PBX vs Cloud

Benefits of Cloud Communications vs On-Premise PBX Systems

Remember back in the old days when the phone was just a phone? This isn’t your grandpa’s business anymore, and a phone isn’t just a phone–it’s an investment in the way you do business.
But the question is, what phone system is right for you? A cloud-based phone system? On-premise PBX?
Here’s what you need to know about these two systems, the ways each system is unique, and how to figure out which system is the perfect match for your small business.

What is an On-Premise PBX System?

Let’s start with the home field: on-premise PBX.
On-premise private branch exchange (PBX) isn’t as complex as the name makes it sound. A private branch exchange, or PBX, is a private telephone network used within an enterprise (as opposed to a public telecommunications system). “Branch” refers to a remote subsystem, and “exchange” refers to switching functionality.
Basically, PBX act’s as the phone company’s office within an organization, a private telephone network that doubles as the exchange point and the point for routing calls.
On-premise PBX, then, is a phone system physically deployed in your office. You’re responsible for setting up the hardware required for the system because you own everything: hardware, appliances, servers, interface cards, and more.
In addition, your on-site IT team is responsible for maintaining the system, since the system is set up entirely on-site. This may require a dedicated segment of IT, depending on how large and specialized your phone system is.


Since your IT team is responsible for building and maintaining on-premise PBX, the features of that system are whatever you want them to be (or whatever your IT team has the capacity to set up for you).
In addition, this means that your IT team can build your PBX system to directly integrate with proprietary software. After all, it’s your phone system, completely in your control. And if you need extensions or extra features, all you have to do is set your IT team to the task and see how you can make your system work for your business.

Key Benefits

The primary benefit of on-premise PBX is control. Since your IT team is responsible for building and maintaining on-premise PBX, the features of that system are whatever you want them to be (or whatever your IT team has the capacity to set up for you).
In addition, this means that your IT team can build your PBX system to directly integrate with proprietary software. After all, it’s your phone system, completely in your control. And if you need extensions or extra features, all you have to do is set your IT team to the task and see how you can make your system work for your business.

What is a Cloud-Based Phone System?

A cloud-based phone system, sometimes called hosted PBX or hosted VoIP, is a solution that leverages your Internet connection to make phone calls.
In ye olden days, phones relied on copper wires run underground to relay phone signals across a network. Cloud-based phone systems still rely on wires, but instead of specifically designated phone lines, they rely on fiber optic cables that transmit data over the Internet. Instead of relaying a signal to make a phone call, VoIP converts analog voice calls into packets of data that travel like emails or any other type of data on public or private Internet networks.


Like other cloud offerings, cloud-based phone systems rely on…well, the cloud, a network of storage servers with a designated purpose.
Cloud services are offered by third-party providers. For a regular fee, you can access a designated segment of storage on their cloud servers, as well as certain features. Basically, instead of investing in your own hardware and on-site maintenance, you can take advantage of someone else’s server space.
Since cloud-based systems are offered through a subscription service, the features you get depend on the subscription you choose. However, most subscriptions will include things like backup, storage, data recovery, and IT support.

Key Benefits

Cloud storage alone gives you access to the trappings of a large organization without all the foundational investments required to get there. In terms of a phone system, you don’t need to invest in every element of a phone system from the ground-up–instead, you can simply buy into the infrastructure already available.
However, there are plenty of other benefits to cloud communication beyond storage and infrastructure.
For example, you can enhance your productivity with advanced phone features. In the past, small businesses had to settle for basic phone features like voicemail and call forwarding, and major features corporate directories, email alerts for voicemails, mobile apps, auto attendants, and extension dialing were limited to major corporations. The cloud changes all of that. You can get all of the features of a major corporation at a price that small businesses can afford.
Better still, you can get those features on the go. These days, 63% of companies have remote workers, which means that 63% of companies have to adjust to the cost of remote workers. Think separate phone bills and tolls for each location and the high sticker price of long-distance or international phone calls. But with the cloud, you can unite all your workers under the same phone system, with international and long-distance fees far lower than traditional phone services.
Plus, if you’re trying to use video conferencing to consolidate training costs, you can consolidate your phone and conferencing costs.
And if you need to make changes? No worries. Since you’re paying for a portion of storage with available features, all you need to do to get more storage is pay to upgrade your subscription. No additional infrastructure, no extra IT staff, no extra maintenance fees. Just the functionality you need, when you need it.

What’s the Difference?

