Showdown: On-Premise Phone Systems vs Cloud Phone Systems

Communication is at the heart of every business.

[Pull quote] “And even in the digital world, phones still matter. Forty percent of customers prefer speaking with a real human on the phone to resolve complicated issues.”

The question, then, is this: which phone system is the best? It’s time for the highly-anticipated showdown.

In the red corner, we’ve got the good old-fashioned on-premise solution. And in the blue corner, we’ve got the younger up-and-comer, the cloud phone system.

Who will come out on top? Let’s put them head to head in four rounds of close combat.

What is an on-premise phone system?

Without getting too technical, an on-premise phone system (sometimes referred to as a PBX) is a physical phone system that is either owned or leased by the business and stored at the business’s main premises or in its data center.

On-premise phone systems can include on-premise Voice over Internet Protocol (VoIP) and digital setups.

Typically, you will be responsible for the upgrades, maintenance processes, and expansion of the system. Many businesses do, however, choose to partner with a services provider when using an on-premise phone system.

What is a cloud phone system?

[Pull quote] “Seventy-seven percent of enterprises have at least one aspect of their computing infrastructure – and this number is expected to grow.”

Like other cloud-based services, a cloud phone system is delivered via the internet. In contrast to on-premise phone systems, the only hardware stored in the workplace are the actual phones and a network PoE switch.

Typically, a cloud phone system service provider hosts a large phone system in a data center, and this is segmented into smaller systems for their various clients. The service provider is responsible for all upgrades and maintenance.

Cloud phone systems are also referred to as the following:

On-premise phone systems vs cloud phone systems

Both on-premise and cloud phone systems offer advantages to small- and medium-sized businesses. Both have their drawbacks, too.

To help you decide which is the best option for you and your organization, let’s examine how each service option performs in several key areas. Let’s get started.

Round 1: Available features

Phone systems are significantly more advanced than they used to be. Businesses can now access a whole host of game-changing call features and data analysis if they invest in either on-premise or hosted VoIP systems.

Both on-premise and cloud-based VoIP systems offer the following features:

  • Collaboration tools, including file sharing
  • Call control
  • Voicemail greeting
  • Messaging
  • Mobility
  • App integrations
  • Web management tools
  • Call training
  • Contact storage
  • Analytics
  • And more

The winner: If you go the VoIP route, it’s a tie.

Round 2: Scalability

Your phone system must be agile enough to change and expand with your business. When you grow, you should be able to scale your phone service to meet increased demands.

On-premise systems give you complete control over these changes. You can switch to a new solution, or even mix and match to create a truly customized system. The drawback? Expanding a phone system can be complex, and without a provider, it’s your responsibility to execute changes without causing downtime.

If you opt for a cloud phone system, on the other hand, your provider shoulders the risk. They can scale your service quickly and effectively – and you don’t have to do a thing. What’s more, software updates tend to happen automatically, so your phone system is always equipped with the latest features and security patches.

The winner: Cloud-based phone systems.

Round 3: Cost

As a business owner, you know that every dollar counts. Cost is always a leading concern, so how do on-premise and cloud phone systems measure up?

On the one hand, an on-premise system may be more economical in the long run. There’s no risk of a fee increase, and once you own the equipment, you own it for good. On the other hand, you will need to fork out a fair amount of cash upfront to secure the hardware you need. What’s more, you are responsible for upgrades, maintenance, and repairs, which can add up over time.

Cloud-based phone systems are far cheaper to set up. And you won’t be subject to unexpected repair costs. That being said, your service provider could increase their fee at any time.

[Pull quote] “For the startup business, it’s never been easier or so cheap to set up a business phone system or even a call center.” – TechRadar

The winner: Upfront, cloud-based phone systems are more economical. However, you do risk paying more long term. 

Round 4: Control

Phone systems are not one-size-fits-all, and control over the scale and functionality of your service is critical.

On-premise systems, without a doubt, offer greater control. You and your IT team have total authority over every detail. You can combine distinct solutions to formulate a custom-created system that meets your business’s needs better than anything else on the market.

Do keep in mind, however, that with great power comes great responsibility. Implementations, software updates, and maintenance must be performed by your IT staff or outsourced.

While cloud phone systems don’t offer the same level of control, they do give you access to features that you may not have been able to implement yourself.

The winner: If control is a top-priority, on-premise solutions cannot be beaten.

Which comes out on top?

So, there’s no clear winner. Which phone system works best for your business truly depends on your needs and limitations. What we can conclude is this:

  • If you are an SMB with significant IT resources that requires total control or a fully customized solution, opt for an on-premise system.
  • If you are a business of any size looking to stretch your IT budget or you don’t have in-house IT resources, go for a cloud phone system.

Happy phone shopping!