Hosted PBX vs. On-Premise PBX

Hosted PBX

A hosted PBX is entirely managed by an external provider, meaning no physical telephone exchange equipment is required on-site. All phone communications can go directly through a computer attached to the Internet, with USB phones or headsets used to give a better audio experience.

The hosted PBX provider charges a monthly fee and handles the routing and switching of the system. Often a web-interface will be provided so that a user can log in and manage the system themselves.


Greater mobility – the phone system can easily be moved to new premises.

In the event of power or Internet outage at the office, calls can be rerouted to mobile phones.

Patches and upgrades are handled by the external provider.

It’s easy to add or remove phone numbers, as they are only virtual on the system.

Installation of new features is handled by the external provider.


Call quality can be affected by a slow or bad Internet connection.

Loss of Internet connection will bring down the phone system.

Flexibility is limited to the constraints of the external provider.

New features are reliant on the external provider.

Fees are mandated by the external provider and can be increased unexpectedly.

On-Premise PBX

On-Premise PBX is managed locally by company staff, rather than outsourced. On the user side, the system is essentially the same, with USB phones or virtual phones running through a computer. These are then connected directly to an on-site IP PBX Server over LAN cables, rather than over the Internet to an external service. The onsite PBX Server is managed by local IT staff or technicians, giving a company greater ownership of the system.

While On-Premise PBX requires higher additional expense to purchase the necessary equipment, it can also be more reliable. Using Gateway cards, a PBX Server can connect to a traditional telephone provider. This maintains some telephone communications in the event of a power or Internet outage.


Provides a greater element of control over the entire system.

New features can be added without incurring additional licence fees.

The system can be implemented with your current communications carrier.

While initial costs are more, server ownership will reduce costs over time.

All hardware will be installed and configured by the provider.

The provider will give your staff all the training that is required.


Expansions can involve complicated projects that affect the running of the business.

Technicians need to be called in to do upgrades and patches.

Server failure can result in a loss of communications.

Requires a reliable provider for long-term management of the bespoke equipment.


Hosted PBX:

  • Initial costs are very low.
  • Lower monthly service costs.
  • Any extended features required can incur additional costs.
  • Necessary training of staff may incur additional costs.

On-Premise PBX:

  • Initial costs are higher.
  • Maintenance costs of onsite equipment are higher.
  • The provider will offer staff training at no additional cost.
  • Over time, costs are reduced as there are no monthly fees.
June 2019
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