On-Premises Communications: The True Cost of Ownership

Many organizations are hesitant to make the switch from traditional communications systems to new, modern, cloud-based systems. Unified Communications as a Service (UCaaS) enables productivity by allowing employees to work from anywhere, anytime, with minimal equipment.Budget Concept. Word on Folder Register of Card Index. Selective Focus. 

Those who decide not to switch to UCaaS systems may fail to understand the true total cost of ownership (TCO) for continuing to have on-premise-based phone systems. More charges are associated with this traditional system than just monthly costs; there are also often implementation costs, maintenance fees, move/add/change charges, and other capital expenditures. 

To truly understand the differences in prices and technology, it is crucial to analyze everything spent on maintaining and operating traditional on-premise systems and compare them to modern, cloud-based systems. Below, we outline some of the hidden costs associated with conventional methods and factors you need to understand and consider when deciding which system is best for you. 

Faster and Easier Deployment

Deployment of on-premise systems is much slower than UCaaS systems. These cloud-based communications systems are overseen by an expert and set up to make your day-to-day operations much more manageable. The right provider can offer the necessary skills and expertise to have a seamless, multi-site implementation while making training for team members easier. Traditional systems do not have the same mobility or agility to integrate new features seamlessly, often due to licensing requirements, necessary testing, provider-based maintenance, or other considerations. 

UCaaS can provide value, flexibility, and quality more quickly than on-premise systems because licenses and infrastructure are cloud-based and there is no physical PBX hardware needed. It is more agile than traditional systems because it allows businesses to scale features and customize their plan whenever they need to.

Scaling Your Business

Sometimes businesses grow quicker than expected, and it is necessary to have communication systems to grow with them. With traditional on-premise-based communications, scaling costs are associated with increasing data center capacity, hardware upgrades, and handset upgrades. The prices of ownership can grow quickly and dramatically. What if the vendor-provided capacity is far more than you need? You will be left paying for unneeded and unused capacity.

UCaaS is billed on a “per-user” basis; you only pay for what you use, essentially. You are not required to pay for unneeded capacity. This raises the potential for your business to grow, and you don’t have to worry about spending even more money. The communication system scales with you.

Organizations should always be mindful of rising costs and calculate them into total costs of ownership, especially when there is a cost associated with hiring employees (whether permanent or temporary). Sometimes businesses boom during certain times of the year and need to scale up and hire more team members, and sometimes companies are slower and need to scale down. Your communication system should be able to scale with you. 


When business is booming due to peak seasons or just growing recognition, companies may realize that hiring new talent is necessary to support rising communication levels. However, when a business utilizes on-premises base communications, this process can be much pricier than planned initially.

In a study conducted by Qualified, it was found that the average cost of hiring a skilled engineer could be upwards of $20,000 per hire due to a minimal amount of talent. Businesses need to hire customer service professionals with personal skills and experience, but also need to hire these talented engineers with knowledge of the various aspects of communication systems and tools like data center management, software engineering, utilization and maintenance of hardware and software, integration, testing, and team member training on the system.

UCaaS is able to provide organizations with instant access to the skills needed for an easy, seamless transition out of traditional systems. There is no need to find and hire engineers at the organization level. Team members can learn different IT aspects; the vendor often supplements simple implementation, maintenance, and testing. 

Calculated Costs and Benefits

Small businesses, newly founded businesses, or even other organizations with large targets and agendas may have a hard time finding investments needed to have an on-premise communication system. Unified Communications or Internet-based communications is much more budget-friendly and may be a much better option. A monthly, guaranteed cost is less of a risk.

UCaaS saves money from the beginning of use. That money saved can be implemented in other ways like growing sales, marketing strategies, or other activities to boost business growth and reach customers. 

Flexible Billing

UCaaS providers should be able to meet all of your organization’s billing requirements. They should even create personalized agreements to bill based on a per-site basis. You can see which sites are using the most resources or those that are not doing enough overall. Statements should be clear and easy to understand. They should be defined based on your organization’s specific needs and save you time and money each month on various processes, especially accounting.

Test Drives

Many people fail to realize that many on-premise technologies require many hardware and applications that users must purchase to use them. These additions may not even meet all of your needs or business requirements. What if these additions are not received well by users or clients and are kind of hard to use? These traditional options can limit businesses and create a wall between company and customer if it is not received well.

These conventional systems typically don’t allow for proof of concept testing before adopting a new application or technology. Internet-based systems, or UCaaS, can qualify for easy changes, additions, subtractions, allow businesses to see best what their customers are engaging with the most, get their feedback, and adapt their communication system based on what is being well received by clients and team members alike. There is no commitment to one technology or one application for the business. 

UCaaS uses the cloud and providers can allow clients to even test out new features within their organization as a whole or through specific departments, almost like focus groups. The provider, business, and clients can all determine what features are working best before purchasing them. This enables companies to develop cost-effective innovations and avoid technological failures for their organization.

More Flexible Contracts

Some companies that supply on-premise systems offer incentives to interest potential clients but have lots of hidden costs. Along with the hidden fees, the clients are locked into contracts to get discounts for the long term (often multiple years). These long-term contracts mean that both the customer and the organization are obligated to use the PBX system originally supplied and maintain it. Should a contract need to be broken, there are often hefty price tags associated and can be a time-consuming process. 

By choosing a cloud-based communication system, you are not obligated to a specific system long-term. You have flexibility in many aspects (including billing) and do not have to worry about being stuck with one system that no longer meets your needs.

Organizations often find that UCaaS solutions are much less expensive than traditional on-premise systems. It is essential that organizations carefully analyze the costs they are currently spending on keeping communications on-premises. Premise-based systems can restrict a business’s ability to implement new features, functionality, or other improvements that could help the organization grow. UCaaS allows enterprises to achieve even more than they imagined, and productivity can skyrocket with the right communication tools and system. 


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