Researching business-grade VoIP (Voice over Internet Protocol) telephone systems doesn’t need to be overwhelming, or confusing. In this article I’ll give you the information that you’ll need to determine which of these systems is best for your business.


If you’ve been reading about VoIP for businesses, you have probably heard of: “Premise-Based VoIP (Managed)” and “Hosted VoIP (Hosted PBX).”  They’re both VoIP telephone systems, but the overarching distinction between hosted or premise VoIP is where the equipment is physically located.

  • Premise-Based VoIP – you purchase all of the equipment and you keep it in your office.
  • Hosted VoIP — the telephone equipment is off-site and in “the cloud”.


The following table highlights the key differences between Premise-Based PBX and Hosted PBX.  It is important to note that certain aspects may vary depending on your provider. The table reflects the differences in how Steadfast Telecommunications offers either of the arrangements.


Premise-Based VoIP

Hosted VoIP

Time Investment

  • Can take some time for the system to be implemented.
  • Takes less time to get up and running.

Initial Capital Investment

  • Expensive
  • Must buy all of the equipment up front: IP Phones, a router, network switch and a server.
  • Very little cost if network (Ethernet Category 5e or higher) wiring is already present.
  • Must purchase the IP Phones, a router and a network switch (preferably “Power Over Ethernet” based).
  • You won’t need to purchase a server.

Acquisition Costs

  • In many instances, a Premise-Based PBX arrangement can cost around  230% more than a Hosted PBX equivalent.
  • N/A

Operating Expenses over 5 Years

  • Often, customers can expect to pay around 30% more than a Hosted PBX equivalent.
  • N/A

Equipment Failure and Interruption to Business Operations

  • Potentially severe.
  • Downtime is possible for days if parts need to be ordered and a service person must visit your site.
  • Much lower risk of downtime.
  • Your provider’s equipment will automatically switch over to backup systems.  You won’t have any interruption in service.


  • If internet connection disrupted:
  • Within the office, calls can be made and received.
  • Calls to and from the outside are interrupted.
  • Option to pay extra for a separate failsafe internet connection.
  • If internet connection disrupted:
  • The phones won’t work without internet. -However, calls can be easily switched over and routed to cellular phones.
  • You could pay extra for a separate failsafe internet connection.

Equipment Maintenance, Upgrades and Repairs

  • Depends on whether you have a maintenance contract.
  • Taken care of by your provider.

Phone Mobility

  • Your router can be configured to enable you to move your phone to any location with an internet connection.
  • Your extension number stays with the phone. If you move your phone, the extension comes with it.
  • You can even take your phone home and use it just as if you were actually present at the office. You just need a broadband internet connection.
  • Same functionality as with the Premise-Based PBX system.
  • The only difference is that, with Hosted, your provider performs the programming to enable this functionality.


  • System can be programmed or upgraded as needed.
  • Additional phones can be added.
  • Your provider takes care of anything involved in scaling the system.
  • Additional phones can be added.

Control over all settings and system details

  • With Premise-Based, you can fine tune the system to your exact specifications.
  • Programming is complicated and will involve paying for a technician (unless you have IT personnel who are able to manage the system).
  • Hosted VoIP offers the same great features as Premise-Based.
  • Provider will be able to recommend appropriate settings and implement them for you.

Altering System Settings

  • Often involves having physical access to the equipment.
  • Remote access is sometimes possible.
  • Your provider can easily make changes for you.
  • Rarely requires an office visit.

Physical Space Required

  • You will need a centralized room or closet to install everything.
  • Minimal footprint.


  • Uncertain in terms of actual hardware, but software can be updated.
  • A service contract can protect you in the event of a hardware failure.
  • A good provider will add the latest equipment to their system .
  • Your business will benefit from your provider’s upgrades, but you won’t need to purchase a complete new system.

Main Advantages

  • You have physical control and access to your system’s components.
  • You are able to “lock down” your system’s firewall to block remote access and maintenance if you would like.
  • Since internal calls do not need to leave the premises, you can save on bandwidth.
  • You don’t need to devote extra physical space to house the equipment.
  • You don’t need to think about your equipment or programming it — everything is done for you.
  • If your office is damaged by water, say from a burst pipe, there is much less equipment to replace.


You now have a comparative overview of  “Premise-Based VoIP” and “Hosted VoIP” In recent years, more and more businesses have been opting for the Hosted VoIP service.  Some reasons for this are: 1) significant cost savings; 2) unprecedented flexibility; 3) great reliability and 4) not having to invest time and money into routine maintenance and service.

However, if you have any questions, or would like some advice, leave a comment below or call
1 (855) 783-2332


As always, I’d really like to hear your feedback and comments.

  • What is the most important factor in your decision to choosing a Hosted VoIP arrangement or a Premise-Based one?
  • Do you have any concerns or questions about Business VoIP service?