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Cloud Phones vs On-Premise – The Shootout

Cloud vs On-Premise Phone Systems

The debate around which type phone system is best for your business has been building for years.  Most modern manufactures will offer a hosted (cloud) and on-premise offering, which can confuse the client’s perspective around the benefits of each deployment. 

Telebyte offers both types of solutions with a number of manufacturers which can be even more confusing.  There is a definite reason for both, and normally a conversation around your business’ circumstances will make one of our solutions stand out.

To dive into this debate, we will look at 5 key questions which will help you analyze different aspects of your business and determine the best fit for you. 

Before we get started, let’s take at what hosted and on-premise methods are, as well as how they differ:


On-premise phone systems are physically deployed at your office(s) or data center. This deployment method has been the traditional phone system option for decades.

Typically, you buy and own all equipment, including appliances, servers, interface cards, and more. Your IT staff will have complete control of the system, as well as responsibility for all moves, adds, changes, on-going maintenance, and updates. Your company will also supply the system via analog, PRI/T1, SIP Trunk, or another connection.


Hosted, or cloud-based, phone systems are deployed by a hosted provider in an off-site data center. Your company pays a monthly fee to use the system, which is connected to your office via public or private Internet connection. 

The only equipment you typically have to purchase are desk phones, though some providers do provide the option to rent them. Normally you will have some control over moves, adds, and changes, but the hosted provider performs all updates and maintenance, while also supplying voice service. 

How Would You Prefer to Pay?

On-premise systems are almost always fully paid for up front, ensuring full ownership of the equipment and licenses. This method is great for companies that prefer to own the equipment they use. To ease the burden, leases can be arranged to turn the upfront cost into a smaller monthly payment.

When looking purely at equipment costs, on-premise systems typically have a lower Total Cost of Ownership (TCO).   

Cloud phone systems allow companies to maintain phone service as a monthly expense. This is often the preferred method because it offers tax advantages and frees up cash for revenue-generating spending opportunities. 

Bottom Line:

  • Choose an on-premise system if you have the budget to buy the system outright.
  • Choose hosted to take advantage of the tax benefits of your phone system as an operating expense.


What is the State of Your IT Staff?

It’s important to know how many team members are available to manage a phone system. If your IT staff already has the willingness and knowledge to take on this task, then an on-premise option gives them full control of the system.

If not, a hosted offering eliminates the need for that responsibility and frees up time for the team to focus on other projects.

Bottom Line:

  • Choose an on-premise system if you have the resources and desire to maintain your own phone system and have full control.
  • Choose hosted if your IT staff is under-resourced or simply want IT to focus on revenue-generating projects.


Do You Need Full Control?

On-premise deployments deliver full control of the system, including moves, adds, changes, fine-tuning network settings, advanced IVR creation, and more. 

Cloud phone systems open up enough of the system for a user to do what they want, but handle everything else. Allowing a service provider to do the bulk of managing a phone system is also attractive to small businesses with limited or no in-house IT support.

Bottom Line: 

  • Choose an on-premise deployment if you need, or want, full control of your phone system.
  • Choose cloud if you prefer the provider to handle the heavy lifting of phone system maintenance.


Do You Have Multiple Offices or Remote Users?

On-premise systems are certainly capable of handling remote users and multiple offices, but it’s more complex and expensive. Oftentimes, additional equipment is required to connect the offices or users together which is simply not necessary with a hosted environment.

With a hosted solution, remote users can enjoy the flexibility of a modern, fully-featured phone system that scales easily. And, if you have multiple offices, a cloud-based PBX allows you to access a single phone system, rather than peering together multiple locations.

Bottom Line:

  • If you have remote users and multiple offices, consider hosted to save money and avoid installation headaches.


How Flexible Do You Need to Be?

If you predict significant growth or contraction in your business, a hosted system may be your best choice. With cloud solutions, you only pay for what you use, so, if you need to add or remove users, with some providers you can start or stop paying for them on a monthly basis. 

With an on-premise system, you pay upfront for the users you have, which can leave you paying for unnecessary users.

Bottom Line:

  • If you foresee significant changes in staffing levels, consider hosted.


As you can see, there isn’t a single answer to this question. Whether or not you choose a hosted or on-premise deployment depends greatly on growth, budget, bandwidth, and other factors. 

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