On-premise vs Cloud
Which PBX Phone is best?

Decision between Cloud, Phone and Hybrid

Understanding the Differences, Benefits and Risks of each PBX System

Cloud services have become dominant among businesses during the Covid-19 Pandemic. In 2010, just 3.6 per cent of PBX shipments worldwide used hosted cloud technology, but that increased to 18 per cent by 2018 and during Q1 2020 the spend on cloud infrastructure services has grown 37 percent comparing to Q1 2019. 

Many companies have adopted Microsoft Teams or Zoom in a rush. However, just because the cloud is growing in popularity, this doesn’t mean it’s right for everyone. One of the biggest factors in on-premise’s favour is the large amount of control and customisation available. If you have particularly unique or complex business requirements or need to use specific services, on-premise can give you more options.

On-premise vs Cloud vs Hybrid

Download our free White Paper below to learn which phone system is the right one for your business.

Choosing the right phone for your business

What’s the best solution for your next phone system? On-premise? Cloud? Or both? Download our FREE WHITE PAPER to learn about the pros and cons of each and find out how to make the right decision for your needs.

In the “On-Premise vs Cloud Phone System White Paper” you will learn:

  • The Differences and benefits of each PBX System.
  • The costs and financial implications of each system.
  • 10 Key factors to consider when choosing a phone system.
  • Differences between CAPEX and OPEX expenses.
  • Case studies and which technology was adopted.
Discover more by downloading our FREE White Paper below:

Telephony Case Studies

We have helped thousands of businesses to choose a new telephone system. Click below to read some of our case studies.

Openreach ISDN Telephone Switch-off: What are your options?

An enforced migration for many users

Another key reason for many businesses to upgrade their phone systems is that, in just a few years’ time, they won’t have a choice. That’s because the UK’s legacy ISDN networks are being switched off in 2025, which will mean that any company that still relies on this technology will need to make a migration sooner rather than later to ensure they aren’t caught out. Click here to find out more about the ISDN switch off, how it might affect your firm, and what your options are.

Contact Us

We have helped thousands of businesses to choose a new telephone system. We can help yours too.

Speak to our technical advisers to receive a tailored proposal to your business.

On-premise vs Cloud Phone System – Differences and Benefits

  1. Introduction – the need to update communications systems

No business can hope to be successful without good communication, and this still means having an efficient, up-to-date phone system.

Yet for many companies, this may be an area that has been somewhat neglected, seen as a necessary resource rather than something that can actually drive a business forward. But this is not the case. In fact, a good communications system can offer a wide range of benefits.

Effective phone systems can make workers more productive, for instance, by ensuring they can reach their colleagues wherever they are, with high-quality services. Being able to connect from anywhere is also good for employee morale and helps staff members maintain a good work-life balance.

Having a modern phone system is also invaluable when it comes to customers. That’s because, even with more options available than ever, voice is still the preferred method of contacting a firm for many users. For instance, 75 per cent of consumers believe that phone calls will help them get a quicker response from businesses[1], so it will be important your systems are set up to enable users to get through to the right person as quickly and easily as possible.

The changing behaviour of users

One factor that’s likely to demand a more up-to-date solution is the changing nature of business and the evolving expectations of users – both among your employees and customers. For example, mobile and flexible working is on the increase, and if you’re going to support this, you need a strong phone system that can boost communication – for example, by making it easy to redirect calls to multiple landline or mobile devices.


89 per cent of people say flexible working is more effective than financial incentives for boosting productivity[2]

85% of Arrow employees believe they could continue to be or become more effective, if required to work from home indefinitely following the coronavirus pandemic (Source: Arrow staff survey conducted in May 2020).

74% of companies planning to permanently shift to more remote working after the covid-19 pandemic.[6]

How we collaborate is also changing, so firms need to consider how their telephony solutions assist with this. For example, with more employees spread over multiple locations and more home workers, unified communications tools that can combine traditional voice services with tools like videoconferencing, instant messaging and screen-sharing may be highly useful, and this may require a new approach to how you deploy telephony solutions.

  1. Understanding the options – cloud, on-premise and

When it comes to migrating a legacy phone system to more modern technology, however, there are a range of factors to consider. One of the first and most important decisions you’ll need to make is what deployment model to use – on-premise, cloud or a hybrid of the two.

There’s no ‘right’ answer to this, as each business will have its own unique needs and what works for one won’t be effective for another. But while an expert communications partner can help talk you through the options and identify what will work best for you, it pays to have a good understanding of what each service can offer.

The essential differences

On-premise phone solutions are exactly what they sound like – a complete telephony system that sits within your business, with all hardware and connectivity on site. Cloud, on the other hand, hosts its features on a server at the provider that you connect to via an IP network. Whereas on-premise is typically procured as a capital expense, cloud services fall under ongoing operational expenditure, as they are usually based around a subscription system.

This means that cloud services are often less costly than on-premises and users can enjoy faster upgrades as support and maintenance are handled by the provider. On-premise, on the other hand, promises greater control of the system, as you own the servers outright.

