This blog has been written to help businesses and organisations understand the differences between a premises-based phone system and a cloud or hosted phone system specifically for deployment into an organisation with multiple sites.
We wrote this as a result of being asked repeatedly to explain the differences, so our customers can make a more informed decision.
The telecommunications market place is more fragmented than ever with different models, different suppliers and different technologies available to the end user customer.
We have kept vendor agnostic. However, inevitably some of the content has been derived specifically from our personal experience with different options. We have over 25 years experience and much of this has been with products and solutions from AVAYA, BT, Gamma, Microsoft, Mitel and Samsung.
We thought it would be useful to define what we mean by a ‘Premises-based phone system or PBX’ and a ‘Hosted Phone System’ or ‘Cloud based phone system’
This is a piece of hardware (normally, although systems can be software-only residing on a premises based server) that is installed in your physical office or premises.
Typically, this will use a line connection like a SIP trunk (newer technology) or ISDN2e or ISDN30 (due for end of life in 2025). It may also have an analogue line or multiple analogue lines for back-up.
Focussing on SIP as it is now the preferred method of connecting phone calls, this is essentially a phone service on an internet connection.
The system would be configured to support a certain number of lines, extensions, users etc etc. You would normally purchase or lease the system. It will require support and will need upgrading from time to time.
Typically, the system is in ‘The Cloud’ and consists of a partitioned ‘virtual’ phone system for use by a specific customer.
The main elements on a physical site include an internet connection, router/firewall, network switch (POE), internal data cabling and handsets. Typically, capacity can be scaled up and down almost instantly.
We would add an important point here. Hosted systems can vary. A proper hosted system would be an ISP-based service (typically using a Broadsoft platform) running off a resilient network of servers with enterprise-grade specification. Examples we have come across include Gamma Horizon, 8X8, BT Cloud Phone.
Some resellers may resell these products or may have their own ‘in-house’ system – see below.
It is easy to call a system ‘hosted’ by installing a software-based PBX/phone system into a private data centre, install some SIP trunks and run a tenanted service, portioning off resources for multiple customers. Whilst this is a mini-version of the ‘proper’ hosted system, it is unlikely to have anywhere near the resilience and redundancy of the first type.
It is also true that some of the PBX vendors now offer a cloud-based version of their premises-based systems! AVAYA and Mitel for example, both offer this so you could get the same product you would install on-premise based in the cloud.
It is a complicated marketplace these days and it is important to get your supplier to fully explain their offering.
This is an organisation with staff placed in physically separate geographical locations.
This could be 5 or 50 offices (or more of course), in a region or across the world in any location
This could also include remote workers working at home (or mobile workers of course).
This is not an exclusive list, but these are the most likely features/elements required to be available across all sites and for all users:
- Ease of deployment
- Feature transparency across all sites
- Voice quality
- Ease of use
- Distributed hunt groups
- Ability to easily scale up or down in terms of capacity
- Visibility and/or presence of other users
- Instant messaging
- Site to site extension and one touch dialling
- Free calls between sites
- Centralised and remote administration and management
- Centralised support
- Integration with CRM systems, click to dial, screen popping
- Call recording
- Call logging/management
- Contact Centre functionality
- Soft phones
- Smart phone integration
- Twinning with mobiles
- Voice mail and voicemail to email
- Queuing and Automated Attendant
- Simplified cost model
- Agility dealing with multiple technologies (eg SIP/VoIP/ISDN/analogue etc)
- Simplified support model
- Fraud protection
The following pages explain how the different types of phone system deliver the above.
A hosted phone system will normally be much easier to deploy than a premises-based system. Users can be set up by a central administrator tool (a browser) from any location and usually that user is then live on the system immediately subject to subscriptions and licenses. So, if someone new started in the organisation at 9am, by 9.05 you could have them working on a soft phone from any location in the world.
By contrast, a premises-based system would be more difficult to deal with as the user would need to have a secure route through to the host system. Whilst this can be done, this would need some setting up and security would need to be handled so it would be a lot more involved.
