Recently, a prospective client, who was looking to upgrade their business phone system and confused about the difference in a cloud versus premise system, contacted Teltek, so we thought others may benefit from our response to this client.
There are two categories of phone systems: premise-based and cloud-based. Within each system, there are several options (brands, price points, etc.) from which your business can choose. You can set up a call or meeting with Teltek to explore these options more thoroughly and then Teltek can supply you with a quote or multiple quotes based on your business’ needs.
What is a premise-based phone system? This is the traditional way of buying a telephone system and prior to the invention of Voice Over Internet Protocol (VOIP) what nearly all businesses once had. This is where you buy hardware (CPU and phones) that you own and the hardware is installed within your office. Keep in mind that you will still need a phone service provider like Comcast, Verizon, etc. to supply you with your phone lines. Now, this system does not require internet to function unless you have phones outside of the office (such as in your home or a second office) that connect back to your main office.
What are the advantages and disadvantages to a premise-based system? Since this option does not require the internet, your calls will typically be clearer with less potential for echo and dropped calls. Furthermore, once you buy it, you do not have continued monthly payments outside of your phone service. Finally, you also have some pretty significant tax benefits from buying or purchasing this kind of system – check out section 179 of the tax code to learn more. Some disadvantages of a premise-based phone system are that it requires you to continue to pay for phone service and maintain the hardware (typically with some kind of a maintenance or support agreement from a PBX vendor such as Teltek).
What is a cloud-based phone system?
In this option, you typically have only the phones installed at your office and you are utilizing the internet to connect to a remote (cloud) location where the phone system CPU of the vendor you choose is located. There are thousands of these companies out there, all of them offering variations of a similar product. It is most common that that cloud solutions hardware is bundled into the cost of the monthly service. For example, you might see a lease option for the term of the agreement, most commonly 36 months. The average cost of an all-inclusive cloud solution across all vendors is somewhere around $35 per phone per month (a 10 user system would be approximately $350/month before taxes). Additionally, you should also expect to have approximately $800-1500 in installation costs for the same 10-phone system, note this is an average across several vendors.
What are the advantages and disadvantages of a cloud-based phone system? One benefit is that you don’t have to worry about maintaining the CPU as that is typically included by the cloud provider under your monthly agreement. Another advantage of this type is that, although you have to keep internet service for a provider like Comcast or Verizon, you do not also have to pay for phone service. With that being said, the disadvantage is that all of your calls go across the internet, so the added voice traffic on your internet connection could put strain on your internet connection; second, when your internet is down, then your phones will be down; third, if the internet is running slowly, then you can experience call quality issues (echo, dropped calls, etc.).
Finally, what we see most often overlooked by our competitors is the computer networking requirements for cloud based systems. You need ensure that your computer network is “VoIP ready;” this basically means that you have a managed Layer 3 network switch to prioritize the voice traffic over the data traffic on your network (basically, you may need to get your IT consultant involved to translate!). Also, you will need to either purchase power supplies for each phone or ensure that your network switch also has Power Over Ethernet (POE).
In most cases, both premise-based and cloud-based phone systems can offer you the exact same features, depending on how they are designed. Thus, it really comes down to which technology and financial options you think are best for your business. Teltek represents a number of different cloud and premise based phone vendors. We work hard to educate our prospective clients on the various options available and help them to make an educated decision on what is best for their organization. We’re here to help, so please give us a call!