With changes in today’s VoIP technology there are numerous ways for your company to communicate. Due to changes in the telecommunications industry, business communication is increasing in speed and quality. While this is a great advantage for today’s market, your company may be left questioning which is the best solution for your business. Recently, with the advent and rapid uptake of cloud-based VoIP systems, it leaves businesses questioning which is better for their company moving forward, an On- premise solution which hosts the server and hardware appliance on the enterprise’s own site, or a hosted solution in which the vendor physically houses the primary hardware and software for the Cloud PBX. The graph below shows the expected changes in Hosted verses On-premise VoIP solutions in the next four years. As you can see, while hosted is growing, On-premise is not going away.

Hosted verses On-premise
Source: Grandview resources

When it comes to choosing which solution, there is no right or wrong answer, but your company should consider key factors of both solutions before coming to a final decision. When making any big decision for your company you should first consider some key factors like; Total Cost of Ownership (TCO) investment, business size, users per locations, infrastructure of LAN and WAN, along with installation and training requirements.


Cost is always a decision factor for any business when it comes to any major corporate goal or strategy. Think about the two questions below:

Does your company prefer to pay for IT investments as Capital Expenses (CAPEX)? or Does your company prefer to pay for IT investments as an Operating Expense (OPEX)?

If your company prefers IT investments as capital expenses, you probably would prefer an On-premise VoIP solution. While you would be paying more upfront, your company will be investing in infrastructure that will be reliable for years to come (usually 8-10 years). In contrast, a Hosted VoIP solution can be seen as a pay as you go plan. Typically, a hosted plan allows you to easily add on new users with a simple increase in monthly cost. With recent market advancements towards Hosted VoIP you have more than likely came across numerous articles that state that a hosted VoIP allows you to have predictable monthly costs while an On-premise does not. However, this statement is not always true, if your company leases the On-premise system, it too can become a predictable cost with 36- or 60-month lease options. With an On-premise solution, you may be paying more upfront, but with a hosted solution your vendor could decide to increase price when it feels necessary or you may get trapped in a contract you have to break because of a vendor that delivers inferior service.

Number of Locations and End Users

With technology today, companies often have more locations, fewer local and centralized end users, but more remote end users. Think about these two questions below:

Does your company have multiple offices with few phone systems and several remote end users? or Does your company have mostly end users all clustered in central business locations?

When it comes to location, there are certain factors in which a particular VoIP option is best for your business. The most important factors to consider here are number of locations your company has and number of end users using phone services in each location. With a hosted VoIP there are two types of businesses that can really benefit from using a hosted VoIP, if your company has multiple offices and only a handful of phones in each location, or if your company has several remote or virtual users. Retail stores and restaurants are ideal companies for hosted VoIP, since classically they have several locations but few phones per site. Today, many companies are virtual or have several sales and administrative users working remotely. These companies could strongly benefit from hosted since users are not all at one central location(s).

Companies that have a call center or multiple users in one location that tend to rely heavily on the quality of calls, may want to consider an On-premise VoIP system. One major concerning factor with a hosted solution is the quality of voice and connectivity dependency. Quality of service can be another challenge. In IT, the “quality of service” refers to the overall performance of a telephony or computer network, particularly the performance of applications seen by the users of the network. With a hosted solution, your company has to decide how to prioritize all data traffic coming in, and if not organized correctly, calls could be dropped or muffled in sound. Most often with 15+ users, a dedicated circuit to handle voice over SIP or a traditional PRI is required, to insure this QoS.

Installation and Maintenance

If your company does not have all the internal IT resources, installation and maintenance could be a deciding factor. Think about the questions below:

Does your company have an IT department that capable of managing the installation and maintenance, or a MSP that could fill that role? or Is your company thin in the IT department and would not use those resources when it comes to installations?

With the On-premise solution your company can personalize and maintain the functions and installations on their own time. Today, certain companies can fully function with few or no internal IT resources. One major advantage of a Hosted VoIP is its ability to minimize complexity. If your company uses a hosted VoIP solution the installation and timeframe will generally be much quicker and less work for your company. However, your company is solely reliable on your Hosted VoIP vendor for everything else. With hosted solutions being the trending topic in the market place, there are a plethora of companies to choose from, but what happens if your vendor goes out of business or is lacking in the customer service department. In these situations, frustration from the vendor could cause tremendous stress or your company, and you may have to face a forklift upgrade. Think about updates the same way, while an On-premise solution may cause more time and effort to coordinate initially, a hosted solution will refer solely on the vendor for updates and enhancements solutions. While a hosted solution again takes pressure off your team for updates and enhancements, what happens if your system crashes with the upgrades and changes make to your system? In these situations, you’ll be forced to nervously wait and hope your vendor has the proper resources to fix the errors. Some companies suggest that they’ll have less infrastructure and equipment to deal with if they stick to a hosted VoIP. With a hosted system, you’ll still have to maintain the network POE switch if you have more than a handful of VoIP phones per location.

Infonetics Research

After considering these key factors, your company should be headed in the right direction of choosing the better system for your particular business. While recent data shows increases in hosted VoIP, remember that quality On-premise solutions are here to stay for the next decade or two. The graph above shows the prediction of increase for Hosted VoIP solutions by the end of 2016. When thinking about these current market trends, remember to go back to the basics of costs and reliability, number of locations and end users, installation, training and maintenance. If your company is still having a tough time trying to decide which solution is more ideal for your current and future circumstances, you should look towards a quality Managed Service Provider for advising your best fit.