Phone System - Hosted vs. On-Premise

Today, the telephone is still central to business communication. If you are operating a business you want to ensure your customers can reach you by phone, while you are in the office, working from home or on your cell in case of an emergency.

There are several different solutions available to the modern enterprise when it comes to telephone systems. This article will present two primary options for business phones and will help provide a clearer perspective on which option would be best for your business.

On-Premise IP PBX

An on-premises PBX (Private Branch Exchange) phone system allows users to share several external phone lines while switching calls between users. It is a phone system that resides inside a business. For a business to operate with this type of on-premises system, it must be able to purchase the equipment, install and set up the equipment as well as maintain it. The advantage of an on-premises PBX is that the system can be customized internally for your needs, if you have a knowledgeable resource or hire a company with expertise. The disadvantage is the higher setup and maintenance costs. Also, if your office loses power or there is an Internet outage, your calls will be missed, unless the provider of your business phone lines can redirect the calls to a cell phone or at least voice mail. And if your business operates from several locations, to avoid interruption each location should have an independent phone system.

An on-premises PBX system would be taxed as a depreciating asset. You would own the equipment but would be responsible for all maintenance and upgrades and warranty extensions.

Hosted PBX

A hosted PBX phone system carries the same basic functionality as the on-premises PBX; however, the equipment resides off-site, usually within a third-party company, and servers provide your connection to the telephone system. There are numerous advantages to the hosted PBX system. First, there is no need for a large capital investment for the equipment. Equipment purchase and maintenance are handled by the third-party provider. Also, adding or canceling extensions can generally be done quickly, in some cases even by users within your organization via an online application. And you are not locked to your office only since IP phones can work from any location, as long as you have Internet access. Also, the provider will always be upgrading their equipment, to ensure you’re running on the latest and greatest technology at no additional cost to you. The only disadvantage is that, because the system resides with a service provider, you rely on them for changes to it, but partner with the right company and this will never be an issue.

A hosted PBX contract would be taxed as an expense. You would not own any of the equipment, and the fees would be 100% tax-deductible.

What’s right for your company?

Generally speaking, hosted PBX is the best solution for the vast majority of companies in 2018. Anyone from a small mom and pop shop to a medium-sized enterprise will reap the benefits of a third party hosted PBX business phone system. In some rare cases, a very large corporate enterprise may find that this type of equipment is required on-site anyway, or may have so many users that it makes more sense financially to go with the on-premises PBX system. For anyone else, the flexibility and low initial cost of hosted PBX is the way to go.