Hosted Phone System Or On Premise Phone System: What’s Best for Your Business?

Voice over IP technology (VoIP) has gone from novelty to necessity in the last fifteen years. Customers put a premium on phone communications as is evidenced by the fact that over 60% of customers prefer phone support to email support, live chat, online knowledge base, and “click to call” support automation. What’s more, close to 50% of customers initiate purchases over the phone and three out of four customers say they would pay more to work with a company that offers good customer service than they would pay to do business with a company that has low prices but lackluster customer service. VoIP offers the tools you need to customize your phone settings to make it easy for customers to reach the person they need to talk to. It also allows you to send text messages and faxes by phone, communicate with suppliers, partners, and clients when out of the office, set up conference calls and video calls with ease, create customized messages for customers on hold, and much more.

There is no question that VoIP phone service will boost your business. The only question that remains is, should you invest in a hosted phone system or an on-premise phone system? The truth is, there is no right answer for every single business. You need to understand how each system works and what its inherent advantages and disadvantages are to make a well-informed decision that will meet your current and future business needs.

The Pros and Cons of a Hosted Phone System

Hosted phone systems, also known as virtual phone systems and cloud-based phone systems, is a phone system that uses a remote, cloud-based data center to connect calls via the internet. A business owner rents portions of the system based on his or her needs and the number of employees in the business. Some hosted phone system companies will include the actual telephones in the rental package; in other instances, one will need to pay an additional fee to purchase the phones. Common hosted phone system service providers include RingCentral, Vonage, GoToConect, Ooma, and Nextiva.

The Advantages of a Hosted Phone System

Low Prices

It costs nothing to set up a VoIP cloud phone if you already have the desktop telephones or your service provider includes these in the rental contract. Cloud-based phone service providers typically charge $20 per user, per month, making this telephone set-up an ideal option for anyone with a limited budget. If you’re just starting a new business on a limited budget and need immediate phone service, hosted phone systems are sure to be an ideal option for you.


Do you hire extra part-time employees during busy seasons? If so, using a hosted service makes sense as it’s easy to add or remove users from your monthly plan. This scalability also makes it easy for companies to save money by simply reducing the number of users on the contract.


A hosted phone service is a flexible option for an entrepreneur or small business owner who travels a lot or is considering a change in locations in the near future. The service can be easily programmed to ring certain numbers in sequence and there are no transfer costs if you move to another office as the phone is hosted entirely on the internet.

Outsourced Maintenance and Servicing

One big advantage of using a VoIP service is that your service provider takes full responsibility for updating and maintaining the VoIP phone system and fixing problems as they arise. The fact that these jobs are handled by a professional phone service with experienced IT technicians ensures that you’re getting top-tier assistance to keep your lines of communication working smoothly at all times. You won’t have to worry about hiring an IT expert to manage your phone system; alternatively, companies that already have an IT technician can assign the technician to other tasks directly related to empowering your business to reach its core goals.

The Disadvantages of a Hosted Phone System

Unreliable Call Quality

Perhaps the biggest disadvantage of using a hosted phone system is that various factors can affect call quality. Downloading or uploading large files, using a SaaS cloud platform, and conducting more than one conference or video call at the same time can negatively impact call quality. In a worst-case scenario, you may not be able to get through to the person you are trying to communicate with. Alternatively, your connection may be glitchy with the person on the other end being unable to understand you or see any visuals you are trying to present.

Support Problems

Who can you turn to if your VoIP service isn’t working as it should? The answer isn’t straightforward. Your hosted phone service provider is meant to handle all service calls but that doesn’t mean the provider can fix any problem you’re facing. Problems with your internet service will have to be addressed by your internet service provider. The company managing the data center your system is hosted on may be responsible to deal with other problems. If you aren’t sure why your hosted phone system isn’t working as it should be, you may have to call several support services to find the root cause of the problem and fix it. This can not only be a huge hassle but also cost your company thousands of dollars in lost productivity and lost sales.

Another support problem you’ll run into can stem from changing hosted phone service providers. Hosted phone services typically draw up “locked-in” contracts that require you to stick with them for a pre-determined period of time. Alternatively, your chosen service may allow customers to drop service as desired but offer discounts to companies that sign a long-term contract. In either case, it won’t be easy to transition to a new hosted phone service if your current service provider isn’t meeting your needs.

Monthly Rental Costs

It doesn’t cost much to sign up for a hosted phone service but the monthly rental costs do add up, especially as a business grows and adds additional employees. Long-term, it costs more for a growing business to stick with a hosted phone service than it would to invest in an on-premise phone system.

