On-Premise vs. Hosted VoIP: What’s the Difference?

Introduction

Hey guys, welcome to the week of When You Need Them, Ask Neadom. Today we're gonna try to cut through all the muck: what is the difference between an on-premises Voice over IP (VoIP) system and a hosted VoIP system? We're gonna take a look at that. Stay tuned!

Hosted VoIP Systems

In a hosted model, you typically pay per extension per phone, with a monthly fee ranging from $19 to $30 per phone. The exact cost depends on the provider and the services included. Providers like RingCentral or 8x8 may offer lower prices but with fewer features.

These solutions are designed for the masses about 80% of users will find them sufficient. If your needs are straightforward, they’re a great fit. But if you need customization or integration with a CRM, hosted solutions may fall short. Some hosted platforms offer built-in CRM tools, but you’re often locked into using their system.

On-Premises VoIP Systems

The key difference between on-prem and hosted VoIP lies in where the call originates and ends. With an on-premises system, the dial tone comes from your internal PBX system. With hosted VoIP, the dial tone travels over the internet.

Hosted systems usually require you to bring your own bandwidth (BYOB). And no, this isn’t a party. You’re responsible for your internet connection. Poor internet quality can directly affect your call quality. While hosted solutions are generally cheaper, they come with trade-offs.

On-prem systems can still use SIP trunks—either BYOB or provided by your internet service provider. Larger companies (50+ users) often prefer on-prem systems. For example, 3CX licenses by concurrent calls rather than per device, which can be more cost-effective for businesses with many phones that aren’t used simultaneously.

Cost Considerations

On-premises systems typically involve a one-time or annual fee for software updates and maintenance. Hosted systems, on the other hand, charge monthly per device. If you’re a small business just getting started, hosted VoIP is likely the better choice. For larger businesses, on-prem may offer better value and flexibility.

Conclusion

We hope this clears up a few things about on-prem vs. hosted VoIP solutions. If you have any questions, reach out to us online at Kotori Technologies. See you next time—bye now!