March 3, 2022
On Premise PBX vs Hosted IP PBX - What’s the Difference?

On Premise PBX vs Hosted IP PBX - What’s the Difference?

Read time:
2 Minutes

Upgrading your telephone system is a minefield of acronyms, jargon and complicated diagrams. This guide is here to help.

With so many different telephone systems on the market today, choosing the right one for your business can be tricky. Understanding the differences between each can be even harder.

In this article, we’ll explore two different types of telephone system:

  • On Premise PBX telephone systems
  • Hosted IP PBX telephone systems

So, let’s break it down.

What is an On-Premise PBX?

On-premise PBX telephone systems have long been the standard for businesses.

An on-premise PBX is a telephone system with a physical presence in your office. With an on-premise solution (often shortened to on-prem), you have a piece of hardware in your office that controls your businesses incoming, outgoing and internal call traffic.

A typical on-premise telephone system has your businesses telephones all wired back to a central point (usually a comms cab or a server room). Each telephone is connected to a centralised telephone system, which connects internal calls, and passes external calls out to the internet.

PBX Telephone System Diagram
PBX Telephone System Diagram

On premise solutions used to be the only way for businesses to make and receive calls to the outside world—but now they’re outdated, use old fashioned technology and can be very costly to install and maintain.

What is a Hosted PBX?

A hosted PBX is similar to an on-premise solution, but it uses the cloud (as a posed to a physical bit of hardware in your premises). Rather than routing all your calls to a centralised piece of equipment, your calls go via the cloud.

With a hosted PBX phone system, your calls are all controlled by a similar piece of equipment as an on-premise solution, but rather than paying for it yourself and having it inside your office, it’ll be hosted in the cloud.

Hosted PBX Diagram
Hosted PBX Diagram

Most businesses now have moved their telecoms over to hosted PBX systems, especially with the ISDN switch off looming, which leads us onto the differences between hosted and on-premise telephone systems.

The Differences Between On-Premise vs Hosted Phone Systems

Essentially, both on premise and hosted telephone systems do exactly the same function, they allow your business to have control of incoming, outgoing and internal calls, but there are a few key differences that set them apart.

The Equipment 

The main difference between on-premise and hosted phone systems is the equipment they use. On-premise telephone systems use a physical piece of hardware in your office; whereas hosted telephone systems use the cloud (so there’s no need for on-premise hardware).

The Costs

Another key difference between on-premise and hosted PBXs is the costs. Typically, on-premise solutions are significantly more expensive than their hosted counterpart. On premise telephone systems require constant maintenance, which requires engineers to visit site. However, a cloud telephone system can be updated and maintained remotely, meaning you’ll save money on engineering visits.

ISDN Switch Off Ready

You may have heard that in 2025, ISDN is being switched off in the UK. This means that legacy PBXs on ISDN will cease to work, leaving your business with no communications. You can upgrade your traditional on-premise PBX to SIP (which moves you away from ISDN), but if you’d still be left with outdated on-premise hardware. The best option is usually to choose a hosted PBX, move your telephony to the cloud and then your business is ready for the ISDN switch off.

Which Phone System Should I Choose

The answer, to be honest, is simple: choose hosted. Hosted PBXs are far ahead of their on-premise counterparts.

Maybe 5 years ago, the question would be a little bit more complicated, but with products such as 3CX and VoIP Phone Systems, hosted telephone systems just offer businesses so much more than on-premise solutions, as well as significant cost savings.

If you have any questions, or would like some more information about how Bytes Digital can help your business, email hello@bytesdigital.co.uk give us a call on 03331 301 021.

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