Regardless of location, a hosted user is much faster and simpler to deploy.
Leading on from point 1, it is easy to understand why a hosted system is easier to secure than a PBX.
Assuming that the hosted provider has excellent security set up at the core (you would expect them to), then really there are very little security concerns around a hosted system. In a small number of cases, the user’s local router may need a setting changed (SIP ALG) or a minor change but this doesn’t compromise security.
As eluded to earlier, a premises based PBX will need to open up the main site to all users, potentially through a VPN or MPLS or something else.
Whilst this can be made very secure, it will be up to the end user customer or their support company to ensure the security of this and maintain and support it.
Hopefully all phone systems are reliable but from time to time things go wrong.
A hosted system should be more reliable is it would normally be a software product residing on reliable and robust servers.
A PBX is normally hardware and software so there is more ‘tin’ to go wrong and support.
Note that both may depend on an internet connection so this connection should be as reliable as possible with failovers built in.
Resiliency defines the ability to recover, converge or self-heal to restore normal operations after a disruptive event.
A hosted system would probably offer great resiliency than a PBX as, hopefully, the supplier would have ensured that enough budget has been spent on cloud infrastructure and monitoring at the core and that connected devices are easily able to re-authenticate following an outage.
A PBX would entirely rely on the support company for this, probably with much less budget availability and complexity.
Redundancy defines the deployment or provisioning of duplicate devices or systems in critical areas to take over active operation if the primary device or system fails.
As a hosted system is based on cloud infrastructure, one would expect much better redundancy compared to a premises based PBX although it will depend on the supplier’s network, set up and budget applied. A leading hosted supplier, for example, will probably have several different failovers with redundant servers etc.
Nevertheless, it is important to install local redundancy with a failover internet connection for mission critical sites or a 4G Sim failover for smaller sites. Some hosted systems also have an ‘unreachable’ destination for all users so if their handset cannot be reached, the calls will automatically be sent to their mobile phone.
A premises-based system may have ‘mirrored’ systems that can take over from each other depending on their capabilities. Also, it is possible to use a SIP trunk provider that provides load-balancing and redundancy across sites – you would therefore need 2 or more identical systems, potentially increasing costs significantly.
Also, some SIP trunk providers will offer advanced intelligent features allowing you to automate and/or take control of inbound numbering which all adds to redundancy – these would normally incur additional costs compared with basic SIP trunks.
With a proper hosted system, the whole point is that a user can be anywhere in the world on any device and be part of the system – as such, they would have access to all features.
Some suppliers may offer what they call a ‘hosted system’ which could actually just be a PBX delivered on software in a private data centre. However, as long as it is set up properly (wholly dependant on the supplier), everyone should get the same features.
Where to decide to install 2 or multiple phone systems in different sites, some systems offer complete feature transparency whereas others do not. For example one supplier offers just a select number of features such as BLF across sites, distributed Hunt Groups, Centralised voice mail, paging and a few more – but not total feature transparency – it is important to establish what is available between sites deployed in this scenario.
With premises-based systems, there is often a restriction on the number of calls that can be supported between sites, often with increased costs for increased capacity.
This is not the case with most hosted systems.
This is an area where suppliers often fail to deliver.
For a hosted system, it is imperative that, for any sites where there are more than just a few users, the internet connection being used must be fast enough to support the service. Ideally, the connection with be properly managed with QoS (Quality of Service) configured on the router so that voice is given priority over any other data traffic.
Indeed, it may be preferable for the voice service to be give it’s own internet connection if internet speeds aren’t brilliant. If speeds are really poor, any type of VoIP on the line side is a bad idea.
Where a user is a home user, as long as speeds are reasonable, there should be no issues or router configuration required.
The same goes for a Phone System using a SIP trunk.
VoIP can be configured using 2 main protocols: G711 is the best option as it allows 100k per voice call and therefore has superior quality. However, you need, say, 500k or half a 1Mb to support 5 concurrent calls.
