Hosted vs. On-Premises Systems: Pros & Cons

There are many serious considerations that an organization should make - to go for Hosted Solution or On-premises solution available in the market.

The most critical of these from the point of view of implementation and future growth is whether to have a IP-PBX / Dial Centre system physically on your organization’s premises and under your control or whether to have it hosted externally by a service provider. For a few organizations this decision will stem from a fundamental philosophy of the business – outsourcing all functions that are not directly germane to the core business.

We’ll take a look at the pros and cons of hosted versus on-premise solutions in each case:

(1) Total Cost of Ownership
On-premise IP-PBX / Dial Centre Hosted IP-PBX / Dial Centre
Pro: You have complete control and flexibility – you can even switch solutions or mix-and-match (Inter-op). Pro: Lower setup cost
Pro: Your provider shoulders all the risk, work and complexity Pro: No maintenance costs
Pro: No risk of fee increases Con: Potentially higher ongoing service provider costs

 

(2) Future Expansion
On-premise IP-PBX / Dial Centre Hosted IP-PBX / Dial Centre
Pro: You have complete control and flexibility – you can even switch solutions or mix-and-match (Inter-op). Pro: Your provider shoulders all the risk, work and complexity
Pro: It is easily scalable, no additional Hardware Cost Con: Your provider may not be able to make changes as quickly as you could yourself & may not be able to precisely match your needs.

 

(3) Control
On-premise IP-PBX / Dial Centre Hosted IP-PBX / Dial Centre
Pro: You really do have control over every detail. An easy-to-use solution with careful management will give you a solution that matches your needs. Con: Let’s face reality – your service provider has the actual control – you don’t.
Pro: It is easily scalable, no additional Hardware Cost Con: Your provider may not be able to make changes as quickly as you could yourself & may not be able to precisely match your needs.

 

(4) Flexibility
On-premise IP-PBX / Dial Centre Hosted IP-PBX / Dial Centre
Pro: You can do what you want with your equipment – the ultimate flexibility. Pro: Service provider may have more resources to implement a solution you could not afford to do just for yourself.
Pro: Relocation of your office's server is made easy with a compact, easy transportable & adaptable NEOX Hardware Con: Slowness to adapt & reluctance to adapt for a single customer.
Con: You may not have enough resources to do complex, expensive or difficult things where a service provider might be able to do them for its hundreds of customers more easily. Con: Lock-in Period for Hosted based offerings

 

(5) Range of Features/Customization
On-premise IP-PBX / Dial Centre Hosted IP-PBX / Dial Centre
Pro: All Features come along with the solution without incurring any additional cost Pro: spreading the cost across thousands of customers makes it easier for a large provider to add features at lower cost
Pro: Feature required can be added as and when required Con: Every additional feature that you want will be charged separately
  Con: Your provider may be slow to make even small changes
  Con: Customization is very difficult in standard/bundled offerings

 

(6) Implementation
On-premise IP-PBX / Dial Centre Hosted IP-PBX / Dial Centre
Pro: You will know your system’s capabilities a lot better than if you didn’t implement it yourself. Pro: Cheaper, quicker and easier
Pro: Better control, more options and flexibility
  Con: Your provider may be slow to make even small changes
  Con: Customization is very difficult in standard/bundled offerings

 

(7) Voice Quality
On-premise IP-PBX / Dial Centre Hosted IP-PBX / Dial Centre
Pro: To ensure voice quality, on-premise systems will prioritize data traffic Con: voice and data packets will often fight for preference, which leads to deteriorated voice quality
Pro: Superior voice quality as you are utilizing your LAN/MPLS environment Con: Session Border Controller (SBC) device may help improve data quality, but at considerably cost and complexity.
  Con: Dependent on broadband link. If a link is down, you cannot make calls
  Con: Customization is very difficult in standard/bundled offerings

 

(8) Cost of Tech Support
On-premise IP-PBX / Dial Centre Hosted IP-PBX / Dial Centre
Pro: Quick response time Pro: potentially save your company from having to hire technical staff members
Pro: Utilize existing IT Staff Con: Reliability of third party support
  Con: Third party support will come at a price
  Con: Customization is very difficult in standard/bundled offerings

 

(9) Security
On-premise IP-PBX / Dial Centre Hosted IP-PBX / Dial Centre
Pro: Less chances of misuse of company data Con: Company Data might be compromised
Pro: There is no concern of anyone listening to your calls
Pro: You decide what handsets you want and you can add surveillance equipment as well

Final Verdict

Smaller your business, the more likely that a hosted solution is right for you, but there are exceptions. An organization that is changing rapidly has a high turnover or that can’t afford the evaluation and management overhead of picking a customer premise system is still going to find a hosted solution a good fit.

And in contrast, a business that needs tight control and flexibility and for whom an integrated telephony solution is a mission critical business application is going to want to have a solution they own and operate on their premises in order to truly deliver for its employees and customers.