The Pros and Cons of an On-Premise Phone System

An on-premise phone system, like a hosted phone system, uses VoIP technology to connect your phone system to the internet. However, unlike a hosted service, an on-premise service is set up in your office, giving you full control over, and responsibility for, your phone system. To install and use an on-premise phone system you will either need to work with a VoIP/SIP service or a traditional phone company such as Comcast or AT&T.

The Advantages of an On-Premise Phone System

Quality Performance

An on-premise phone system typically has higher call quality than a cloud-hosted system. As you have full control over your phone service, you’ll be able to see what adaptations need to be made to ensure your internet can handle additional phone and video calls along with regular business traffic. If something goes wrong, your in-house IT department should be able to fix it in short order as the entire set-up is right in your office.

Long-term Cost Savings

Do you intend to grow your business and then pass it on to one of your children or eventually sell it and retire? If you have a long-term vision for your company, you’ll find that it costs less to invest in an on-premise phone solution than it would to pay for hosted phone services every single month.

Custom Service

Does your company have special needs? If so, a customized on-premise phone system is likely to be the best option for your business. While phone services vary depending on which hosted phone service you use, only an on-premise system allows you the freedom to set up your communication system the exact way you want it.

The Disadvantages of an On-Premise Phone System

High Installation Costs

The average set-up cost for an on-premise phone system is an eye-popping $20,000. This high price tag can automatically put such a system out of reach of most entrepreneurs and small business owners. You’ll need to have plenty of cash on hand to buy telephones and have them installed and programmed. While it is possible to lease the equipment instead, you’ll still have to cover installation and programming costs and a leased phone could negatively impact your tax situation.


Even a good on-premise phone system will need maintenance. Furthermore, if problems occur, you’ll be fully responsible for handling them unless the fault lies with your internet service provider. This means you’ll need to have at least one full-time IT technician on hand to ensure your communication system is running smoothly at all times.

Hiring an IT technician is no small expense. The average annual salary for an IT technician in the United States is $74,853, and this sum doesn’t include the cost of expected benefits such as vacation time, medical and/or dental insurance, loan repayment assistance, relocation assistance, and professional development assistance. Furthermore, if you experience problems with your system while your IT tech is sick, on vacation, or at an IT conference, you could experience long-term downtime that would have a severe negative impact on your business.

Introducing Technijian

Technijian is an IT managed service provider in Orange County, California. The company has more than twenty years of experience offering top-tier IT services along with business telephone services to keep your IT and phone systems running smoothly, securely, and efficiently at all times.

Technijian offers support for both hosted and on-premise phone solutions to provide your business with the communication system that best suits your needs at any given time. Partnering with us eliminates many of the downsides of using either a hosted phone service or an on-premise one because our technicians are always available to immediately address any call quality problems you face. For hosted phone services, we can immediately identify the source of the problem, contact the service provider that needs to address the issue, and work with your internet company, hosted phone service, or data service center to rectify the issue. If you use an on-premise phone system, you won’t have to spend time looking for an experienced IT technician and then pay tens of thousands of dollars a year for his or her services because our experienced, licensed IT experts will do the work at a fraction of the cost. What’s more, we’re available 24 hours a day, seven days a week, 365 days a year. As an added benefit, our team continually stays abreast of IT developments impacting the telephone service industry to ensure you get cutting-edge service and assistance at all times.

Are you still wondering which VoIP phone service would be the best fit for your business? Alternatively, have you selected a phone service but need top-tier help to keep it running smoothly in order to maintain office morale, keep customers happy, properly service new customers, and boost employee productivity and profits? In either case, give us a call at your convenience to learn more about our services or to schedule an appointment with our business telephone consultants. We take pride in helping every single business owner we work with create a custom phone solution that will enable a company to reach its core goals faster and easier than would have otherwise been possible.

Ravi JainAuthor posts

Technijian was founded in November of 2000 by Ravi Jain with the goal of providing technology support for small to midsize companies. As the company grew in size, it also expanded its services to address the growing needs of its loyal client base. From its humble beginnings as a one-man-IT-shop, Technijian now employs teams of support staff and engineers in domestic and international offices. Technijian’s US-based office provides the primary line of communication for customers, ensuring each customer enjoys the personalized service for which Technijian has become known.

No comment

Leave a Reply

Your email address will not be published. Required fields are marked *