Cloud-Based Vs On-Premise PBX Phones

Originally posted on July 10, 2020 @ 7:33 pm

Cloud-Based Vs On-Premise PBX Phones

How to Choose the Right Phone Setup for Your Business

What’s the difference between cloud-based (hosted) PBX phone systems and ones that you host yourself “on premise”?

This is our guide to help you make an informed decision for your business. You can also  explore Interwest’s services or contact us for any questions.

Hosted Cloud-Based PBX Setup

What is a cloud-based PBX?

A cloud-based PBX is a phone system that operates on technology and equipment managed and housed (hosted) by the provider.

Businesses pay a monthly fee to access a hosted cloud-based pbx via the internet.

Interwest has five data centers that host their cloud-based phone system across the country for reliable customer provision.

On-Premise PBX Setup

What is an on-premise PBX?

An on-premise PBX  is a phone system that operates on technology and equipment managed and housed by a business on their site.

With interwest, you purchase the telephone system equipment and bundled installation, and we configure, install, train and maintain this system for a low annual fee.

This means you still have control over your phone system but Interwest helps manage it.


Is a cloud-based or on-premise phone system better for your business?

Every business is different and has different needs. How do you decide if a cloud-based or an on-premise phone system is right for your business?

Here are some factors to consider when comparing the pros and cons of cloud-based and on-premise phone systems:


Does an on-premise PBX mean sacrificing VoIP features?

With Interwest on-premise, your calls are routed through a traditional phone company as well as through VoIP using SIP trunking. Both Interwest cloud-based and on-premise PBX include all the VoIP features:

  • Call control

  • Collaboration

  • Mobility

  • Call management

  • Voicemail

  • Messaging

  • Contacts

  • Web-based management

  • Call training

  • Integrations

  • Contact center

  • Analytics


Setup & Implementation

How easy is it to set up and get started?

Cloud-Based PBX

Cloud-based phone systems are cheap, quick, and easy to deploy. All the technology and equipment is centralized and managed by the provider for fast and easy configuration, instead of being managed and installed on the premise of the business which takes time.

There are potential feature limitations for advanced configurations and customization because providers configure systems that work across the board for many businesses, instead of tailor-made systems to accommodate a single business’s unique needs.

On-Premise PBX

On-premise phone systems are highly customizable and feature-rich, but it takes time to install the system and prepare it for use.

Every customization can add to the complexity and may include additional hardware acquisition costs.


Future Expansion

Cloud-Based PBX

A cloud-based PBX makes it easy for businesses to expand and upgrade their phone systems.

The provider handles all the complexities and heavy lifting, which keeps costs low and allows expansion and improvements to happen quickly, and software updates automatically so your system is always up to date

On-Premise PBX

With on-premise PBX, you have complete control and flexibility to expand or customize as you wish, but you are limited by your IT capabilities.

Every expansion can add to the complexity and includes additional hardware acquisition costs.



Cloud-Based PBX

A cloud-based phone system means you pay a monthly subscription fee for access to the system, instead of the large upfront costs of setup and hardware.

This monthly fee covers everyday maintenance and operating costs, and includes updates to the system.

On-Premise PBX

On-premise phone systems have a higher initial setup cost for the hardware than cloud-based ones, but they have a lower cost of operation in the long run.

Upgrading and expanding an on-premise phone system can be time consuming and expensive. Depending on the specific provider and phone system, on-site VoIP PBX phone systems can cost an average of $500-$1000 per user.


Control & Maintenance

How much control do you have to make changes and updates to your system?

Cloud-Based PBX

With cloud-based phone systems, all the major software updates and maintenance processes are handled by the provider, so you have the ability to spend IT resources on other revenue-generating tasks.

Your service provider has the actual control over your system – you don’t own the equipment.

This means there may be certain desired customization that are unavailable, or alterations made to the system that don’t fit your specific needs.

On-Premise PBX

An on-premise phone system means you have control over every detail, so your phone system can be tailored to match all your needs.

Although, all software updates and maintenance processes must be done by internal IT staff, or outsourced, which costs time and resources that could be spent elsewhere.



Data security is a top priority for businesses, and with multiple significant security breaches of sensitive information over the last decade, it’s no wonder that security is one of the number one concerns with a cloud-based PBX for small businesses.

If you can connect to your phone system from anywhere through the internet, what’s stopping an outside entity from accessing it and causing trouble for your business?

Cloud-Based PBX

One of the benefits of a cloud-based PBX hosted by a provider is that security is one of the responsibilities included in the management and maintenance of the system.

This centralized control allows for the implementation and automation of dedicated security measures and consistent protocols that are effective at preventing a security breach.

This also means security costs are reduced because you don’t have to spend money on dedicated equipment or constantly monitor security yourself.

On-Premise PBX

Some people find a sense of security with on-premise PBX because they have a sense of control over the system since it is in a location that they can control.

On-premise phone systems are accessed via hardwired connection, so that acts as an added layer of security because businesses can place it behind locked doors and security personnel.


Why do these things matter?

What are the key points when choosing between a cloud-based and on-premise phone system?

Cloud-Based PBX

With a cloud-based PBX system, service providers may have more resources that are dedicated to implementing and operating features you could not afford to do just for yourself. Although, some hosted cloud options do not scale to large deployments in a cost-effective way.

On-Premise PBX

With on-premise phone systems, you can do what you want with your equipment—ultimate flexibility, but you may not have enough internal IT resources or the budget to make complex, expensive, or highly customized changes.


What We Recommend

Choosing between cloud-based PBX and on-premise PBX can be a daunting task. The deciding factor comes from weighing a business’ IT needs with its IT capabilities.

Cloud-based phone systems are recommended for any size business that wants to conserve IT dollars with an OPEX model, or a small business or start-up that does not have in-house IT resources or the capital funds necessary for a phone system purchase.

On-premise phone systems are recommended for small and medium sized businesses or enterprises with available IT resources who have the need for more control over their phone system, or require  more customized features. It is also recommended for a lower total cost of ownership if capital funds are available to purchase a phone system.


What have we learned?

What is the difference between cloud-based and on-premise PBX phone systems?

The biggest differences between hosted cloud-based PBX and on-premise PBX are:

1. Where the equipment is housed

2. Who manages the phone system

The centralized control and IT resources that a provider dedicates to operating a cloud-based phone system provides a low-maintenance, low-upfront-cost option for businesses.

The control that a business has over an on-premise PBX allows them to customize it to meet their needs, if they have the IT resources available to spend.

Whichever option you decide is right for your business, Interwest is here to help you. Contact us if you have any questions or check out our services to get started with a PBX.