The biggest difference between cloud-based phone systems and on-premise PBX is where the phone system exists in the world (in terms of the servers and hardware, anyway).
On-premise PBX systems are all located on-site. They’re your servers to do with as you please. Cloud-based systems, on the other hand, rely on the servers of a third-party provider.
This also changes who is responsible for maintaining the system. On-premise PBX is solely the responsibility of your IT team since the servers exist in your offices. If something breaks down, your IT team will be the ones to fix it; conversely, if the system needs an upgrade, your IT team will also be responsible for managing the process.
Cloud-based systems, on the other hand, use outsourced IT. Since the servers you use aren’t your own, part of your monthly subscription fee goes towards paying your provider’s IT team to maintain and update the servers on your behalf.
Where the servers are located and how they handle data also changes the relative mobility of your system. Cloud-based systems are tied to your Internet network, not a fixed phone system, which means that as long as you can access the phone system from almost anywhere.
Finally, there’s a question of continuity. Let’s say your business was caught in the crossfire of a natural disaster. If your servers are on-site, your business will lose those operations until you can get the servers repaired and back online. But cloud systems allow you to carry on business as usual, no interruptions, no lost money, even if the office itself is out of commission for a while.

Which is Better for Your Business?

Which is better for your business: cloud-based phone systems or on-premise PBX? That depends on what your business is looking for in a phone system.
Start by asking yourself a few basic questions:

  • How would you prefer to pay?
  • What’s the state of your IT?
  • Do you need/want full control?
  • Do you have remote users or multiple offices?
  • How scalable do you need to be?

Let’s take a closer look at each question.

How Would You Prefer to Pay?

Money makes the world go round (or, in this case, keeps the phone lines open). For these two phone systems, the question is where and when you pay.
The cost of on-premise PBX systems is almost entirely upfront since you need to invest in the hardware required to set up the system. You will need to pay maintenance costs over time, as well as overtime for surprise breakdowns and upgrades to keep the system competitive, but either way, you’re going to pay a significant sum of money at the start. The benefit is that you can build the phone system you want.
Cloud-based systems, on the other hand, are already set up when you buy into them. You don’t have to hire people or build infrastructure, just opt into the service. As such, your phone system becomes a monthly fee (which can often be reduced if you opt for an extended contract).

What’s the State of Your IT?

Keep in mind that IT is critical in managing your phone system. Even if you have the resources to pay for on-premise PBX upfront, you’ll still need to assess the state of your IT department.
Specifically, you need to know:

  • What those IT people know how to do
  • How much time they have to accept new tasks
  • How much training they might need to build and maintain a phone system

If you don’t have very many IT people or those IT people would require extensive training to be genuinely useful in maintaining a phone system, you’re going to have to make a significant investment to get them up to speed. A cloud-based system already has IT in place, trained and ready to keep the servers operating smoothly.

Do You Need Full Control?

You should also ask yourself how much control is important to you.
The primary benefit of on-premise PBX over cloud systems is control. You’re in complete control of what your system does, how it works, and how it integrates into your business. Every little change and upgrade lies in your hands.
Then again, with great power comes great responsibility. Having absolute control means that you’re responsible for handling every potential crisis your phone system can throw at you. If you don’t have a big IT department or significant resources, a cloud-based system takes those concerns off your plate while providing the same high level of functionality.

Do You Have Remote Users? Multiple Offices?

To be clear: on-premise PBX systems can manage remote workers and multiple offices. The problem is that it’s complicated and expensive.
Remember, you have to provide the equipment and tech support necessary to support remote workers and multiple offices, and that means more investments and more work for your IT team.
If you want fewer installment headaches, cloud-based systems are the clear winner in this case.

How Scalable Do You Need to Be?

Finally, ask yourself how scalable you need your system to be.
To figure this out, ask yourself how stable your employee base is. Do you anticipate your company growing or shrinking in the lifetime of the system?
For most businesses, the answer is yes. While on-premise PBX can scale to match your growth, it requires a greater investment of time and resources. Cloud-based systems, on the other hand, simply require a subscription upgrade.
So if you anticipate your business growing in the foreseeable future, cloud-based systems are far easier to scale.

Looking for a Cloud-Based Phone System?

In the battle between on-premise PBX and the cloud, cloud systems almost always come out on top. If you’re in the market for a cloud-based phone system, you’ve come to the right place.
We’re IT experts with relationships with over 200 IT providers. When you come to us, you’re investing in more than just tech solutions–you’re getting solutions that help your company build your technological future.

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