What is the difference between hosted and on-premise phone systems?

Posted by Michael Kay on Mar 2, 2018 12:37:22 PM


In the world of email and instant messaging it is easy to forget how much our business relies on good old fashion telephones. While email has become the primary form of communication, nearly all still rely on phone calls to conduct their business. Whether you are a new startup looking for your first business phone system or it is time to replace your existing phone system, the options are plentiful and sometimes confusing.


One of the biggest decisions you will make is whether to go with a physical phone system in your business or rely on a hosted phone solution in the cloud. To make that decision you'll need to understands the differences between hosted and on premise phone systems.


Hosted Phone Systems


Hosted solutions have increased in popularity in recent years due in large part to internet speeds and network infrastructure becoming faster and more reliable. A hosted solution is a phone system that is physically located at the hosting providers location. Unlike traditional on premise systems the only part of the phone system at your business are the phones themselves. Each phone plugs into your existing network just like a computer and uses your internet connection to communicate with the phone system located at the hosting provider's location. Their phone system then connects your calls around the world.


Many businesses go with a hosted solution due to the low upfront costs and ease of installation and use. While this seems like a great option to many businesses, there are some drawbacks:


  • 100% reliant on internet connection. If your internet is down, your phones are down.
  • Must have solid network and good internet speed to avoid dropped calls and poor call audio quality.
  • Troubleshooting is limited from the hosting provider. Either your IT staff or outside IT company may need to troubleshoot issues with routers, switches, or network cables.


On-Premise Phone Systems


Unlike a hosted solution, an on premise phone system is physically located at your business. By having a system on premise you have more control over the connection between the phones on your desks and the phone system since they are on site and only reliant on your internal network infrastructure. Having control of your network reduces the likelihood of a complete phone system outage.


There are several options for an on premise system. You could use IP phones with a SIP trunk service, digital phones with an PRI phone service or other variations. The options can get a bit confusing, but are useful to understand in order to overcome issues with internet speed or network connections. You should contact a company that specializes in business phone systems who will visit your business and evaluate your network infrastructure and internet connection before recommending a system.


There are some drawbacks to on premise systems:

  • Large upfront costs. (Though leasing options similar to hosting costs are sometimes available.)
  • IP Systems must have proper internal network infrastructure to accommodate these systems.
  • Maintenance and service of phone system is your responsibility.




Both Hosted and on premise systems can be beneficial. Which phone system is right for you depends on several factors. Learn more about which phone system is right for your business by downloading our phone system guide.


Get Our Phone System Guide

Topics: business phone systems, hosted phone systems, on premise phone systems


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