Dobson Fiber Blog

Premise Based Phone Systems vs. Hosted Cloud Phone Systems.

Written by John Zeiler
Posted on: April 10, 2018

Dramatic changes in the capabilities of both premise based and hosted phone systems have occurred over the last 10 years, with VOIP/SIP based technological advances being the focus in many instances.

Premise based phone system

Generally, a premise based system is an onsite PBX or Key System hardware device controlling all aspects of call management for connected phones.  The hardware, including the phones, are owned or leased, and many times are managed by the consumer.  Dial tone is delivered by the consumer’s carrier of choice to the consumer’s hardware, which manages calls and call features. The consumer is responsible for the upgrades, maintenance, and/or expansion of the system, but will usually partner with a provider for ongoing support or rely on their own internal IT professionals.

 There are several highly regarded premise based phone systems available today. Most manufacturers continually develop modifications to improve service quality or to install advanced features.  Some newly developed advanced features are available at no cost, while some features may have additional costs.  These factors should be considered when comparing premise based systems to hosted systems.

Hosted Phone System

Generally, this solution is a phone system that is owned and managed off-site by another entity on behalf of consumers.  Typically, the only hardware onsite are the physical phones and a network PoE switch. A hosted system is very scalable, with limited up-front costs.  It leaves the burden of system management, upgrades, and maintenance to the provider.  Hosted phone systems are also extremely feature rich.   The consumer may think of a hosted solution as a large phone system segmented into smaller systems to meet the needs of various consumers. The consumer is connected with dial tone to the hosted phone system via a data connection, with calls completed (inbound/outbound) over the internet.  In hosted phone systems, as with premise based phone systems, the consumer has a choice of their provider for dial tone in most areas of the country.

Premise Based Manufacturer Business Model Changes

As many small and mid-sized businesses, and a growing number of large businesses, have transitioned to hosted solutions, there has been a decline in the number of premise based systems manufacturers.  This can potentially translate into a decline in the support from such manufacturers of previously purchased systems.  This could also translate into fewer local distributors with the ability to support systems recently purchased.  Some manufacturers are also seeing the need, based upon consumer demand, to alter their available product platforms to VOIP only. Questions regarding the availability of support for a digital device replacement, required expansion modules, and even repair issues could arise.   In a changing market in which retailers have little or no control, consumers need to be made aware of any situation that may negatively impact their business. 

 Toshiba, a well-respected major manufacturer of electronics including premise based phone systems, discontinued its Toshiba America Information Systems operations in March of 2017.  Ultimately, Mitel acquired certain parts of Toshiba’s related assets, inventory and support obligations.  Shoretel, another large provider of premise based phone systems, was also acquired by Mitel later that year.  Recently, Samsung announced that it will discontinue manufacturing digital devices, focusing its attention on VOIP only.  As a retailer of these reliable and robust systems, we do everything we can to stay abreast of change so that we are able to maintain these systems for consumers.  Whether consumers have chosen to buy from us or only use our services for support, manufacturer changes make it challenging at times for providers to have the expertise and equipment available to meet all needs.

 Are Hosted Phone Systems the Future?

From a VOIP perspective, they are definitely the most recent development in phone system solutions for consumers of all sizes and are similar in structure to the old analog Centrex hosted solutions of the past.  Premise based manufacturers continue to develop similarly unique solutions for mid to large size business consumers.  Both hosted phone systems and premise based systems are powerful and proven solutions for many businesses.  In arriving at the solution that is best for your business, it will be necessary to weigh the pros and cons, understand the long-term and short-term costs, and calculate the overall value to your business.  We are ready to assist in any way we can.

 Be selective in choosing a provider that is focused on serving you rather than focused on selling you.  Many web based providers can drop ship a “plug and play” phone but without the proper pre-testing, pre-configuration, or network pre-qualification, these “plug and play” solutions are frequently returned almost as quickly as they are shipped out.  The consumer plugged; but the device didn’t play.  Additionally, that provider’s limited support, in the consumer’s mind, translates to non-existent support.  Be selective.  At Pinnacle Telecom, we try to minimize the “plug and play” mentallity due to the multitude of challenges that can arise.  We want to keep the solution simple to you, but that doesn't mean it's a limited product.

