Cloud versus On Premise Phone Systems. Which is Better?

Netari Blog - Cloud versus On-Premise Phone Systems.  Which is Better?

Choosing your right voice product has become more difficult than ever – as technology has advanced, we’ve gone from analog exchanges to digital and now virtual systems. Picking the ideal office phone system for your organization will increase profits and productivity, and increase greater long-term value.

Choosing a business telephone system

Until a few years ago it was pretty simple; you picked the brand and the hardware, had your lines installed, your handsets connected and if you needed to take more calls, you added more lines. But as the functionality of telephone systems has increased, the buying process has become much more complicated.

This post is designed to help you understand the benefits of each type of phone system in the market, and give you some ideas to help you in the decision making process. Don’t just think about what you need today, but instead consider the features and functionality you will need in the years ahead.

Telephone systems today fall into four principal categories:

  • PBX phone systems

  • IP enabled phone systems

  • IP PBX systems

  • Hosted IP telephony

Traditional PBX Phone Systems

Phone systems have evolved dramatically in recent years. This is principally due to the increase of high-bandwidth connectivity and the demand to integrate multiple services into one connection (i.e. voice, data and video). Many businesses still think that investing in a PBX phone system is a safe solution, but what many businesses fail to realize is that as phone systems continue to evolve and integrate with a company’s network environment, the traditional PBX platforms are becoming obsolete.

However, purchasing a PBX phone system might be right for your business if all you need are basic features. If you’re looking for a long-term, scalable solution then traditional calls and lines is not the way to go.

Some businesses prefer to operate on traditional PBX phone systems with their own in-house overheads. Usually this is in the form of a communications room that is run by an IT team. Purchasing a PBX phone system also gives you full ownership of the hardware unlike in other phone system solutions like cloud-based, hosted phones. For companies operating out of one building, the PBX phone system can be just as beneficial as a virtual system.

The emergence and acceptance of Voice over Internet Protocol (VoIP) as a preferable business application has influenced the demand for hybrid phone systems and IP phone systems, which combine the best of PBX functionality with the flexibility of an IP architecture.

IP-Enabled Phone Systems

For most businesses, new technology is seen as a risk which makes them tentative to upgrade or migrate to a full IP/VoIP environment.

An IP enabled PBX phone system can easily address communications challenges and adheres to those who are hesitant to migrate completely by using or combining Session Initiation Protocol (SIP) connectivity, digital extensions and ISDN trunks; meaning that you have the option to make calls completely via the internet, or the traditional Public Switched Telephone Network (PSTN).

This not only extends the longevity of a traditional PBX phone system (for instance, moving to virtual extensions when you run out of physical extensions) but also allows businesses to deploy new and seemingly ‘risky’ applications at their own pace.

Pure IP Phone Systems

IP PBX phone systems are rich in features and functionality, often designed to be modular, extensible and flexible. An IP PBX is based on open standards technology so that they can be fully developed with third party applications. This gives businesses the option to migrate to a fully managed, unified communications solution.

IP PBX phone systems are convergence ready, improve network scalability and support multiple offices, remote and mobile workers, and changing IT environments.

Investing in IP PBX phone systems removes the need for confusing and costly ISDN circuits in order to drive down costs, while maximizing efficiency in your workplace. Using SIP technology, businesses can still access the PSTN allowing voice traffic to be sent over a data connection. An IP PBX solution is also able to switch calls between VoIP and traditional phone lines while still offering the same functionality of your traditional PBX phone system. The ability of an IP PBX to use modern and traditional voice connections also provides built-in redundancy in the event one of the connections experiences an outage.

Hosted Telephone System

Unlike most telephone systems that require connections to the PSTN, hosted telephones, also known as a ‘cloud PBX’, is delivered completely over a broadband connection or SIP protocols. In essence, the so-called ‘hosted’ phone system is ‘hosted’ off-site in a secure data center. You gain access to the system by way of an intuitive dashboard or high-quality IP handsets.

