Hosted PBX vs on premise PBX: which fits your business, and how to migrate

An on-premise PBX is hardware or software that you own and run at your site. It connects to desk phones over your internal network and to the outside world through phone lines or SIP trunks from a carrier. Your team or an IT partner installs it, configures it, patches it and replaces it at the end of its life. A hosted PBX runs in the provider's data centers. Your phones and apps connect to it over the internet, and the provider handles the software, updates, capacity and the connection to the public phone network. You manage users, numbers and call flows in a web console. In short, with on-premise you own the system and its maintenance, and with hosted you rent the result.

The cost profiles are very different, so compare them over the same period, such as five years.

• On-premise: upfront purchase of the PBX, licenses per extension, desk phones, installation, and then ongoing costs for SIP trunks or lines, maintenance contracts, software updates, power, backups and the time of whoever administers it. A hardware refresh at the end of the life cycle is a second large payment.
• Hosted: a fee per user per month that covers the system, updates and usually the apps. Hardware is optional, since many people use a softphone. Costs grow in step with headcount and stop when a seat is removed.

Neither is automatically cheaper. A large site with a recent PBX, in-house telecom skills and a stable headcount can run it economically for years. A growing business, or one with several locations, usually spends less and plans more easily with a hosted service. Our low cost VoIP service worksheet helps you put the hosted side into numbers.

On-premise gives you full control. You decide when to update, you can integrate with legacy equipment such as door entry systems or paging, and call data stays on your hardware. That control comes with responsibility for security patches, access control and backups. A hosted PBX gives you control through configuration rather than ownership. You set call flows, recording, retention and user roles in the console, and features arrive through regular updates. For compliance, ask a hosted provider about encryption, data retention settings, audit logs and single sign-on. The security page lists the questions we think matter.

An on-premise PBX works as long as the site has power, the hardware is healthy and the lines are up. A single site outage, such as a fire, flood or long power cut, takes the phones down, and redundancy means buying a second system. A hosted PBX depends on the provider's infrastructure and your internet connection. If your office goes offline, calls can fail over to the mobile apps of each person or to voicemail, so callers still reach someone. For multi-site organizations, a hosted system also removes the need for a PBX at every location.

If you have invested in an on-premise PBX that still has years of life, you do not need to choose all at once. SIP trunking replaces the phone lines between your PBX and the outside world with a connection over the internet. The PBX keeps running your extensions and call flows, while inbound and outbound calls travel over SIP trunks to a provider. This usually lowers line costs, makes it easy to add capacity, and lets you move numbers to the new provider through porting. It also sets up a clean migration later, because your numbers are already with the provider that will host your system.

A phased migration keeps risk low and lets teams adjust gradually:

• Inventory: list extensions, numbers, call flows, hunt groups, recordings you must keep and any legacy devices connected to the PBX.
• Trunks first: move the external lines to SIP trunks and port the numbers, keeping the PBX in place.
• Pilot group: move one team or one location to the hosted PBX, using the apps and a few desk phones. Route calls between the old and new system during the transition.
• Rebuild call flows: recreate the auto attendant menus, schedules and ring groups in the hosted console, and simplify them while you are at it.
• Move the rest: migrate the remaining teams in waves, test each wave, and retire the PBX hardware when the last extension leaves.
• Keep what must stay: legacy devices such as paging or door phones can stay on a small local setup or an adapter until they are replaced.

Porting follows the same rules as any business number, so read our guide on how to port a phone number before you start.

An on-premise PBX still fits sites with strict requirements for on-site call handling, heavy integration with legacy equipment, in-house telecom staff and a system that is not near the end of its life. A hosted PBX fits most other businesses, especially those with remote staff, several locations, growth or shrinkage in headcount, or no one who wants to maintain a phone server. Many organizations run both for a while, and that is a perfectly reasonable plan.