VoIP News

Your call: deciding between hosted versus on-premise for VoIP

Voice over Internet Protocol (VoIP) technology allows businesses to make telephone calls over IP networks (including the Internet) instead of the public switched telephone network (PSTN) owned by the telecommunications companies. VoIP can reduce call costs and increase flexibility over how calls are sent and received, but there are two main ways of using the technology and business decision makers need to assess which approach to VoIP is most suitable for their organisation – on-premise VoIP PABX or a hosted managed VoIP service.

To assist with this decision, it is important that business leaders understand the main differences between hosted VoIP and on-premise VoIP PABX phone systems.

Hosted VoIP providers are often referred to as “cloud telephony” providers as the customer does not manage the equipment or software. The client connects client side devices, or additional PABX systems, to the hosted VoIP service and can begin making and receiving calls. Client devices include IP-enabled desk phones, softphones, and mobile handsets with VoIP support.

Customers may have to pay setup costs for a hosted service, but generally the service is charged on a per-user, per-month basis excluding call costs. Once the client devices are registered with the hosted VoIP provider, the provider handles the call management.

With on-premise IP-PABX systems the customer purchases the equipment and is responsible for hardware maintenance and software updates. IP-PABX systems connect to a regular telecommunications provider or a hosted VoIP service to deliver calls.

Assessing the differences between hosted and on-premise

Most of the standard features like toll-free numbers, unified messaging, and faxing, for example, are available for both on-premise and hosted services. The main difference between the two types of phone systems lies in how the technology is deployed and the upfront and ongoing costs.

Hosted VoIP services do not require hardware or software management or skilled people to do the administration work. Despite the low barrier to entry, buyers of hosted VoIP services should consider the costs of adding new users to the system, whether the service is fully managed or requires some management by the customer and the bandwidth requirements for the internet connection that is to be used to connect to the hosted VoIP service provider.

With an on-premise IP-PABX, your company must wear the cost of server and phone equipment, which can be considerable. Existing non-VoIP capable PABX systems can be upgraded to support IP calls, but again this requires additional cost. With on-premise PABX equipment if your organisation moves offices, all on-premise PABX hardware must be moved as well. This is less of a problem with hosted VoIP services which can be accessed from any location with a broadband connection.

Financially, on-premise equipment can be depreciated whereas VoIP as a service can be tax deductible. This adds to the cost equation and overall decision making process. Hosted VoIP services can look good in the immediate term, but the cost will add up over time.

The benefits of Hosted VoIP services include no requirement for PABX management; low up-front costs; no maintenance fees; the service is not location-dependent; and has built in disaster recovery if the customers’ office loses power or the internet connection. In contrast, hosted VoIP cons include possible fees for new users and features and custom features might be difficult to implement.

On-premise IP-PABX systems have the advantage of availability of custom options; more control over features; and more sovereignty. Conversely, on-premise IP-PABX solutions require up-front costs for hardware and setup; IT skills to manage the system; and office moves require phone system moves.

Hosted, or cloud, VoIP services are well suited to small to medium sized businesses that generally lack the resources to invest in and maintain on-premise systems. Larger organisations, however, have existing infrastructure and application requirements and the resources to invest in on-premise equipment that could allow them to get more value out of on-premise PABX systems. Saying that though, even large organisations are moving business critical systems like telephony to the cloud and to outsourced specialists. This facilitates the redeployment of internal resources that can concentrate on IT systems and applications that differentiate the business and give it a competitive edge. Consider the pros and cons of each type of solution and speak to other businesses similar to yours to determine how your organisation can benefit most.


M5 Networks Australia are experts in business VoIP and softphone technology with over 10 years experience providing flexible office phones as an alternative to the traditional PABX. The only business phone company will need from the most experienced VoIP Business Phone providers. Contact the experts today.


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