secure area in your office, such as on a computer hardware rack or in a purpose-built phone closet.

While many individuals are shifting to hosted phone systems, many fancy having a physical box in their office. For some companies, peace of mind and sticking with what one knows is provided, while for other businesses, it is about being in total control of the situation, maintenance, and general upkeep of the system itself.

Who Should Use an On-Premise Phone System?

Large office team

A large office team can benefit from using an on-premise phone system as there is complete control over the phone system. Communication can be done internally or externally within the office. As you own the system, there will be a lower running cost. And you will be able to see higher staff efficiency, more flexibility, and greater customer service.

Medical Centres / Hospital

As medical centres and hospitals already have the infrastructure, bandwidth, and network settings, an on-premise phone system would be an ideal setup for them.


An enterprise could greatly benefit from using this type of phone service, as many great options can be utilized. On-hold music, voicemail to email, conference calls, and call transferring are just a few. An enterprise will also customize the system with its own IT tech person, providing further benefit to the business.

Cost of On-premise Phone Systems

Typically, you can expect to pay from $1500 upfront — up to $10,000, depending on how many handsets your company requires.

There are also expenses to think about when expanding. Adding more phones to an on-premise PBX is as easy as acquiring additional IP phones unless another type of extra licensing is needed.

Final Thoughts

It can be a big decision on which type of business phone system you go with for your company. This is an investment that can help the professionals in your company grow and make your industry stronger. There are many factors to weigh, such as cost of ownership, maintenance costs, upgrades, and any additional features you may desire to have.

A goal of almost every company is to keep the monthly expense down while having a quality system. They also desire to have user-friendly phone solutions that have popular features that will make functional differences in your company. With this knowledge, you can save money while having communication systems that work for your business.


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