Both on-premise and hosted (cloud/VoIP) phone systems are dependable and effective communication solutions and each system has its own set of advantages and drawbacks. Which system to choose depends on the features that would be most beneficial to your company.
On-Premise Phone Systems
An on-premise phone system is a physical system that is owned or leased by the company that is using it. The server is located on-site in an equipment room or phone closet and the company is responsible for the upgrades, maintenance and expansion of the system. Even with an in-house IT/technology department to assist in managing the system, most companies still require some level of support from a Value Added Reseller (VAR), like Teltek for ongoing support and maintenance.
Hosted Phone Systems
A hosted phone system is a cloud-based, virtual phone system where the server is located outside of the client’s premise (office). The only hardware required to be on-site at the company is a “VoIP Ready” computer network (Business-grade firewall, Layer 3 Power over Ethernet Switches, battery backup and adequate/reliable internet bandwidth) as well as physical IP phones or Softphones (a software phone application loaded onto computers). Hosted phone systems are usually located in one or more data center(s) and the phones at the company’s location(s) are connected to the virtual phone system via the internet. The hosted provider is responsible for housing/maintaining the core phone system, providing phone service (including managing the client’s phone numbers) and typically, providing ongoing support (client’s moves, adds and changes).
Costs
Establishing an on-premise phone system requires you to purchase phones and a server/KSU. With an on-premise phone system, you will have a larger upfront cost because you are buying the equipment, licensing and paying for more-involved installation costs. You will also need to factor in the cost of phone service (analog POTS Lines, PRI or SIP Trunks) which can be procured from one of many companies such as Verizon, Comcast, Teltek, etc. Additionally, you will need to account for ongoing maintenance, hardware replacement and upgrade costs (typically covered under some form of a maintenance agreement supplied by either the manufacturer or the company that sold/implemented the system for you.
For a hosted phone system, you will have the option to either purchase the IP phones or rent them. You should also consider budgeting for some Local Area Network (LAN) upgrades and possibly an increase in internet speeds and/or a redundant Internet Service Provider (ISP). Although start-up costs are lower with a cloud-based phone system, there will also be a monthly expense to account for. Depending on the size of your business and requirements, the overall cost may work out to be more or less expensive than a premise phone system; we recommend calculating all costs over a 5-year period as that is the anticipated lifecycle of a premise phone system before a major upgrade is required.
Here is a breakdown of initial investment and ongoing costs associated with each option:
On-Premise PBX Costs:
- Higher initial equipment and set-up costs
- Potentially higher maintenance costs
- Potentially lower monthly cost after expenses are covered (based on size, access to affordable bandwidth and feature/functionality requirements)
- Consider costs associated with a hardware refresh every 5-7 years
Hosted PBX Costs:
- Lower initial equipment and set-up costs
- No/low maintenance costs
- Low monthly cost (based on size, access to affordable bandwidth and feature/functionality requirements)
Other factors to consider:
- On-premise systems can be easy to use and manage in most cases, but are less flexible and more costly to scale as your company evolves.
- On-premise systems have more flexible cabling options if you are in an older building and do not have Ethernet (CAT-5e/CAT-6) cabling installed.
- If your phone system requires advanced Unified Communications features and complex integrations you may find a cloud system to be easier to deploy and manage.
- Companies that employ mobile workers or have multiple locations would probably appreciate a hosted system since it’s easily scalable and includes many phone features at no extra charge.
- Businesses that do not have access to reliable and affordable bandwidth or have inadequate computer networks (outdated cabling, multiple network switches to extend service to various parts of the building, etc.) may find a premise system to be more affordable and accommodating to their needs.
Determining which system is better for your company depends on your specific location, communication requirements and budget.
Unlike many telephone companies, Teltek does not have a “one-size fits all” business model or mentality. Our goal is to educate our customers on the pros and cons of each solution and help them make an educated business decision for their individual needs. Too often our customers report hearing something like the following from other telephone companies: “VoIP or Premise is the best solution and you don’t want to go with the other one because…” when it turns out the reason they are positioning it that way is because they only offer one of the two options and want to make a sale. We also see a lot of competitor companies not properly educating prospective clients on the importance of having adequate internet for cloud systems and testing local area networks to ensure they are VoIP ready.
As stated above, we strongly believe the best way to approach this decision is to:
- Evaluate your current internet connection cost, reliability and ability to support the overhead of VOIP
- Evaluate your internal computer network for its ability to support VoIP (a free Teltek VoIP Test can be found here: https://myteltek.com/comm_portal.php)
- Talk to suppliers that offer both VoIP and on-premise options and educate yourself
- Create an analysis calculating all costs over a 5-year period (be sure to include lease costs, maintenance costs, cost of upgrades to internet connection, etc., cabling required for network upgrades/modifications, etc.)
If you’re still not sure which system would best suit your needs, give Teltek a call at 1-866-9-TELTEK or 410-552-6580. We’ll be happy to talk with you, evaluate your situation and help you make the right decision.