Difference between On-premise and Hosted IP PBX Systems

The debate between on-premise and hosted IP PBX systems persists, leaving businesses wondering which option to choose. Both on-premise and hosted IP PBX solutions offer distinct features and advantages, and the key lies in identifying the option that aligns best with the specific needs of your business.

Despite the prevalent shift towards cloud-based solutions, it's important to note that hosted IP PBX options may not be suitable for every organization. In this article, we will delve into the specifics of each system to assist you in determining the ideal IP PBX choice for your business.


On-premise IP PBXs offer users a higher level of control, customization, and responsiveness, allowing complete ownership of their communications solution. You have the flexibility to make changes quickly without relying on a service provider and can integrate with other software systems for a unified communications solution. However, managing an on-premise IP PBX requires an IT team or system administrator.

In contrast, hosted IP PBX options provide convenience by offloading management to the service provider. You can easily add features and more users by contacting the service provider, but this comes at an additional subscription cost. Hosted options may have limitations on integrations and customization compared to on-premise solutions.


Hosted solutions have a lower initial cost as setup and management are handled by the service provider. They are ideal for smaller businesses without an IT team. However, monthly subscription fees and additional charges make them more expensive over time.

On-premise solutions require a higher upfront investment but offer lower costs in the long run. Hardware costs are the primary expense, with no recurring service fees. They are suitable for enterprises with an IT department, providing control, scalability, and third-party integrations.


In today's world, where news of hacks and cyber-attacks is commonplace, prioritizing security is crucial. On-premise solutions provide enhanced security for your communications network compared to hosted options. By retaining control over your system and network, you can actively manage, monitor, and secure them. This approach ensures that security is not solely dependent on the hosted provider, but rather, you maintain control and responsibility for safeguarding your network.


The size of your organization is a significant factor when deciding between hosted and on-premise solutions. Depending on your organization's size, your requirements for features, cost, and control will differ. Hosted IP PBXs are well-suited for smaller businesses that lack an IT team or system administrator and when the recurring costs per user remain manageable. If your business has simpler feature needs and doesn't require extensive customization and integrations, a hosted solution would be suitable. Conversely, medium to larger businesses typically necessitates greater control, customization options, and higher capacity, making an on-premise solution more advantageous.


VoIP technology requires a stable internet connection for uninterrupted communication. Both hosted and on-premise solutions offer different continuity features. In a hosted solution, internet outages affect the phone system, but calls can be forwarded to voicemail or mobile phones. Dependency lies with the service provider to resolve issues. On-premise solutions provide alternatives when the internet connection fails. PSTN lines enable calls without internet, and redundancy options reduce hardware downtime. This ensures reliable communication even during internet outages. To choose between on-premise and hosted IP PBX Systems, keep in mind the differences discussed in this post.

Jane Smith

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