Cloud Hosted Vs. On-Premise Deployments – Which is Best?

Over the past decade as internet communications and high speed broadband communications have become almost ubiquitous at least in major metropolitan areas there has been a steady move towards cloud-based services. This has also been the case with IP PBX where cloud hosted IP PBX’s have grown exponentially over the decade as companies not only abandon the PSTN but also their on-premises IP PBXs. The common reasons given for this shift in dynamics is that it is down to convenience and costs for SMBs but the reasons are not quite so clear why mid-sized businesses and enterprises are making this shift into the cloud. After all telephony is a major business communication tools and perhaps it is not as vital as it was prior to the advent of the internet (email, chat, etc) and mobile telephony, it still is an essential business function.


So What are the Advantages of a Cloud Hosted IP PBX?

The most obvious advantage is that the service provider is responsible for the server hardware and application, and this entails maintenance and support. Similarly, they should have 99.999% availability, as this is the measure of service reliability, through having several redundant geographically diverse data centers and ISPs. Obviously, for the SMB selecting a host-based solution, whether it is for a SaaS (software as a service) CRM or a telephony IP PBX service makes sense. In-fact this is a logical solution as having to run their own application and telephony servers may not be beyond their technical knowledge but obtaining five nine reliability of the service will almost certainly be beyond their budgets. However, for the larger businesses that have their own IT departments and computer rooms/data centers then the decision is less clear-cut.

Another advantage of a hosted cloud PBX is that the system will be seamlessly upgraded both for the applications and the OS (operating systems) and this is a source of headache for most SMBs who might not accept the risk of installing application upgrades on their PBX systems. Another advantage is that on a hosted cloud system you don’t have to concern yourself with system and configuration backups it’s all managed in the cloud. Again, this all makes sense for the SMB but is less clear for the larger business and enterprise, which will already be supporting and have business practices and procedures for all of these issues and events.

A further cloud based advantage cloud is construed to be web based administration and reporting portals. This would be essential for the SMB that does not support their own web site servers but for medium business and enterprises, this is hardly a technical issue, as they would simply have to host a web portal running a backend API or secure web service to their PBX server. Indeed, they are probably running several similar remote access web portals for a variety of applications.

Cloud applications do have inherent advantages due to the very nature of the cloud data centers architecture. For example, application servers can scale, in effect they stretch and shrink as resources are required or dropped and this is called elasticity. However, this level of scalability in an IP PBX system in a single tenant PBX application is unlikely to be an issue.


What are the Disadvantageous of an On-Premises PBX Server?

If we cannot resolve the issue looking at the problem from the perspective of cloud advantages perhaps the problem lies with an inherent problem in the on-premise model. The most obvious drawback to having an on-premise server is the daily maintenance and support of the server and application. In this regard we have to consider the costs of housing the server in an appropriate cooled computer room and supplying it with a reliable source of power. For an SMB this may be beyond their budgets but for larger organization hosting their own applications and email servers, one more server isn’t going to make much difference to the OpEx (operational expense). Therefore, we can disregard the inconvenience of maintenance and support. Similarly, application upgrades and configuration backups are just going to fall in line with existing procedures, so moving them to the cloud gives no real advantage.

In fact the more we look at the issue the more advantageous it appears to be for large businesses and enterprises to keep their PBX in the local computer room/ data center.


What are the advantages of an on-premises IP PBX server?

The advantages of keeping the IP PBX server on-premises are considerable. Being hosted local means that IT can use existing or obtain PSTN trunk lines (E1 or T1 depending on the continent) and have an automatic fail-over system that provides the five nine availability that the cloud service was boasting. However, providing the fail-over service in-house means there will be instant failover with no loss of service or lost calls.

Having the choice between using VoIP lines, and PSTN trunk channels gives IT the flexibility to provision PSTN channels to the contact center, sales and VIPs and then provision VoIP for everyone else. This is a far more flexible and pragmatic approach to provisioning and assigning extensions and call plans.

Secure lines and C-suite extension could also be a security issue passing across the internet and may well be better served using POTS lines and re-routes when required thereby leveraging the inherent security and quality of the PSTN.

Finally, for large businesses it makes no economic sense to host in the cloud, as their total cost of ownership will be lower hosting on premises. This is because even though the first years will be expensive due to the cost of the hardware – but Virtual Machines will mitigate that – subsequent years will be almost zero as there will be fewer monthly service charges from the cloud service provider. Therefore, over a five-year cycle the TCO will be markedly lower, especially if utilizing virtualization on a shared application server.



For SMB’s with no IT, computer rooms or in-house VoIP expertise then the choice of going with a cloud hosted IP PBX is a logical one, both from an operational and financial perspective. However, for businesses with existing IT presence, computer rooms hosting mission critical servers then there really is no advantage to hosting in the cloud. Indeed, there are several advantages to hosting on-premises. These are PSTN/POTS automatic failover, built in business continuity and lower total cost of ownership.

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