You know how important communication is to run your business, so selecting the right phone system is incredibly important. Choosing between an on-premise system and a cloud-based system can be difficult, but understanding the pros and cons of each option can help make the decision easier.
What Is an On-premise Phone System?
Also called a private branch exchange (PBX), an on-premise phone system is a physical system leased or owned by a business and stored at the business’s physical central location or data center. “On-prem” phone systems can use wires that connect your office’s data center to desk phones or include Voice over Internet Protocol (VoIP) and digital setups.
Typically, the business owner is responsible for upgrades, equipment setup, and maintenance processes for an on-premise system, which can all add up quickly and become costly. Any changes to the system, such as the addition or removal of employee extensions, requires external support which can take time. You will need either an in-house IT team or third-party service to repair and fix any damages or problems associated with the physical equipment. Many businesses choose to partner with a service provider to deal with issues related to the on-prem technology because they are better equipped and have the expertise.
On-premise phone systems lack team member flexibility. To make calls, you have to be located within the physical location of the office where the technology is installed. If you have remote employees, it is extremely difficult for them to make or receive phone calls because they cannot do it away from their desks.
What Is a Cloud-based Phone System?
Cloud-based phone systems use an internet connection to make and receive calls. Usually, this type of phone system is more cost-effective because all you have to pay for are the licenses upon setup. Using VoIP to connect to the internet can dramatically decrease setup time. The service provider is responsible for all upgrades and maintenance. Changes can be implemented in a matter of minutes via cloud-based portals.
Employees also have more flexibility with cloud-based phone systems because they can use their business phones, laptops, and mobile devices to make and receive calls so long as they are connected to the internet. This is useful if your business has remote team members; they can work from anywhere worldwide, provided that they have the compatible VoIP software installed on their devices.
With that being said, a cloud-based system still provides the option of using your normal everyday equipment like your computer or cellular devices. You do not have to invest in any unique IP phones or hardwired desk phones to use a cloud phone system. All you have to do is download the service provider’s app onto a laptop or smart device to start making calls over the internet.
If you prefer to use a desktop phone, your VoIP service provider may have multiple options to provide you with the right tools for your business needs. The option to purchase or rent equipment is available, allowing businesses to choose whether a capital expense or operating expense is best for their bottom line. VoIP desk phones are robust and easy to use. Unlike a legacy phone system, VoIP phones offer more functionality and mobility. Your in-office team can physically take their work phones home and continue working without the constraints of staying in the office.
On-premise Systems Versus Cloud Systems
It’s important to understand the advantages and disadvantages of both on-premise and cloud-based phone systems.
Advantages of On-premise Systems
#1. Security
With an on-premise system, all data (including software) is located on in-house servers. Although the best VoIP providers provide extremely rigorous security for cloud-based systems, some business leaders may still prefer the peace of mind that comes with knowing all their data stays on site, without the potential vulnerabilities that come with placing data in the cloud.
#2. Compliance
In highly regulated industries like financial services and insurance, it is often imperative to know exactly where data is located at all times. An on-premise system is the best way to ensure that these regulations are met.
Disadvantages of On-premise Systems
#1 Costly setup
Costs to set up an on-premise phone system are a lot higher than a hosted option. These costs are associated with purchasing the phones, the server, the switch, and the licensing. The phones will not operate without all the above parts, meaning costs for these items are mandatory.
#2 Lack of remote work capabilities
To make or receive calls, you have to be next to the phone located in a central location in the office. If you are traveling, you cannot make calls to perform tasks for your business. The on-premise phone system lacks the geographical flexibility to work anywhere other than the office.
#3 Difficulties with expansion
If your company is looking to expand, the phone system must expand with it. An on-premise phone system will eventually reach a performance limit; then you will have to pay more to expand the existing system. The on-prem system will usually require additional costs for more licenses, multiple handsets, and the time associated with setting up the system.
Advantages of Cloud-based Phone Systems
#1 Minimal hardware requirements
Cloud-based phone systems can require almost no hardware at all. Most of them work with current office equipment like computers, office desk phones, and smartphones. These systems are a lot less expensive to install due to fewer hardware requirements. The only costs you have to pay for are subscription fees and expenses that occur with specific features you need like video conferencing, call recording, or recording storage.
#2 Geographic flexibility
This opens doors of opportunity for businesses that have or want to start using remote work. A cloud-based phone system allows you to make calls away from your in-office desk phone, and practically anywhere in the world. All you need is a viable internet connection to set up the phone, or connect your laptop, and use your smartphone or softphone to begin making calls.
#3 Reliability
Because the components of cloud-based phone systems are not hosted in one location, customers hardly ever experience service downtime or disruptions. These types of phone systems rely on geographic redundancy. Multiple servers can be used as a backup when one server may fall through.
#4 Simplicity of expansion
It’s effortless to expand or add additional handsets, with minimal increases in monthly payments. Cloud-based systems easily adapt to include new or additional features if and when the need for a new phone arises.
Disadvantages of Cloud-based Systems
#1 Internet dependency
Most cloud-based phone systems completely rely on internet connections or a local service provider. So call quality really depends on connection quality. If the connection is not strong, you may experience dropped calls or muffled voices. If the internet connection completely goes out, then the entire phone system might not work.
#2 Billing upon contract execution
Some service providers begin billing a client as soon as the contract is signed versus upon installation and turn-up. It’s important to look for a VoIP service provider who provides transparent pricing, high-quality service, and support.
#3 Surprise regulatory fees
Some service providers will charge random regulatory fees that are not included in the initial quote for service. This can become very shockingly costly if you exceed your limit. Again, look for a service provider who is transparent about fees and charges.
For most businesses, the advantages of a cloud-based system outweigh the disadvantages, and will also offer the flexibility and cost-effectiveness that an on-premise system doesn’t deliver.
To learn more about which option might be right for your business, please contact us at Simplicity VoIP.
Disadvantages of Cloud-Based
#1 Internet dependency
Most cloud-based phone systems completely rely on internet connections or a local service provider. So call quality really depends on connection quality. If the connection is not strong, you may experience dropped calls or muffled voices. If the internet connection completely goes out, then the entire phone system might not work.
#2 Billing Upon Contract Execution
Some service providers begin billing a client as soon as the contract is signed versus upon installation and turn-up. It’s important to look for a VoIP service provider who provides transparent pricing,high-quality service, and support.
#3 Surprise regulatory fees
Some service providers will charge random regulatory fees that are not included in the initial quote for service. This can become very shockingly costly if you exceed your limit. Again, look for a service provider who is transparent about fees and charges.
For most businesses, the advantages of a cloud-based system outweigh the disadvantages, and will also offer the flexibility and cost effectiveness that an on-premise system doesn’t deliver. To learn more about which option might be right for your business, please contact us at Simplicity VoIP.
