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Choosing Between Cloud or Analog Phone

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Are you sure you’re getting the most out of your phone service? Looking to upgrade your old legacy system? Choosing between a hosted or on-premise system? The number of options for what type of phone system you have and how you deploy it can certainly get overwhelming. Take a deep breath, grab a cup of tea (or something else yummy) and don’t sweat it.

We understand that the options can seem endless and the differences between them aren’t always crystal clear. Throw in a few confusing acronyms here and there and understanding how your phones work can feel like speaking a different language. We’re here to help.

There are, of course, pros and cons to choosing both a hosted phone system and an on-premise system. We’ll break these down, provide some use cases and best practices, and help you determine whether a hosted phone system or on-premise system is best for your business.

What is a Hosted Phone System?

A hosted phone system, also known as hosted cloud, virtual phone system, or just a cloud phone system, is exactly that. Hosted in the cloud. Calls are made, whether incoming or outgoing, through an internet connection, as opposed to using physical wires.

The only hardware needed for a cloud phone system to operate successfully are your office phones or headsets. Everything else is powered through the worldwide web and your VoIP provider. Luckily, most business phones support a hosted system, so you can probably continue to use the same equipment you have. Or, if you’re feeling like upgrading everything all at once, you can take this time to upgrade your phones as well.

If you already have a traditional PBX (Private Branch Exchange), you can utilize SIP trunking to convert to the power of VoIP and a hosted system

What is an On-Premise Phone System?

An on-premise phone system is powered by physical equipment and hardware that is stored somewhere on your property. Most on-premise phone systems simply keep their PBX in their office headquarters.

The equipment needed to run your premise-based phone system can be both bulky and costly. In many cases, it requires an entire closet or room within your workspace to keep all of the boxes and wires organized.

It’s important to note that you own and are therefore responsible for maintaining the physical hardware when using a premise-based phone system. This includes regular maintenance and patches, any outages, and adding new physical equipment as you scale. Owning your own equipment does give you a level of total control that renting or leasing cannot offer you so be sure to weigh your options when choosing between the two.

Choosing between Hosted Phone and an On-Premise System

Clearly, there are several reasons why one would prefer a hosted phone system over an on-premise system, and vice versa. So, how do you choose which is best for your business?

First, take a deep, introspective look at where your business is now, and where you hope it will be. What are your goals and how can telephony help you achieve them?

Now that that’s taken care of, examine the features and offerings of both a cloud-based phone system and a premise-based phone system. Which features are critical for your business, and which can you live without?


Mentioned earlier, one of the largest differences between a hosted phone system and premise-based systems is the requirement (or lack thereof) for equipment. Premise-based systems must house physical equipment somewhere within their workspace. A cloud-based system does not require any extra equipment. All you need is a phone and an internet connection.

Installing an on-premise phone system requires a much larger initial investment. All of that equipment costs money, with prices ranging around $4500 for just 5-10 lines. For larger organizations with several hundred, or even thousand users, that cost can add up quickly. A cloud-based system that does not require that initial hardware is therefore much cheaper to install up-front.

It is also important to note that installing an on-premise phone system takes much longer than a hosted system. Depending on the size of your business, physically configuring your equipment will take time, and may interrupt your business operations. Keep in mind that you will be unable to place or receive calls during this time.

Scaling your phone system

For an on-premise phone system, scaling is quite similar to installing a new system. You’ll need to purchase more equipment, install it, and add it to wherever you house the rest of your phone equipment. Overtime, you may even outgrow your space.

Each new user you add to your system will require new hardware. As your team scales up, your on-premise phone system will have to grow, too. Sometimes, you may only need one extra seat but have to buy large packs of equipment that can accommodate several more users.

A cloud-phone system, on the other hand, can be scaled with the click of a button. Adding users is done so instantly, allowing you to continue with your normal business operations interruption-free.

Using your Phone System

Beyond just installing and scaling your phone system, on-premise phone systems vary from hosted-phone systems in their day-to-day use as well.

Be sure to consider how your team will use your phone system each day, both today and in the long-term. If one solution isn’t an absolutely perfect fit for today, but would make the most sense for achieving your business goals, you may want to consider implementing it now.

By far, the largest difference between a hosted phone system and a premise-based system is that a hosted system allows users to work remotely via the cloud. So long as your employees have a reliable internet connection and VoIP, your team can conduct work from anywhere in the world.

A premise-base system demands that all employees (who want to use the phone, of course) do so while it is plugged in to your PBX, which is housed somewhere in your office. These employees can NOT work remotely.

Maintaining your phone system

Regular maintenance for your phone system is non-negotiable. Premise-based systems and hosted systems are maintained differently.

As the owner of premise-based phone equipment, it would be your responsibility to maintain it. This includes regular patches and updates, and technical breakdowns, and of course, adding new users.

Cloud-based phone systems are maintained by your VoIP provider. Whoever you select as your partner can set their pricing however they like, but it’s typically done on a $X per user per month structure. Prices vary across vendors and what they offer, but in general, is less than the cost of owning equipment, to a certain point. Of course, the more users you have, the more your monthly fee will be.

How to Choose the Right Phone System for Your Business

As you can see, each phone system has its own set of pros and cons. Weighing your options can seem like a hefty task. How do you choose the right phone system for your business?

Cost- what can your business afford? Is a large up-front installation fee cost-prohibitive? Perhaps a premise-based system isn’t for you? Does the thought of a monthly fee for hosting your phones scare you? Do you have hundreds or even thousands of employees? If so, be sure to consider the recurring costs of a cloud-based system before signing a contract. The Bottomline: In general, cloud-based phone systems are more affordable than a premise based system, and are especially more affordable for small to medium sized businesses.

Vendors: Selecting the right vendor for your hosted phone system is just as important as deciding between hosted and premise-based. Your vendor will be your go-to for all things related to your phone, so be sure you select a trustworthy, reliable vendor. A vendor with a 98% retention rate and over 3,000 happy customers is a great option (like us!).

Your team: If you have a remote workforce, or ever plan to, a cloud-based phone system is essential for your business. Similarly, if you have multiple offices you may want to consider a cloud-based system as opposed to installing premise-based systems for each and every office. However, if you want total control of your system, and your team always works on site, a premise-based system might suit you best.

S-NET is Here

As Chicago’s leading cloud-solutions provider, S-NET has the experience and expertise to support your business’ telephony needs.

We’ve added and continue to support tens of thousands of users to our industry leading cloud communications platform, and have a 98% customer retention rate, with 99.999% uptime reliability. We’ve helped thousands of businesses just like yours.

Whatever you decide, contact us today for a free evaluation of your current phone system.

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