Instead of purchasing or leasing the system outright, a hosted or cloud-based phone system is charged on a fixed monthly fee per user, and the hardware is owned and maintained by the service provider. Telephone systems installed at the customer’s location generally have a lifecycle of around five to seven years, whereas a hosted phone system is software based and upgraded on an annual basis through the service provider. Essentially, with a hosted phone system, you are space-sharing with other companies on the same platform. This is ideal for companies that don’t want to pay licensing, maintenance and software upgrades in order to have phone service.

Side-by-Side Overview

Key issues to consider

1. Connectivity

If considering a move to an IP based communications or hosted phone system, it is of utmost importance that your business has the level of correct network connectivity in order to properly support the solution.

When the internet was created, it was not designed to handle VoIP as VoIP was non-existent at the time. While the internet can handle, to some degree, VoIP traffic, it has to be configured over a fast network such as fiber broadband or MPLS, which provides greater benefits, better quality and bigger cost savings.

VoIP will continue to replace legacy ISDN telephone services, so for large businesses wanting to make the most out of a voice-over-data service, the key component will rely on the correct type of connectivity.

The benefits of upgrading your connectivity in an IP environment:

  • Access to more robust features that aren’t available with standard PBX systems or ISDN channels

  • Potential for full migration to Cloud services or unified communications

  • Lower cost SIP trunks

  • Multiple Quality of Service (QoS) at all points

  • Increased functionality

  • Improved voice quality

  • Improved security

  • Site to site VoIP

  • Remote access for home workers

  • Combined voice and data on a single line instead of multiple lines for separate services

  • Disaster recovery

  • Easy network management

To maximize your investment into a next generation telephone system will require an early review of your current infrastructure. For example, most credible providers will not be able to guarantee QoS with a VoIP over ADSL solution. The old saying, measure twice and cut once definitely applies. Using a consultant or talking directly you’re your carrier early in the process will help identify any potential quality-related issues that may come up – such as insufficient bandwidth.

2. Quality of Service (QoS)

Quality of Service – or ‘QoS’ is an industry-wide set of standards for ensuring the high-quality performance of critical applications such as voice traffic. The goal of QoS is to provide for the successful delivery of voice traffic over a network by ensuring there’s sufficient bandwidth, that latency and jitter are controlled, and to reduce the possibility of data loss.

The networks performance will need to be evaluated at its most vulnerable (i.e.: busiest time of the day) so that congestion can be considered. Sufficient bandwidth must be made available for future applications such as video conferencing.

QoS provides the following benefits:

  • Ensures that time-sensitive and mission-critical applications (such as voice traffic) have the resources required, while allowing other applications to access the network

  • More control over network resources allows you to manage the network from a business viewpoint rather than a technical perspective

  • Improves user experience

  • Reduces costs by using resources more efficiently, thereby delaying or reducing the need for expansion or upgrades

QoS depends on the type of connectivity and network solution used by your business. When implementing a VoIP or IP PBX phone system, it is highly recommended that you invest in a QoS network that will prioritize your voice traffic.

Costs comparison – what you can expect to pay for per system

It is best to look at your phone system as a long-term financial plan. For example, you may think that by owning your phone system (such as a PBX system) you may be better off, but maintenance, licensing and support for a five to seven-year period can be expensive.

Costs also need to be measured against the long-term savings to your business and overall productivity enhancements. You will also need to bear in mind ongoing costs such as adding new users, moving offices and other service costs.

1. Traditional PBX phone systems

  • Initial upfront cost/investment

  • Owned by your business

  • Prices for PBX systems can range from a few hundred dollars for a system with two lines and up to six extensions all the way up to tens of thousands of dollars for much larger systems

  • On-site resources are needed to manage the system – IT teams, telecom manager, etc.