 “Which way do I go George?”  Or, what is the best solution, the best value, the best investment?

Each solution truly is reliant upon the stability of the underlying business or manufacturer for the real value.  And, the real value to consider is your businesses future.  With changes in technology being absurdly fast and manufacturers dropping to the wayside or changing their platforms, a premise based system requires a well versed specialist either under contract, or on-staff, at a significant cost. 

 For some very large businesses, the availability of an on-staff, always available specialist for necessary and immediate changes is valuable, yet something that can be overcome by a hosted phone solutions partner.  There is no pat answer here.  Some experts believe that consumer choice is, or should be, made based upon the businesses culture, or short & long term direct cost, or investment strategy, each having value and purpose. 

 Some experts understand that a businesses culture, just as the potential for the manufacturers continued existence, is subject to change, and that the short-term direct costs are potentially insignificant in comparison to the long-term management of a high cost up-front system that may or may not be supported in the near future.

 As a hosted provider with 60 years in the telecom business, our Metaswitch solution is supported by a manufacturer that continues to grow, invest and develop at our cost not the consumers.  Yet, as the provider, we also elect when to upgrade to the latest solutions.  Each aspect has pluses and minuses. Let us help your business consider cost of ownership vs. cost of hosting.  Focusing on ROI is most valuable when you consider all of the facts and variables.  See the chart below to begin your consideration.


Which system will Work with My Current Network?

The existing infrastructure of your data network is critical to achieve exceptional results. With either a hosted or premise system we would analyze elements of your network for stability through testing and investigation of wiring (Cat5e or better is required), networking, bandwidth, latency, and other QoS controllable measures.  In many instance the consumers Cat5e network is exceptional.

What Is Quality of Service, and Why Do I Care About It?

Quality of Service (QoS) is critical in deploying VOIP technology. In many instances we provide fiber to the premise, but we are also extremely capable of implementing either hosted or premise based service over a consumers “Bring Your Own Bandwidth” (BYOB) solution. This means that we could simply point our hosted system or your premise based system to connect with your office’s and remote location’s IP address(es), using the public internet to transport the voice traffic. With a BYOB solution, we are selective regarding connectivity due to our insistence upon Quality of Service (QoS) to eliminate packet loss and jitter, which would result in poor call quality. QoS control allows us to prioritize real-time traffic (voice traffic).  Premise based phone systems have this same complication in sending VOIP voice traffic over the internet, but the burden of QoS may be on the consumer’s IT or contract staff.

Again, both solutions are favorable for different reasons and the decision to adopt hosted or premise based systems changes from entity to entity.  Consumers with well trained, preferably certified IT support, that understand the premise based VOIP technology and related QoS, and also have the time to administer a premise based system, may find this solution to be agreeable.  They are in greater control of their customer’s perception in relation to telecommunications, to the extent that the control is within their own network.  If something breaks and they are storing a spare item and they have the knowledge to replace it and they have the time to do it, then the consumer can make it happen; but not everyone has the resources, expertise, time, or material to create that situation within their business, especially if their business isn't technology based.

 Final Thoughts to Keep in Mind:

  • Cost is always a pain point. Identify the direct and indirect costs, both short & long term
  • What problems can you accept and who do you want to hold responsible?
  • What is your provider’s/partner’s customer retention rate?
  • Call their (your partner’s) help desk. Call their help desk.  Call their help desk.  No, this is not a typo, this is a valuable repeat test to determine their availability, their time to respond and their method of response.  These are all pain points.
  • Consider us a partner in evaluating either solution.
  • Your partner should be able to help evaluate the best solution for your business, not just evaluate their only solution(s).
  • How long has your partner been in the telecom business?
  • How long has your partner been in the phone system sales and/or hosted system sales business?
  • Given your pain points, how best do you want to invest in the future?

 We value our customers highly and work to partner with them in any way possible.   

Check our our Cloud Hosted Solution and contact us to see how we can make a difference for you.

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