Choosing a new phone system – On-premise versus cloud

As older traditional phone systems reach end of life, more and more organisations will be looking to replace legacy equipment with more modern unified communications (UC) technology that can deliver additional benefits such as cost-savings, enhanced customer service more functionality and greater flexibility in terms of location-independent collaboration and integration of existing applications.

The question though is whether they replace like with like and still go with a capital investment or if they opt for cloud-based communications. A recent report by IDC says that SME cloud spending will grow by nearly 20% by 2019, so there is clearly a rise in the popularity of hosted technology, but a decision between buying or ‘renting’ could be determined by a range of factors such as industry sector, size or other characteristics unique to an individual business.   

[easy-tweet tweet=”SME cloud spending will grow by nearly 20% by 2019″ user=”comparethecloud” usehashtags=”no”]

So how do companies best assess what type of communications is right for them? Whilst there may be little difference in the functionality available with cloud-based UC compared with on-premise (be aware though that some vendors’ cloud solutions may be adulterated) there is a large contrast in the delivery and payment model. For many businesses this is often a starting point for discussion.

For organisations such as start-ups that lack working capital, the cloud model is particularly attractive for communications, as for all cloud-based solutions, the initial outlay is low, using a ‘pay as you go’ approach’ for each user and on-going costs are affordable and predictable.  In contrast, an on-premise unified comms solution can often involve a large capital investment for the system itself plus all the additional hardware equipment such as servers and software licences for every user. The hardware investment has a dual implication:

1. upfront costs
2. on-going costs, in the shape of:

  • adding or changing phone extensions
  • upgrading new functionality
  • future de-installing and re-installing of the solution in the case of a move or expansion.

For new and/or fast-growth companies, MACS (moves and changes) are likely to dominate, and if you do not have an IT Manager in-house, then it could be both expensive and time-consuming to rely on a third party if you go for an on-premise solution.  In these circumstances cloud based UC is likely to be preferable because it provides much more flexibility both budget-wise and from a scalability point of view.

The only hardware that potentially is required is for desk-phones or headsets, and with many solutions such as Swyx, these can be eliminated altogether and just replaced with a mobile, as all PBX functionality (calls, call routing, CTI etc.) and ‘rich presence’ or status information can be supported on a smartphone device.  Similarly when it comes to upgrading your software and system, with cloud this is done automatically by your service provider, so you are always on the latest and greatest without worrying about managing legacy equipment or downtime.

[easy-tweet tweet=”If your business is highly reliant on communication, then with cloud you will have built-in redundancy supplied by your service provider” via=”no” usehashtags=”no”]

With the majority of phone systems (including on-premise), now based on VoIP and SIP trunking, the question of business continuity should also be raised. If your business is highly reliant on communication, then with cloud you will have built-in redundancy supplied by your service provider, whereas with on-premise you would need to invest in a second server at the same or at a different location to offer a back-up facility.

Conversely there are also arguments for buying a solution because once an organisation has re-couped the initial investment, costs could be lower over the long-term.  For established companies that can afford the capital outlay this may be preferable to cloud, and it is even possible to have a CPE solution virtualised in a data centre, so you have all the advantages of cloud, but also can realise a return on your investment.

Maintenance costs can also be minimised if you can draw on the expertise of your own IT team, who can carry out any updates or even work on integrating your communications with other applications in the business such as your CRM or accounts. With Swyx’s Visual Contacts function for example it is possible for the system to automatically draw from a company database, so that screen-popping of information occurs including customer details or perhaps accounts data, so you can handle enquiries more efficiently.

If you are still unsure of which path to take, always speak to a vendor or reseller that offers both, so there is no bias and they can then judge more fairly what makes best business sense based on your specific individual circumstances and overall objectives.  The good news though is that whichever choice you make, unified communications is sure to reduce overheads, increase productivity and provide a competitive edge.

According to the Cloud Industry Forum, more than 30% of small businesses and 55% of mid-sized companies plan to deploy some form of UC in the next 12 months, so now is the perfect time to discover how you can align your communications strategy with your business goals.

Checklist for Choosing ‘Cloud’ or ‘On-Premise’

Here is a quick overview of the key attributes of companies and why they would opt for cloud or on-premise respectively.

Cloud On-Premise
Start-Ups working with minimal capital Cash-rich preference for capex
No IT expertise in-house IT Manager / Expertise in-house
Already use other cloud services More conservative industry e.g. banking
Always want to be on the latest technology term Want to save money over the longer term
Green credentials (less hardware required e.g. no server required) Size and needs of business are static
Fast-growth companies continuall moving or opening new sites / offices


SwyxWhitepaperHowSMEscanbenefitfromcloudbasedunifiedcommsFurther Reading: Swyx has produced a free whitepaper on ‘How SMEs benefit from cloud-based communications’ available to download here. 


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