Comparison of Traditional On Premise PBX Systems and Hosted VoIP PBX Systems


Most small and medium sized businesses use either a traditional on premise multi-line PBX system or they use a Hosted VoIP PBX system.  Which type of system to choose depends on several factors about your business, your staff, and how you need to use the telephone for conducting business.  Often, there is also a difference in both short term and long term costs between the two options.

First we must understand the difference between these two choices.  All phone systems use a technology to control the phones’ lines and features.  This technology is usually a PBX, or the “brain” of the system.


The traditional on premise PBX system has the PBX box and the actual phones all working as a system in your business premises.  The PBX is handling all functions of the system including voicemail, auto attendant, call transfers, call holding, intercom and more.  The system is connected to the telephone company lines to allow incoming and outgoing phone calls.  Just how the system connects to the lines is a whole other set of choices.  It can be standard analog lines, digital PRI trunk, or even VoIP (SIP Trunks) lines over the Internet.  You purchase the entire system as a capital investment while paying the phone company or SIP Trunk provider for monthly service and the cost of your calling plan.


With a Hosted VoIP PBX System, the PBX box is said to be “in the cloud.”  These systems are often called cloud systems.  You will have an account with a Hosted PBX provider.  They operate and maintain the box for “your PBX” at their facility.  Your office phones will connect through the Internet to the PBX.  Accordingly, 100% of your phone functions and calls are dependent on the Internet.  The phones you will need are special VoIP phones that are called SIP phones.  There are many makes and models of these phones available for purchase.  Once you purchase these phones, they are pre-programmed with your Hosted PBX account information.  When you plug the phones into an Internet connection at your office (or anywhere for that matter) the phones will register themselves to your “cloud PBX.”


Now let’s look at pros and cons of each:


Pros: Hosted VoIP PBX Phone Systems

 No need to purchase the PBX equipment.  Only VoIP (SIP) Phones will need to be purchased.

  • No Maintenance since all maintenance is done by the service provider.

  • Setup is relatively easy and we will do it for you.

  • Depending on plan, usually unlimited call paths for incoming and outgoing calls are available.

  • Very easy to connect multiple locations and employees with home offices to all be on one system.

  • Very useful for small operation to utilize big business features such as Auto Attendant and off premise call transfer capability.

  • Different plans can be chosen to be cost effective with high line usage and low number of phones, or for low line usage with a high number of phones.

  • Calls can easily be forwarded to cell phones when you are away from the office.

  • If your office Internet fails, calls can still go to voicemail or have a failover forward to your cell phones.

  • You pay a monthly price for the Hosted PBX service and depending on the plan, usually all calls are included in the fixed price.


Cons: Hosted VoIP PBX Phone System

  • Your entire phone system and call quality is dependent on your Internet connection.  You will need very good Internet and adequate internal network hardware including router and switch.  Your network is completely your responsibility.

  • Each phone must be connected to your computer network.

  • A network cable and switch port is require for each phone.

  • Each phone requires an AC power connection unless you have a POE network switch. 

  • Realistically, features are limited to what the Hosted provider offers and the level of sophistication of the SIP phones purchased.  One example, calls need to be transferred from one phone to another.  Calls can’t be simply put on hold and then picked up at another desk.  There is a call park feature that can come close to achieving this.

  • If your Internet service should go down, you will not have operating phones.  Calls can still go to voicemail, as that is part of the PBX in the cloud.

  • Some useful features such as warehouse paging will be more expensive and clunky to operate.

  • As you add extensions, the monthly costs will go up.


Hosted PBX systems are suggested for small businesses and businesses with remote workforce and home office employees and IT savvy customers.


Pros: Traditional On Premise PBX System

  • Need not be dependent on the Internet at all.

  • Full featured and easy to use equipment.  Simple call holding and retrieving, transferring, and intercom functions are all included.

  • Choice of infrastructure:

  • The phones can be fully digital and not involve connection to your network in anyway.

  • The phones can be IP telephones and provide all features but operate through your network.

  • Connection to the phone company can be choice of standard lines, digital PRI, or VoIP (SIP Trunks) or a combination of these.

  • Features such as warehouse paging and door intercom are easy to incorporate.

  • After equipment investment, long term costs for monthly service should be lower.

  • Add more phones and extensions without increasing monthly costs.


Cons: On Premise PBX System

  • The initial investment in the purchase of the system will be greater than using Hosted PBX.  Lease to purchase plans can be offered to assist with affordability.

  • You will need as many phone lines as you want inbound and outbound calls. 

  • Not as flexible for use with off premise locations, although remote IP Telephones can be used on traditional systems as well.


On Premise PBX Systems are suggested for any business that wants an easy to use, feature rich system that does not necessarily need to tie in with your Internet or computer network.