The Pros and Cons of Hosted VoIP Phone Systems (Hosted PBX) and On-premises IP PBX Phone Systems
The modern-day analog telephone service – commonly referred to as a plain old telephone system (POTS) – can be accredited to numerous individuals throughout history. But it was Alexander Graham Bell who, in 1876, was the first to patent the technology as an “apparatus for transmitting vocal or other sounds telegraphically.” Fast forward to today, and many small businesses still use this archaic technology. However, the good news is that while a portion of society has yet to venture away from this 144-year-old system, the world has progressed, and far superior options are available in the marketplace.
These options include on-premises private branch exchange (PBX) phone systems and Hosted VoIP phone systems (also known as Hosted PBX services). To get your business familiar with these communications system service offerings, GeoLinks has put together this walkthrough on the pros and cons of each service so you can decide what’s right for your company.
What is an On-premises PBX?
An on-premises PBX resides physically on-site at a business. We’ve provided a more detailed overview of PBXs and other phone systems here. Still, for a quick definition, dictionary.com defines a PBX as a “manually or automatically operated telephone facility that handles communications within an office, office building, or organization and that is connected to the public telephone network.”
Many of today’s on-premises PBX systems are IP-PBX systems. The primary difference between a traditional PBX and an IP-PBX is that in an IP-PBX, the signaling is internet protocol (IP)-based, and routing and features are more software-based than hardware-based. Voice calls are managed via “voice over Internet Protocol (VoIP),” which converts voice into digital signals, allowing businesses to make voice calls over networks using IP. VoIP is used both in private company networks and in telephone services delivered over the public Internet.
The Pros and Cons of On-Premises IP-PBX
On-premises IP-PBX Pros:
- Control – Customization and flexibility over your phone system
- Integration – Integrates with company software programs such as Customer Relationship Management (CRM) systems
- Fixed Price – No risks of fee increases after the installation (though maintenance and upgrade costs can add up)
On-premises IP-PBX Cons:
- Costs – Upfront costs are typically steep
- Maintenance – Maintenance costs are your responsibility, and some businesses may not have enough internal IT resources or the budget to make difficult, expensive, or highly customized changes
- Slow Setup or Repair – Initial deployment time or repair may take longer
- Reconfigurations – Adds, changes and removals are your responsibility
- Consumes IT Personnel and Resources – Ties up valuable internal IT resources in routine maintenance
- Costly Outages – Outages can take down all sales and service operations.
What is Hosted Voice Over Internet Protocol (VoIP), and How Does it Compare to a Traditional or IP PBX?
Hosted VoIP delivers PBX-level services over the Internet. For this reason, the term “Hosted PBX” is often used to describe Hosted VoIP. The terms are interchangeable.
The Pros and Cons of Hosted VoIP / Hosted PBX
Hosted VoIP Pros:
- Cost Savings – Lower initial equipment cost and setup costs than an on-premises PBX. Plus, leading hosted VoIP providers, such as GeoLinks, can save companies up to 40% compared to traditional phone lines
- OpEx vs. CapEx Benefits – Many companies value the ability to treat their communications as an operational expenditure instead of the long-term depreciation treatment of an on-site PBX as a capital expenditure
- Always Up to Date – Software updates happen automatically, so your system is always up to date
- Ease of Use – Hosted VoIP is simpler to install, configure, and maintain than premises-based services
- Mobility & Remote Work Enablement – With Hosted VoIP’s ability to support Unified Communications as a Service (UCaaS), a user can make and take calls from anywhere with an Internet connection on a standard office phone, a computer, tablet, or mobile softphone. Increases in remote work due to the COVID-19 pandemic have resulted in 42% of the U.S. labor force working from home full-time (which Hosted VoIP enables). Accordingly, some businesses will permanently adopt remote workforce models to reduce or avoid altogether the costs associated with maintaining in-building offices
- Enterprise-grade Features – Modern, up-to-date and always-improving features without needing to upgrade your phone system. Examples include enterprise-grade features such as call queues, auto-attendant, call forwarding, music-on-hold and unified communications, to name a few
- Outsourced Maintenance – Your provider shoulders all the work, risk, and complexity, thus creating less dependency on costly in-house IT resources
- Business Continuity – The cloud-based model delivers business continuity benefits (such as routing calls to mobile phones during outages)
- Scale on-demand – Hosted VoIP systems scale with your needs
- Application Integration – Hosted VoIP service providers design integrations between their phone systems with numerous other business applications companies typically use, including email services, social media, web browsers, IM/SMS/MMS services, CRMs, etc.
- No Equipment Required – In a Hosted VoIP environment, a business no longer has to shoulder costly on-site hardware and equipment purchases and upgrades—voice communication occurs entirely over the Internet through downloadable applications with data stored in the cloud. (NOTE: Many businesses invest in VoIP desktop phones for user convenience).
Hosted VoIP Cons:
- Bandwidth Dependency – Since Hosted VoIP functions over the Internet, it’s critical to have available and reliable bandwidth to complete calls. Thus, if you’re on a poor Internet connection, you may struggle with both inbound and outbound calls. Quick fix? Upgrade your bandwidth, sign up for a dedicated Internet circuit, so you never have to share your bandwidth, or bundle in an SD-WAN solution to prioritize your voice traffic.
- Voice Quality – Once again, because Hosted VoIP depends on the Internet, your call quality may suffer if you experience latency. Thus, ensure that you have a high-quality Internet circuit with dedicated Voice QoS before upgrading.
Learn more about upgrading from an on-premises PBX to a Hosted PBX in our article “Migrating from on-premise IP-PBX to Hosted IP-PBX.”
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