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Comparison of On-Premise Vs Cloud-Based PBX Benefits and Costs

When choosing a phone system, businesses are often faced with one critical decision.  

Select an on-premise or cloud-based phone system?

With an on-premise solution, your phone system is centrally stored at your location, and your or your IT company will need to provide the service and maintenance. A cloud-based solution uses your Internet connection to connect to the cloud, requiring no additional hardware beyond the phones. System updates are all handled directly by your VoIP provider.

Cloud-based systems are growing in popularity due to remote work environments and the benefits they provide over an on-premise system.

Let’s take a look at the benefits cloud-based PBX provides over on-premise.


Cloud Based


  • Can be up to 40% more costly than cloud-based, requiring cabling, hardware, closet space, electrical and cooling

  • Pay in advance for planned growth

  • If your business has multiple locations you will need multiple systems

  • Upgrades and maintenance costs can add up over time

  • No hardware costs except for the phones themselves

  • Pay only for what you need and use

  • Multiple locations are supported by one phone system
    in the cloud

  • Most features and upgrades are included in cost


  • Installation takes longer with on-premise due to significant hardware required for the set-up. More office space needed to store equipment.

  • Quick and easy setup and installation due to minimal hardware deployment.


  • Hard to scale, requiring thorough planning and accurate forecasting of needs.

  • Takes weeks or months to add or delete phone lines.

  • Scales to your needs as you grow, using exactly what you need when you need it.

  • Phone lines can be added or deleted quickly. In days in most cases.


  • Requires an IT Specialist to manage and make changes.

  • Other than phones, no maintenance is required.

Upgrading Features

  • Time to market varies

  • Upgrades requires manual updates from an IT specialist or the hardware vendor

  • Technology is always evolving and with cloud-hosted time to market is immediate.

  • All upgrades are made available automatically through the cloud


  • Mobile compatibility is complex and expensive

  • Anyone can connect from multiple devices

Disaster Recovery

  • Redundancy is possible, but costly

  • Recovery is typically slower, negatively impacting
    customer experience

  • Geo-redundancy, while possible, requires double
    the space, hardware, software, and capital

  • Built-in fail-over in the event of Internet or power loss

  • Calls automatically rerouted to other data centers
    so customer experience is not affected

  • Geo-redundancy is built in, with no need for a
    capital outlay for space, hardware, or software

About the Author

Kevin Barrett

Kevin has over 30 years of experience providing IT solutions and support for Fortune 500 companies to small businesses. He founded KMB IT consulting in 2003.

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