Some suppliers (not us) will use the lesser protocol (G729) as it only needs 40k per voice call. So you can support more calls on a lower bandwidth. Call quality should be acceptable but it should be avoided where possible.
The above just deals with the technicalities that should be considered on the internet connection. However, it is also necessary to consider quality inside the network.
For most small organisations, the network may not be very busy. So it may be possible for phones and computer devices to be connected to the same network switch (phones will need POE ports on the switch – otherwise they will each need a power supply which adds an extra point of failure, more complexity and is bad for the energy bill and the environment – more power, more plastic…).
As long as each phone can use it’s own ethernet outlet (cat5, cat5e, cat6, cat6a, RJ45 – whatever terminology you prefer to use), it is often preferable to merely use a separate POE switch for phones and a separate Gb switch for computer devices.
Alternatively, most hosted and premises-based systems will allow you to install a phone into an ethernet socket and then connect a PC device into the 2 port switch on the rear of the phone (so both phone and PC use the same socket). You need to take care here as some phones may restrict the speed of the PC to 100Mbps (check it has Gb passthrough). So this is useful where there is a lack of cabling and sockets.
Some systems will allow you to use a VLan tag for voice, thus keeping voice on a virtually separated network. This is good for busy networks. Some systems do not allow this but instead you can prioritise voice by using MAC addresses.
It is important that your cabling is installed correctly and works to industry standards – there are many instances where cabling is very badly installed and may not support IP phones.
This really is subjective as all systems work differently.
Some handsets and software are easier to use than others – that is just a fact.
Well established platforms will probably be easier to use than others simply because they have had more time to develop their products and features.
It is now more common for suppliers to offer their ‘home made’ systems which are often geared towards winning orders on price, rather than value. Often, these offerings are provided with very cheap SIP phones offering little or no functionality. Furthermore, these handsets have not been designed with the system being used in mind and are non-proprietary.
In our opinion, installing a new system should empower the users at the correct level, give them the tools and features that deliver benefit and are easy to use. However, some customers just want a phone that dials and rings and that is understandable in some scenarios.
If you have users spread across different geographical locations, it may be useful for any of those users to be part of a hunt groups so they can answer calls delivered into a group regardless of their location.
This would be easier to set up an deploy with a hosted system.
With a premises-based system, this may or may not be possible and is likely to take more configuration and planning.
With most hosted systems, it should be easy and, indeed, almost instant to scale up. However, this must be queried with the supplier.
It is also easy to scale down, subject to contract minimums. In other words, if you agreed to a 3 year contract with 50 users, you would normally have to keep and pay for 50 users for the contract duration. Scaling down from 60 to 50 should be instant however.
With a premises-based system, this is less likely. You would normally buy the specification and hardware/software to support a certain number of devices, users, trunks and licenses. So they are bought and paid for. You could scale down your SIP trunk channels as per the above contractual restrictions.
Scaling up may be instant if you just want extra licenses, trunks etc. But if you need additional extension cards, for say analogue or even digital extensions (less common these days), then this may require an engineer visit and disruption.
Paging is often an overlooked feature and a missed opportunity.
Rather than using intercoms and paging systems, many premises-based systems would offer paging through handsets. You can also set up different paging zones and exclude certain handsets from the paging groups.
So this is very useful if a caller dials into the organisation and the caller is ‘parked’ in a park bay (eg Park Bay 1). If the person cannot be located, the person answering the call can make a page message stating “there is a call for John Smith on Park Bay 1.” Their voice will be transmitted through the designated speakerphones and it is more likely that John Smith will hear this and pick up the call from the nearest handset.
Some hosted systems offer this too.
Other ‘home ground’ hosted systems may not.
Paging should also be possible across sites so it can be very useful.
In the old days of telephony, a handset may have coloured lights on each handset showing a user instant status of other users on the system.
This seems to be making a comeback and is particularly useful for Reception staff and team leaders/supervisors.
All kinds of systems should offer this but you should check with your supplier as more ‘niche’ hosted systems may not.
