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Hosted Versus On-Premise PBX

Hosted Versus On-Premise PBX

Despite the huge growth in digital communication tech, most businesses still hugely rely on telephone calls. But calling – and the phone systems that power those calls – has completely changed in recent years.

What does PBX mean?

PBX stands for Private Branch Exchange. Gone are the days of an operator sitting in front of a massive switchboard, fiddling with analog switches and pins to connect calls. A modern PBX is a system that carries automated multi-extension phone lines, either using VoIP technology – often known as an “IP PBX”. This allows phone calls to be made over broadband internet, via SIP Trunks which connect to the traditional phone networks.

What is hosted PBX?

Hosted PBX is where an outside provider ‘hosts’ your PBX, providing the physical servers and the services to run your phone network. This means the provider will also be responsible for maintaining, securing and updating the PBX.

What is on-premise PBX?

On-premise PBX keeps it all in-house, with the phone system physically deployed in your offices. The company will buy and own all the necessary equipment, and will have complete control over all aspects of the PBX, including maintenance, moves, changes and updates.

The popularity and effectiveness of this tech has led to a dilemma for many businesses. How do you decide which option to go for? This question is perhaps not as straightforward as it might appear, as both options have a bunch of pros and cons, and the eventual decision will most likely depend largely on your individual business, and its specific needs.

How much do they cost?

One of the big differences between on-premise and hosted PBX is about upfront costs.

Hosted PBX turns your phone system into a monthly expense, as they tend to be charged on a subscription basis, with varying plans depending on the number of users.

On-premise PBX usually comes with a lower monthly cost, but needs more money to be spent upfront. Your business will need to buy equipment and licenses to set up the system, but from then on monthly costs will be largely around maintenance and upgrades.

For larger organisations with the capital, buying your own equipment upfront is often preferable, whereas for smaller businesses and start-ups, transferring the cost of your PBX from a purchase to an expense can be really helpful.

PBX and Headset

What should I consider?

Flexibility and control

It is important to think about the level of access and control you will want to have over your PBX, as there are significant differences between the two options.

On-premise PBX gives you full control over the system. You’ll be able to add users, make changes, fine-tune settings, and create advanced interactive voice responses to your heart’s content.

Hosted PBX is a little more hands-off. PBX providers open up enough of the system to give users control over what they need to do, but will take care of everything else. Hosted PBX also means that the provider takes care of the maintenance, which can be a huge positive for smaller companies with fewer resources.

Hosted PBX systems – like Gradwell’s Wave – are designed for constant iteration. As a customer, you benefit from updates, new functionality and security patches.

Essentially it is a question of control vs responsibility. More control over the system equals more responsibility for maintaining and managing it. This is one of the more attractive qualities of a hosted PBX, as everything is sorted for you, allowing you to get on with your core business and work more effectively.

It is also worth thinking carefully about the future of your business, particularly in terms of staffing. If you are expecting significant growth, or spikes in the number of employees, a hosted PBX might easier to manage than an on-premise system. With a hosted PBX you pay for what you use, so if your user numbers go up (or down) it is an easy fix. With an on-premise system, you’ve paid upfront, so contractions mean wasted resources, and growth requires more investment.


As you might expect, an on-premise PBX is a bit more legwork than a hosted PBX, and it is worth considering the resources you are able to throw at the system before making your choice.

Larger companies with well-resourced IT departments might well prefer an in-house option. The IT department will need to have the skills to install and setup the system, and the time and resources to manage and maintain it.

A hosted PBX, on the other hand, is far less demanding. Smaller organisations, startups, and anyone without significant IT resources will find someone else taking care of the setup, and the day-to-day running extremely useful.


The final piece of the puzzle to consider is your own organisational structure. Is your business centralised in one location, or do you have multiple offices and a host of remote workers?

An on-premise PBX is totally capable of dealing with remote working, but it is a little more complicated, and can be more expensive or require additional equipment and setup. This is unnecessary in a hosted environment, as the PBX itself is remote, meaning no installation headaches or issues with remote users.

For fully remote organisations, the issue of physical space for equipment can also come up. If you don’t have a central office, then you are going to struggle to find somewhere to store your servers! At this point a cloud PBX is particularly appealing.

For larger organisations with great IT resources, and a centralised working structure, an on-premise PBX is a great option. However when it comes to smaller organisations, start-ups, or companies with fewer resources, the lower upfront costs and lessened maintenance responsibility of a hosted PBX can be really attractive.

What next?

Currently researching your options? Why not chat to one of our experts? Get a quick consultation on what might suit your business better with no obligation to buy.

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