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Hosted vs on Premise VoIP Solutions

By November 26, 2018No Comments
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VoIP provides a way for organizations to cut their operational costs by eliminating the costly traditional phones and phone lines. Most modern business private branch exchange (PBX) systems have already migrated to VoIP technology. VoIP provides a cost-efficient solution with a rich set of features that increase the productivity of organizations.  For IT startups, traditional phone lines (PSTN or POTS) are almost no longer useful. They are utilizing VoIP technology to reduce their communication costs and associated maintenance overheads.

If you are planning to implement VoIP technology in your organization, then you have the following two choices:

  • Subscribing to a hosted VoIP service: A cloud-based third-party company will provide you with a monthly subscription plan to make calls using your internet connection.
  • Implementing your own on-premise VoIP system: You purchase the necessary hardware and software components to establish your private VoIP network.

VoIP offers numerous advantages over the traditional telephony including conference calls, voice mailbox, call assistance etc. It becomes obvious to integrate it into your organization. This article aims at educating you the benefits and limitations of using either a premise-based or cloud-based hosted VoIP system. With this knowledge, you can make a good decision and ensure that your business requirements are met with a VoIP solution.

The following comparison should help you analyze the difference between the two choices:

Operational Cost:

Hosted VoIP solution provides a subscription-based payment model. Some hosts also offer a pay-as-you-go payment service in which you only pay for the calls that you actually made. Since a third-party is hosting the necessary hardware, this solution has a very low upfront cost. You only need to buy the phones and PoE (Power over Ethernet) switches.

On-Premise VoIP system has a high initial setup cost. You will have to buy the routers, servers and necessary software which is very expensive in comparison to the cloud-based calling service. But, once the setup expenses are covered, an on-premise system will deliver a significant cost-efficient solution over the hosted VoIP service. Also, the subscription charges incurred in hosted VoIP may increase over time. Your service provider can simply charge you more for making the calls.


On-Premise systems require regular maintenance. You have to dedicate an entire team for monitoring and maintaining the servers and connections. In some cases, your vendor may offer a paid periodic maintenance service. But either way, more efforts are required for maintaining and owning a dedicated VoIP system.

With a hosted VoIP solution, you can avoid maintenance overheads. All the updates and new feature installation are handled by the provider. If you want an easy and quick solution, you should opt for a hosted service. Doing so, will not only mitigate maintenance issues but will also provide flexibility to switch between multiple hosted VoIP service providers.


A successful business likes to have full control of all its operations for added security. This includes control over the telephony service for ensuring the confidentiality of conversations. On-Premise VoIP systems provide complete control and flexibility over the use of the technology. You can integrate any third-party software or apply patches whenever you want.

A hosted VoIP solution will not provide you with greater control over the resources. Although all the software and hardware upgrades are handled by the provider, you will ultimately lack freedom of customization.


With a hosted service, VoIP is totally dependent on the availability of the Internet. A signal loss or catastrophic event may result in downtimes. But your subscription plans may include a voice mail system that can record the message that you want to convey.

An on-premise VoIP system makes use of the internal network for communications. It is not dependent on the availability of the internet. Moreover, with SIP trunking, calls can be made using an internet connection in case of internal network failures. On-Premise systems are robust in comparison to the cloud-based and internet dependent VoIP phones.

Quality of Service (QoS):

A good calling experience can make or break the deal. With reliability on the public internet, your hosted VoIP service provider may not provide Quality of Service. The public internet is already flooded with all forms of data. But voice traffic requires higher bandwidth to reach its destination on time and provide an uninterrupted calling experience. Hosted VoIP providers that do not have their own private connections are reluctant to offer a good quality of service. Therefore, it is necessary to check whether your service provider has its own private connection before choosing a hosted VoIP plan.

In premise-based VoIP systems, you will have greater flexibility over scaling the resources. If the connections are poor, you can simply upgrade them to improve the quality of the calls.

The verdict:

Whether you opt for a hosted service or decide to own a premise-based VoIP system, the choice depends on your budget and requirements. With less operational and maintenance overheads, a hosted solution is suitable for any business. Startups generally prefer this solution because of its less initial expense and flexibility of switching to another hosted VoIP. Enterprises that need full control over their phone system or want a more customized solution, a premise-based VoIP solution should be the preferred choice.

Contact us today to learn about Bleuwire™  services and solutions in how we can help your business.

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