With so many choices, it's tough to know where to begin when choosing a new phone system. There are at least two main categories of phone service: on premise land lines and cloud phones, the latter of which may also be referred to as Voice Over IP (VoIP), hosted phone, voice over broadband, or IP telephony.
ON PREMISE LANDLINES
On premise systems come in many flavors: Plain Old Telephone Service (POTS) line, Session Initiated Protocol (SIP) trunks and Primary Rate Interface (PRI), to name a few. The main thing these have in common is that the phone system is physically located and operated from the place of business and the business must purchase the actual phones and related hardware. Voice data runs over a circuit of some sort, either DSL, T1 copper or fiber optics. (If you receive service through Digital West that data is prioritized over other data on the circuit, which ensures high voice quality. For most other providers, data is co-mingled on the public Internet, which can result in distortions poor sound quality.) Onsite systems usually entail periodic service calls by the phone system provider, which are charged on a per-visit basis. Upgrades to the system cost extra.
Cloud, or hosted, systems store your voice data on a secure server in a data center which digitally transmits the voice signal to another phone or device. Most cloud providers send your voice data over the same circuit as your Internet connection where it is co-mingled with other data. This co-mingling is one of the reasons some businesses have shied away from hosted phones. (Once again, at Digital West we use a private, secure network and prioritize your voice data over other data packets, ensuring the best possible sound quality.) With cloud systems, the “brains” of the phone system reside in the provider’s data center and the customer pays a monthly subscription fee. That fee covers the cost of the circuit, the phones themselves, and all programming. The phones are essentially leased to the business by the provider and are replaced, at no cost, as phones age. Upgrades and enhancements to the phone system happen seamlessly over the cloud, do not require an onsite tech call by the provider, and are included in the monthly price.
With this in the way of background, we’ll detail specific distinctions across key categories.
On Prem: The business buys the phone system up front and then owns it. Other system hardware (e.g., servers, wiring) is located onsite at the business.
Cloud: The phone service provider essentially leases a phone system to the business as part of the ongoing monthly fee, for the life of the contract. Other system hardware (e.g., servers) resides at the provider’s data center.
COST & SUPPORT
The main tradeoff between the two systems is whether business is willing to incur a large, one-time expense up front and then own the system, or wants to spread payments over the life of the contract but not own the system. Likewise, with support, an on premise system will usually require additional service calls, whereas a hosted phone system can be centrally serviced and upgraded remotely.
On Prem: The business buys the phone system, which can range from $5,000 to $40,000 just for the phones, and this requires a large capital outlay. Once the phones are paid off, however, the business no longer incurs that hardware expense and they own the system.
If there are technical issues or service problems, the provider must make a service call to the place of business, and the business is usually responsible for the cost of that visit. In addition, if upgrades are necessary, the business pays out of pocket for those enhancements.
Cloud: Phones are owned by the provider but made available to the business as part of the monthly fee. They are regularly upgraded with new features and replaced at end of life – both at no cost -- and hardware expenses are spread out evenly across the life of the contract.
Nearly all technical issues can be handled directly from the data center, and support is included as part of the monthly fee, so the business doesn’t incur additional onsite service charges. Upgrades are programmed automatically and are included in the monthly subscription price.
On Prem: Generally speaking, most landlines that have guaranteed bandwidth (like Digital West provides), will have low network interference and high sound quality.
Cloud: There’s a BIG difference in sound quality between Digital West’s hosted phone service and the VoIP delivered by commodity providers like Vonage or RingCentral. Because we control our networks from end to end, we are able to deliver all business voice data “on net.” That means we engineer the phone system to prioritize the organization’s voice data over all other data on the network, ensuring the highest quality of voice possible. Other providers co-mingle data and use the public Internet (as opposed to a dedicated phone line).
In some cases, the physical parameters (e.g., the age of the building or wiring, the speed and quality of available data circuits) will narrow the list of phone options available.
On Prem: The main driver is the availability of sufficient circuits over which to run the voice data. For example, if the business is remotely located and only has access to a VDSL circuit, the choice may be limited to POTS lines.
Cloud: A business that has access to a fiber network and modern infrastructure, on the other hand, may choose a cloud phone system or decide to go with SIP trunking.
On Prem: With the range of landline systems available, they are suitable from offices of two to 200+ people, and highly scalable.
Cloud: In general, cloud phone systems function well for smaller offices or businesses with multiple locations. It’s also a good fit for organization in a large growth phase, as it softens the initial capital outlay normally required to add lines for new employees.
Though you might expect cloud systems to have the most advanced feature set, that is not necessarily the case. Some on premise systems have the sophisticated features you’d expect, and some have barely any. Cloud systems tend to fall somewhere in the middle. Understanding what features are critical to your business may help narrow the choice.