hosted vs on premises solution

In the world of business communication, the tides are ever-changing. Today’s Canadian businesses are at a crossroads, navigating through the myriad of phone system options available. The choice between a hosted and an on-premise phone system can be pivotal.  

Let’s embark on a journey to demystify these options, ensuring you make an informed decision tailored to your business needs. 

Understanding Phone Systems 

At the heart of any business communication strategy lies the phone system. But what are these systems exactly? Let’s look at them.  

What Is A Hosted Phone System? 

Hosted Phone Systems are akin to renting an apartment. Your phone service is hosted off-site, typically in the cloud, managed by a third-party provider. This means minimal hardware on your premises and the flexibility to connect from anywhere. 

What Are On-Premises Phone Systems? 

On-Premise Phone Systems, on the other hand, are like owning a house. The entire phone system’s infrastructure resides within your business premises. It offers complete control but comes with the responsibility of maintenance and upfront costs. 

Advantages and Disadvantages: Hosted vs On-Premises Phone System

Hosted Phone System 


  • Cost Efficiency: Pay-as-you-go models significantly reduce upfront investments. 
  • Scalability: Easily scales with your business, adding or removing lines as needed. 
  • Ease of Management: The service provider handles maintenance and updates. 
  • Disaster Recovery: Cloud-hosted systems provide better resilience to local outages. 


  • Less Control: Dependency on the service provider for customization and updates. 
  • Potential Latency: Internet dependency may introduce call quality issues. 
  • Ongoing Costs: Monthly or annual subscription fees can add up over time. 

On-Premise Phone System 


  • Full Control: Complete control over your communication system and data. 
  • Customization: Tailor the system to your exact business requirements. 
  • Long-term Cost Benefits: Higher initial investment but potentially lower long-term costs. 


  • High Initial Investment: Significant upfront costs for hardware and installation. 
  • Maintenance Requirements: Requires in-house expertise or outsourced support. 
  • Scalability Challenges: Expanding the system can be costly and complex. 

Technical Comparison: Hosted vs On-Premises Phone System 

Here’s a comprehensive comparison table that outlines the key differences between hosted and on-premise phone systems: 

Feature Hosted Phone System On-Premise Phone System 
Initial Setup Cost Low High 
Operational/Maintenance Cost High (Subscription-based) Variable (Depends on in-house or outsourced IT) 
Control & Customization Limited High 
Scalability High (Easy to add/remove lines) Limited (Requires hardware expansion) 
Disaster Recovery High (Cloud-based redundancy) Variable (Depends on in-house capabilities) 
System Management Provider-managed Self-managed or outsourced 
Security High (Depends on provider’s protocols) High (Direct control over data and protocols) 
Dependence on Internet High Low 

This table highlights the fundamental aspects where hosted and on-premise phone systems diverge, providing a clear snapshot to aid in decision-making based on your business’s specific needs and priorities. 

When we delve into the technicalities, several key differences emerge: 

  • Infrastructure Requirements: Hosted solutions minimize the need for on-site hardware, whereas on-premise systems demand a dedicated IT space and staff. 
  • Cost Analysis: Initial setup costs for on-premises systems are steep, but hosted solutions might lead to higher operational expenses over time. 
  • Security and Compliance: Both systems offer robust security features, but on-premises solutions give businesses more direct control over their data. 
  • Reliability and Performance: Hosted systems rely on internet connectivity, which can be a double-edged sword, while on-premise systems offer more consistent performance but require rigorous maintenance. 

Real-World Applications: Hosted vs On-Premises Phone System 

Consider a small tech startup that opted for a hosted phone system to avoid hefty upfront costs and benefit from the flexibility of remote work. Contrast this with a large financial institution that chose an on-premise system for enhanced security and control over its sensitive communications. 

Transitioning Between Systems 

Transitioning can be daunting but rewarding. Businesses might consider migrating to a hosted system to reduce operational burdens or switch to an on-premises solution for greater control. A thorough needs assessment and a detailed migration plan are essential. 

Future Trends and Innovations 

The future of business phone systems is bright, with AI, 5G, and IoT poised to revolutionize how we communicate. Hosted solutions might become more intelligent and integrated, while on-premise systems could see enhancements in efficiency and automation. 

Decision-Making Guide 

Assessment of Business Needs 

Consider your business size, industry, budget, and IT capabilities. Reflect on your long-term strategy and how a phone system fits into it. 

Checklist for Choosing a Phone System 

Evaluate potential systems against a checklist of features, security standards, support quality, and compliance with Canadian laws. 

Questions to Ask Providers 

When deciding between an on-premises and a hosted phone system, it’s crucial to consider several key questions that align with your business needs, resources, and future growth plans. Here are some essential questions to guide your decision-making process: 

1. What is your budget for initial investment and ongoing costs? 

On-premises systems often require a higher upfront investment but may lead to lower ongoing costs. Hosted systems typically have lower initial costs but come with recurring subscription fees. 

2. How scalable does your phone system need to be? 

If your business is growing or has fluctuating needs, a hosted phone system might be more adaptable, allowing you to add or remove lines without significant infrastructure changes easily. 

3. What level of control and customization do you need? 

On-premises systems offer more control over the phone system, allowing for deeper customization. Consider whether your business requires specific integrations or features that are only possible with an on-premises solution. 

4. What are your internal IT capabilities and resources? 

Evaluate whether your business has the in-house expertise and resources to manage an on-premises system, including maintenance, updates, and troubleshooting, or if it would benefit from the outsourced support that comes with a hosted solution. 

5. What are your requirements for reliability and quality of service? 

Assess the importance of call quality and system uptime for your business. Hosted systems may depend on your internet connection, potentially affecting call quality, while on-premises systems might offer more consistency but require robust disaster recovery plans. 

6. How important is data security and compliance for your business? 

If your business is in a highly regulated industry or handles sensitive information, consider the security implications of each system. On-premises systems may offer more direct control over data security, but hosted solutions often have strong security measures in place and are managed by experts. 

7. What is your long-term business strategy? 

Reflect on your business’s long-term goals and how your communication needs might evolve. Consider whether an on-premises or hosted system aligns better with your strategic direction, especially concerning scalability, flexibility, and technological advancements. 

8. What is the potential impact of system downtime on your business? 

Evaluate the consequences of system failures. Hosted solutions often include redundancy and failover mechanisms that might be more complex or costly to implement in an on-premises setup. 

9. Are any specific features or integrations essential for your business? 

Identify any critical features your business relies on, such as CRM integration, mobile apps, or advanced call routing, and verify whether they are available and well-supported by each type of system. 

10. How does each option align with your company’s remote work or mobility needs? 

Consider the flexibility each system offers to support remote work or mobile employees, especially relevant in today’s increasingly flexible work environments. 

By carefully considering these questions, you can better assess which phone system—on-premises or hosted—best suits your business’s unique needs and long-term objectives. 


Choosing between a hosted and an on-premises phone system is no small feat. It requires a deep understanding of your business needs, a clear vision for your future, and a commitment to navigating the complexities of modern communication technologies.  

Armed with this guide, you’re better equipped to make a decision that aligns with your business’s unique context and aspirations. Remember, the right choice supports your business’s growth, enhances your team’s productivity, and aligns with your technological landscape.