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For any business, different communication channels are necessary for individual purposes such as internal interactions, sales, marketing, customer service, and support. Until a decade ago, businesses invested in fixed-line telephones, closed user groups or calling minutes for all forms of business communications. However, with the recent wider adoption of high-speed & bandwidth internet and businesses realizing the cost-effectiveness of using the internet to make/receive calls, there is a shift towards using VoIP as the preferred form of calling. 

While making the jump, most get stuck on one question: “Choose an on-site system or opt for a hosted service?” It may seem menial, but contrary to the common response of it being personal preferences, either choice has an impact on the business. So if you also reached here searching for the answer, you are in safe hands.

What are Hosted VoIP systems and On-site VoIP systems?

Understanding how the VoIP calling system works can help you understand the difference between hosted and on-site VoIP systems. The entire VoIP system can be divided into three major categories:

  1. The user hardware
  2. PBX server
  3. The internet line

Any call initiated at the user-end first is converted into data packets and reaches the PBX server. PBX acts as a digital telephone exchange and redirects the data packets to the correct destination over the internet. On the receiver’s end, the data packets are received by a PBX server that converts them back to audio. 

An on-site VoIP system is where the hardware and the PBX server are on-premises. Individual IP phones are physically connected to the PBX server using LAN cables and used for making/receiving calls. The business manages the VoIP calling systems’ hosting, maintenance, and operational cost.

Hosted VoIP services are cloud-based phone systems where the entire arrangement is situated in the cloud. Users make a call using a hosted IP phone system ghosted or using a custom VoIP app, and it is sent to the server of the multi-tenant PBX service provider. The business can only purchase calling credits, and the VoIP service provider manages the operational costs and server maintenance.

Let’s review the pros and cons of each VoIP system.

On-site or Hosted VoIP phone systems: What are the pros and cons?

Before dwelling on the pros and cons of each VoIP system, let’s understand the essential factors to consider in choosing a VoIP system. When selecting any VoIP system, businesses need to consider the following aspects:

  1. Additional costs for features: This is applicable for both systems. However, the ease of adding new features is effortless in VoIP hosted phone systems.
  2. The operational costs: This is important for those choosing on-site systems. Hosting system providers include a fraction of the cost when charging you.
  3. Repurposibility of existing systems: If you shift from a traditional phone line to a VoIP system, you are prone to consider repurposibility and hence would opt for an on-site system.
  4. Post-sales support: On-site system needs to hire a resource person for the maintenance and upkeep of the server, while the cloud-based phone service provider manages everything from their end.
  5. Scalability: When considering scaling an on-site VoIP system, you need to purchase additional hardware. In hosted IP phone systems, it is as easy as adding a new user to your existing calling plan and paying the additional cost.
  6. Security: The security of a hosted telephony system is as per the business, and you can have a customized security protocol in place. Hosted VoIP system regularly update their systems to be secure against new vulnerabilities.
  7. Fallback Options: In the case of a calamity, the business with an on-site VoIP system has to make special arrangements. In the case of Hosted VoIP system, the service provider manages everything.

Now let’s venture into the hosted vs on-premise phone system:

On-Site VoIP Systems


  • Control over user creation, adjustment, and removal
  • Additional open-source feature sets can be integrated without any license fees
  • No need to change the existing carrier
  • VoIP trunks can be added to save calling costs
  • Server ownership expenses reduce over time
  • Entirely handled by the system installation team
  • The provider deals with staff training
  • Fallback with SIP trunking allows calls to be sent to another number or a mobile phone.


  • Needs a dedicated provider for management
  • Expansions may end up becoming complicated
  • Relocation is a pain
  • Lack of support for remote working
  • Expensive equipment

Hosted VoIP Systems


  • Easy to scale
  • The addition of new feature sets is easier
  • Adding or canceling virtual numbers is easy and quick
  • Relocating your system is very easy.
  • The provider manages regular patches and upgrades
  • Multiple fallbacks are available. 


  • Heavily depends on the Internet connection
  • System flexibility is limited
  • Customization of features can take time 
  • Volatile fees depend on the service provider
  • Service stability may vary
  • You may not have complete control or customization abilities.

Which to Choose?

Glancing over the pros and cons of each, it is evident that there is none superior. However, the answer to the question of which to choose completely depends on the purpose, budget, and ease. A hosted VoIP solution is the most common choice for small- to medium-sized businesses. On the other hand, an onsite system may be a better choice for larger companies with IT resources who want control over their phone systems and data and need a customized solution. Consider asking the following questions before choosing between an on-site or hosted VoIP server:

  • How much can you spend?
  • Can your business bear the cost of a PBX server over a hosted PBX?
  • Do you prefer making investments on equipment over operating costs?
  • What are the long-term goals?
  • Does your IT staff have the tools and expertise necessary?
  • What is the projected growth of your business?
  • How will you deal with resilience and redundancy?

Wrapping Up

In order to balance the advantages and disadvantages of hosted VoIP against on-premise VoIP and make an informed choice about which to implement in your business, it is important to assess the demands of your organization. However, Vindaloo Softtech is a dependable VoIP development firm if you are persuaded of the advantages of hosted VoIP services. We are pleased to assist you in identifying the best option for your company, thanks to our many years of experience in both hosted and on-premise voice. To learn more, get in touch with our knowledgeable team right away.