  • Adding new features to the PBX system requires significant engineering in the central PBX. This can often mean that if your business is experiencing fast growth and requires critical application upgrades, the result could be very timely and may cause losses to your organization

  • Expensive to move offices and may require downtime

  • Extra installation costs every time you need to add more lines or users

  • Support and maintenance contracts are usually charged on an annual basis and you will may still have to cover the cost of a technician visiting the site to fix any issues

  • Depending on the applications you use (such as Automatic Call Distribution or Call Accounting) you will likely have to pay licensing fees, which can be costly

  • Based on your carrier, you may be charged national and international rates on calls using the PSTN

2. IP PBXs/IP phone systems

  • Owned by your business

  • Initial up front cost, but generally lower installation costs since it is simpler to install (i.e. plug and play)

  • An IP PBX will cost slightly more than a traditional PBX and range from $150 to $600 per phone + based on the phones capabilities and number of users

  • Costs can be saved over the long-term based on virtual upgrades, which is easier to facilitate and doesn’t require an on-site technician or installation of hardware extensions

  • Optional maintenance and support contracts, but some resources will be needed on site

  • Calls are cheaper when made over a data connection because you are bypassing the PSTN

  • You may need to upgrade your connectivity solution, which can be costly

  • Improves productivity and lowers costs by facilitating remote access for employees and saves on mobile bills by integrating with mobile VoIP

3. Hosted phone systems

  • Owned by your service provider

  • Cost effective – as much as 70% less than many other phone systems

  • Initial upfront set-up fee, and then billed on a per user, per usage basis, but less expensive since you aren’t paying for any equipment

  • All extensions can call each other free of charge – great for international businesses wanting to connect multiple offices in different locations

  • Cheaper national and international costs

  • Your hosted phone system can go wherever you go, and you can easily switch offices – all that’s needed is a secure data connection

  • Increase or decrease the number of extensions as needed with no extra installation cost (perfect for seasonal businesses)

  • Low upfront cost and lower installation costs since there is less hardware and less downtime to your business

  • No resources needed in-house to manage the system as the system is supported, maintained and upgraded by your provider – perfect for small and medium-sized businesses who don’t have or want to invest in a big IT team

  • Lower cost international and national calls

  • Significant investment into your connectivity may be required (i.e. upgrading to an QoS network)

  • Flexible, scalable and future-proof, your phone system is never out of date

  • Lower operational costs (i.e.: less energy consumption, no space required to house the system, etc.)

Other things to consider

  • Support and training – What level of technical support is available? Will your staff need training on how to use the phone system? Is there a charge for support and training?

  • Call packages – Are there bundled services or features included?

  • Mobile Phones – What other products does the provider offer? Can they reduce bills elsewhere in your communications?

  • Add-ons and features - How easy is it to extend the functionality of your phone system? Does your provider offer network level features such as Interactive Voice Response (IVR) menus or call queuing systems? This will be much better in the long run instead of having to source different products from separate providers.

Choosing your provider

No one phone system solution is right or wrong or more beneficial than the other – as it depends entirely on the needs of your business.

Many big name carriers choose to sell their systems to end users through a dealer network, which offers local support and more immediate response. If practical, purchase your entire solution from one supplier (rather than multiple suppliers), which can provide multiple services through a single point of contact.

Could You Use Some Help?

For many businesses, purchasing a new phone system can be time-consuming and confusing, especially when it comes to deciding on the features needed and the right vendor. Netari GCG can help your business find the right solution based on your specific operational needs. In addition to determining the right technology for your business, we can source qualified vendors that can provide you with the best support. And we do this by helping you manage the procurement process, negotiating contracts, overseeing installation and providing you with a second layer of ongoing support.

Netari Global Communications

Netari is a leading IT consulting firm and technology services distributor offering design, sourcing, and lifecycle management for your IT infrastructure. Netari offers a network of over 200 global suppliers specializing in diverse technologies including: Security, Internet, Network, Voice, Data Center, Cloud, Enterprise Applications, and Managed Services.

For more information about Telephone Systems, Network Connectivity or other communications options, contact us by email or call (813) 343-0440.

#PhoneSystems #HostedTelephones #OnSitePBX

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