The benefits of cloud

Cloud services are growing in popularity among many businesses. In 2010, just 3.6 per cent of PBX shipments worldwide used hosted cloud technology, but that increased to 18 per cent by 2018, with small companies with under 50 users projected to be the biggest market for this technology[5].

As well as the benefits of reduced upfront cost, cloud users often benefit from greater flexibility and scalability. As services are secured via subscription and typically priced on a per-seat basis, it’s easy to add or remove capacity as needed, while the fact it is hosted remotely makes it highly useful for firms that need to connect multiple sites.

Why on-premises could be right for you

However, just because the cloud is growing in popularity, this doesn’t mean it’s right for everyone. One of the biggest factors in on-premise’s favour is the large amount of control and customisation available. If you have particularly unique or complex business requirements, or need to use specific services, on-premise can give you more options.

In the long run, it may also end up being a cheaper option than cloud services if you choose to buy outright, although you will have to factor in ongoing maintenance costs.

Hybrid: The best of both worlds?

It’s important to note that there is a third option available, and that’s to choose a hybrid system that includes elements of both cloud and on-premise. This can be useful in a number of situations, for example if you want to take advantage of the flexibility of cloud services, but still maintain close control over specific features, or to have an on-premise alternative if resiliency is a key concern.

Opting for a hybrid system may be a more complex process than going for a pure cloud or on-premises system, but with the right support, it can prove to be a highly cost-effective option that boosts your productivity and gives you all the capabilities you need.

  1. 10 key factors to consider when determining your path

Determining which telephony deployment model is best for you will depend on a large number of factors, however, so it’s important to research the area thoroughly before committing to a path that you could be using for many years. Here are ten key considerations you must take into account when making your choice.

Total cost of ownership

It’s important you look beyond the upfront costs when making a decision on your communications. While cloud services will usually be cheaper to set up initially than on-premise, you must consider the ongoing costs. Ask how long you expect to use the system for, for example, as this could mean ongoing monthly costs eventually overtake the higher capital expenditure. You also need to factor in costs for maintenance and support, as well as potentially replacing hardware such as handsets or even cabling infrastructure.

Expenditure model

Choosing between capital expenditure (CAPEX) and operational expenditure (OPEX) is a key factor for many firms. For those that don’t have liquidity on hand to make a major upfront investment in on-premise solutions, cloud can be an attractive option. As well as lowering upfront costs, this has the advantage of being more predictable, as typically with cloud deployments, all expenses including support and upgrades are covered under a single monthly fee, enabling you to plan your budgeting much better.

However, this method of financing may be undesirable or impractical for some businesses, in which case either an on-premise or a hybrid system will be most suitable.

Business continuity and recovery

Generally speaking, cloud has proven to be highly reliable, and most providers will offer a guarantee of a certain level of uptime, with compensation on offer should these targets be missed. But this still leaves scope for certain levels of downtime, and compensation packages as set out in SLAs may not cover the full cost of lost business or productivity. However, they are likely to have clear plans for recovery in the event of an incident and have backups in place, which you would need to build yourself with an on-premise system.

Maintenance and obsolescence

It’s always good to be planning for the future, so you should already be thinking about how you’ll go about maintaining, upgrading, and eventually migrating fully away from old and obsolete systems. This is often one of the major advantages of a cloud system, as SLAs will include services like maintenance and patching as standard, and you can rest assured that you’ll always get access to new and innovative features when they become available, whereas these would be additional expenses for on-premise tools, while businesses will have to take responsibility for their own patching programmes.


For growing firms, the subscription model offered by the cloud makes scaling up easy, as you can simply add on additional seats as required, while it’s also easy to extend these services to new locations or bring homeworkers into the fold.

Scalability may be more complex with on-premise solutions, while services that are designed for a fixed number of users may be the most cost-effective solution. However, this may not necessarily be an issue for every business. If you have a consistent and predictable need, it should be equally possible to build an on-premise solution tailored to your exact requirements.

Vendor relationships

Opting for a cloud-based solution will naturally mean handing over some control of your system to a third party, so it’s essential you take the time to find the right partner and ensure you can build a good relationship with your chosen supplier. At the same time, it’s important to consider what the future may hold – if you end up locked in to solutions provided by a single vendor, this could seriously limit your options down the line, whereas with an on-premise solution, you should be free to take a more agnostic approach.

Features and customisation

The ability to tailor a solution to the exact needs of your organisation is a major advantage of on-premise solutions, so if you have a particularly unique or complex environment, an on-premise system is more likely to meet your needs than a cloud solution, which may be a more ‘off the shelf’ solution. While you will be able to tailor a cloud service to your requirements to some extent, you may be constrained by the terms of your agreement.


Similarly, on-premise tools are likely to be a better option for business that require a high degree of control over their systems. While this means your IT team will have to take more responsibility for any changes, additions or updates, it also allows you to build a perfectly-tailored solution in much greater detail, ensuring you have a system that includes only the features and functionality you need, which can be adjusted and improved at any time.