All kinds of system will normally allow add-on modules to be added to handsets providing extra buttons. They will also probably provide an option for Reception staff to use a Windows or Browser based Operator Console which is ideal for busy Reception staff.
In more recent years, systems have released other options which indicate presence of other users – most tend to use proprietary software for this. However, this is only as good as the users that use it.
A proper hosted system should be able to give anyone on the system, the visual status and presence information of everyone. This may be more restrictive using a premised-based system.
This can be a difficult area to discuss.
Some systems will offer an instant messaging function and others may not.
Organisations may also have a system in place (eg Skype, Slack etc).
It is important to take a holistic approach with regards to communications – hence why they call it Unified Communications.
As may organisations are Microsoft Centric (not all!), trying to piece everything together, including email contacts, directories and so on can be difficult.
We would recommend discussing this through with your advisors.
When deploying a multiple site phone solution, planning is key.
If there is likely to be a large number of users, then it makes sense to use 4 digit extensions rather than 3 digits.
Both hosted systems and premises-based systems linked and networked should offer site to site extension and one-touch dialling. They may also offer personal speed dialling based on each user.
Of course all calls between users should be free.
Naturally calls between extensions/sites should be free.
One popular feature in recent years was ‘break in/break out’. Where you have multiple phone systems linked, it may be preferable for a site in London to break into the Belgium site (for example) and then break out locally. The first part of the call is free and the second part is a local call. This may be cheaper than dialling direct from London to Belgium. This has become less popular as call charges have reduced significantly.
On a hosted system this will not be possible – however, call charges should be competitive.
Clearly a hosted system should take care of this.
With multiple phone systems in different locations, this may not be possible. Check with your supplier.
The same applies here.
With users spread out over a large area or internationally, it is more unlikely that one supplier can support everything and it may be that any local visits out outsourced.
This is easier with a single site but as soon as you introduce multiple PBX sites it adds complexity.
With a proper hosted system, this should be easier to deploy.
With a home-made hosted system, this may not be so easy.
The same applies here as 18 above.
With multiple phone systems, this could be significantly expensive.
A proper hosted system should handle this with ease.
The same applies here as 18/19 above.
With multiple phone systems, this could be significantly expensive and is nearly always an add-on – often it requires 3rd party software and this would need to be replicated across multiple phone system sites.
A proper hosted system should handle this with ease.
The same applies here as 18/19/20 above.
With multiple phone systems, this could be significantly expensive.
A proper hosted system should handle this with ease.
Certain systems offer much better contact centre functionality than others. For multiple sites, a hosted system is much easier to deploy and manage and will be less costly probably.
Soft phones are basically software applications residing on a PC or Mac with a dial pad and are also likely to mimic some features of the desk phone. So you may get access to contacts, missed/dialled/inbound calls and so on. You may also be able to change the profile of your extension, divert calls and so on.
This software should allow you to click and dial – this may dial out of your desk phone which is nearby or it may replace your desk phone and deal with the full audio/speech.
Soft phones are excellent for home/remote workers as they can use their phone and be part of the system regardless of their location in the world – they just need reasonable internet.
Many premises-based systems offer this kind of functionality, normally for an additional cost.
A proper hosted system should handle this with ease and may or not be an additional cost depending on the provider. This kind of functionality is, in our experience, much easier to set up and deploy with a hosted system.
Smartphone apps are similar to soft phones above but are software applications for smartphones! Everything else applies as per 22 above.
They work better with 4G rather than 3G. This feature can offer lots of benefit to users who are moving around the world, away from the office.
Like soft phones, smart phone users will dial in and out of their desk phone without being near it so can be included in the system for monitoring, extension dialling, call recording and so on.
All systems should have the capability of diverting to a mobile.
On a normal premises-based system, such a divert is likely to draw on line capacity as the call comes in on 1 line and diverts off on another. Tying up 2 lines for the duration of the call. Some systems may also offer twinning with a mobile (or any other number) which does what it says – it calls the mobile simultaneously.
