Articles of Interest

On-Premise PBX vs. Hosted VoIP: What You Need to Know

Posted on Apr 1, 2016 8:30:00 AM

By Mark Kling, Enterprise Sales Consultant, Global Data Systems

MARK_FINAL_2.jpgTwo of the most popular phone solutions for business include on premise private branch exchange (PBX) and hosted voice over Internet protocol (VoIP).

On-premise PBX is a form of VoIP but with a more traditional set-up. With an on premise PBX, all components of the system physically live on site (in an office building’s computer equipment room or otherwise) and internal lines are integrated with IP routing via a local area network (LAN). Calls can go through a traditional telephone company or VoIP (with SIP trunking).

In contrast, hosted VoIP uses the internet only to send and receive voice and multimedia communications. All components (equipment, servers and service) are owned and maintained off-site by a licensed provider. All phones and desk sets plug into a router on premise and almost everything else (signaling, calls and features) pass through the provider’s IP-PBX.

With cost being the primary concern for businesses, most companies question which solution is least expensive and most cost effective. To answer this question, we must look at cost from several angles:

  • Up-front Cost:  With an on premise PBX, upfront cost is substantial because you are responsible for purchasing all the equipment involved in the system. To give an example, it could cost a mid-sized company (approximately 75 extensions) $75,000 - $90,000 in up-front cost to install an on premise PBX. With hosted VoIP, all equipment is owned and maintained by the provider, which alleviates the upfront financial burden on businesses. In many cases, the up-front cost of hosted VoIP is zero.
  • Scalability & Flexibility:  Hosted VoIP solutions were built to be easily and affordably up or down-sized to meet the demands of growing and changing business initiatives. Additional lines and features can be added or eliminated quickly without disruption to service, and the only cost consideration involved pertains to internet connectivity. Because hosted VoIP depends on the internet for service quality, you must ensure your bandwidth is large enough to support the number of users. If you increase users, you may also need to increase bandwidth. With on premise PBX, you must purchase the equipment based on the projected number of users. If this number increases or decreases at any time during your service plan, you may have no choice but to absorb the cost or invest in greater capacity.
  • Investment:  Because hosted VoIP sends and receives data via the internet, most providers offer free long distance and free or low-cost international calling to select locations. If your business operates on a national or international level, this means huge savings potential. With an on premise PBX, you can reduce the cost of calling with SIP trunking, but again, this requires an investment.
  • Ongoing Maintenance:  Hosted VoIP means the provider takes all responsibility. If at any time you experience an issue with the equipment or service, your only task is to call the provider, who will handle the resolution. Additionally, the provider manages updates, upgrades, installation and continued support — most of which is included in the cost of service. With on premise PBX, the cost of maintenance is unknown. If something goes wrong, it’s your responsibility to fix the problem and if you don’t have a dedicated IT person on staff, you may have no choice but to hire outside help.

Experience teaches us the most affordable choice is hosted VoIP because the service provider shoulders all responsibility for the equipment and offers highly customizable plans to meet the unique and ever-changing demands of your business. The upfront cost of an on premise PBX can be astronomical and maintenance issues can become an expensive burden to bear. The cost of hosted VoIP also illustrates an impressive ROI whereas; on premise PBX may take years to make up the cost of equipment, installation and maintenance.

For more information on Hosted Voice from GDS, please click here.

Topics: Mark Kling, SIP Trunking, Hosted Voice, GDS Sales Blogs

Subscribe to Email Updates

Follow Me