A key factor for any PBX system will also be to ensure that your business’ connectivity infrastructure will be able to handle whichever system you choose. For example, if your offices are still connected by legacy Cat3 cabling, you may be forced to replace this with more modern solutions in order to run the latest cloud services, which could greatly add to the time and expense of a migration. Some businesses – such as hotels, for example – may still be dependent on analogue lines for their in-room phones, in which case an on-premises system may be the only suitable option.


Security should be a top concern for every aspect of a business’ IT systems nowadays, and the telephony solution is no exception. In the past, some firms have had concerns that hosted phone services may be less secure than on-premises, as the systems are out of their direct control. This should not in fact be the case, as all cloud providers offer very high levels of protection for their services, and can benefit from the economies of scale to ensure they use industry-leading defences, which may be beyond what a firm could put in place on-premises.

However, there could be compelling reasons why businesses may not want to entrust their communications security to an external provider, and if this is the case for your business, a well-planned on-premise system should be able to provide all the protection you could ask for.

4. Meeting your firm’s unique requirements

Of course, no two businesses are alike, and the conclusions you draw when evaluating each of the above factors will differ depending on your unique circumstances.

For some organisations, the cost considerations and the perceived benefits of OPEX over CAPEX, for example, might be the primary defining factor, while highly seasonal businesses may prioritise flexibility and those in a highly sensitive industry may rate control and security as their top priorities.

For example, among Arrow’s telephony customers are two different businesses with two very different sets of needs – but we were able to help each of them find the solution that was best suited to them. Here’s how.

ABP – A consolidated, cost effective cloud

Associated British Ports (ABP) manages 21 ports throughout the UK and employs 2,200 staff, so having a consolidated solution that could connect all its locations nationwide through a single system was a top priority.

The company’s existing fixed line estate was spread across multiple providers, so Arrow recommended moving all services to a single cloud-based 250 Active/Standby SIP trunk connection with Gamma, and the MiCloud Enterprise platform with MiCollab for company-wide collaboration and MiContact Centre Business to manage its contact centre.

One advantage of this approach was that ABP could retain its existing investments in Mitel handsets – saving it thousands of pounds on new hardware. It also means the firm’s IT service desk now has a single point from which to manage all activities, offering features such as the ability to record a ‘message of the day’ that can be played to anyone looking to get in touch – essential for freeing up staff in the event of a major incident. All of this is made possible with cloud technology.    

QHotels – Migrating from a legacy system

QHotels, on the other hand, had very different needs. The hospitality chain was previously using an old DECT system which had poor coverage and was expensive to maintain due to the constant churn in broken handsets, so upgrading to a more modern solution was a must.

Cloud services weren’t the best fit for this organisation, due to the legacy infrastructure it had in place. But this did not mean it had to settle for less. Instead, Arrow suggested an on-premise Private Mobile Network solution, which uses picocells instead of Wi-Fi Access Points or DECT base stations and offers all the benefits of a dedicated, on-site GSM network.

This means staff can benefit from full coverage wherever they are in the hotel using mobile devices of their choice, effectively making each employee’s mobile device an extension of the firm’s PBX system. This solution was the first of its kind in the UK and highlights how innovative on-premise strategies can still offer highly effective results in the right locations.

  1. The help you need to make the right decision

Choosing between cloud, on-premise or hybrid solutions is one of the most consequential decisions you’ll make when looking to upgrade a communications system. The path you go down will determine your costs and capabilities for years to come, so it’s vital you get it right.

Therefore, it’s highly valuable to choose an expert, independent solutions partner who can evaluate your situation without bias, talk you through the pros and cons of each option, and help you make the right decision. This is where Arrow comes in.

We can clarify questions related to the various finance models, whether you should be looking to replace your hardware and how best to connect multiple locations and home workers to your network, among many other issues. We can determine if the cloud is right for you, explain the benefits of on-premises and show you how to effectively implement a hybrid system to get the best of both worlds.

To find out more about how Arrow Business Communications can help ensure your business is making the right choice for the future of its telephony systems, get in touch today on 0330 440 4444 or email [email protected]

[1] https://financesonline.com/business-phone-systems-statistics-analysis-of-trends-data-and-market-share/

[2] https://www.about.hsbc.co.uk/-/media/uk/en/news-and-media/cmb/171108-flexible-working.pdf

[3] https://www.aviva.com/newsroom/news-releases/2019/03/one-in-four-uk-workers-have-quit-roles-for-greater-flexibility/

[4] https://www.probrand.co.uk/blog/pb/november-2018/10-mind-blowing-stats-about-remote-working

[5] https://www.yeastar.com/blog/2019-smb-trend-hosted-phone-system/

[6] https://www.gartner.com/en/newsroom/press-releases/2020-04-03-gartner-cfo-surey-reveals-74-percent-of-organizations-to-shift-some-employees-to-remotework-Permanently