The same goes for hosted systems. The difference here is it will not use up line capacity as the call is diverted/twinned in the cloud and not locally.
This is not the case for a ‘home-made’ hosted system which will have limited capacity in terms of it’s lines allocated (SIP channels).
Most systems of all sorts should offer voicemail -some will charge extra. Some will not.
Some will also offer voicemail to email which is very useful as you get a wav attachment in your inbox which saves you having to check your messages – this can then be forwarded like any email.
A premises-based system may require a voicemail server which will require backing up and maintaining – storage will also increase and need managing.
Not all premises-based systems offer this as standard and there is likely to be a cost/capacity factor – the more calls you queue, the higher the cost. With these systems, the calls will be answered and queued locally meaning you will need to rent enough lines (SIP channels) to cater for all the queuing calls, all the calls being answered by the Auto Attendant plus all the calls active on the system.
A proper hosted system is likely to queue and answer calls at cloud-level meaning no capacity issues.
A premises-based system is often made up of a significant number of components and you would normally buy these outright. You could also lease them over a period of, say 5 years – beware of anything longer. You would also have to pay for ongoing support, maintenance and upgrades as well as local servers for software, inter-site routers, VPN’s and so on.
A hosted system is normally far more simple and offers a single monthly payment with perhaps some one off costs depending on how it is packaged. Support is normally included and all upgrades and maintenance are automatically taken care of.
Some premises-based systems are true hybrids in that they can cater for all technologies – AVAYA IP Office and Mitel MiVoice 250 are good examples.
Some less so – Mitel MiVoice Business does not offer digital extension capabilities.
A proper hosted system will be 100% VoIP – it will not be possible to connect analogue or digital lines or digital extensions. You can connect analogue devices (eg bells and door entry phones) using ATA’s (Analogue Terminal Adaptors).
Most phone systems have proprietary handsets – some ‘home-made’ hosted systems may use non-proprietary SIP handsets.
In our experience, a hosted system is simpler to support (a proper one).
A home-made one may not be as it may just be a premised-based phone system placed in a data centre.
There are several factors here.
A proper hosted system will deal with this centrally. Some may also offer Fraud Alert thresholds which email or message recipients when certain spend levels are reached. These systems will normally offer enterprise grade security.
Some SIP trunk suppliers also provide this kind of functionality on a premises-based phone system. The main issue here is that your SIP Trunk will need to come in on an internet connection into your premises. This may be separate to your main connection but is likely to be on the same connection. Therefore, this represents a security risk as you will have to open ports on your firewall making your network less secure.
In these instances, it is best practice to install a DMZ or Session Border Controller (sometimes called a Border Gateway) which would drastically reduce the risks. SIP extensions can also be a risk factor. So in summary, network security is a much bigger risk with a premises-based system compared with a market-leading hosted system.
Written by Nick Brandon – firstname.lastname@example.org
Twitter – @nickbrandon
Linked In – https://www.linkedin.com/in/nickbrandon/
Nick Brandon is a Director and owner of Firstcom Limited t/as tecwork
He started life in banking in 1985 working mainly with businesses and moved into ‘Office Equipment’ sales in 1994, mainly selling photocopiers and fax machines to SME Organisations in Kent, Sussex and London in partnership with First Office Systems
After a couple of years, the company started selling phone systems where Nick decided to specialise. From 1994 to 2010 Nick sold, designed and project managed phone system installations across Kent, Sussex and London to many hundreds of customers – this also included phone lines and services internet connections and mobiles.
In 2010, Nick became Sales Director of First Office Systems, who also diversified into Managed IT Services, with a plan to complete an MBO within 5 years. The company grew and supported well over 1,000 local businesses.
Unfortunately, the MBO failed in 2016 and Nick parted company with First Office Systems, maintaining Firstcom Limited, with a new brand – ‘tecwork’.
tecwork has thrived since that point and continues to grow offering IT and Telecoms to local organisations.
tecwork is a partner with global leaders including AVAYA, Gamma, Microsoft and Mitel.