By admin Published on: May 11, 2022 Updated on: IP PBX

Cloud PBX vs On-Premise PBX Systems for Better CX: Check out these Factors Before You Decide

The business communication demands are evolving as most companies are shifting towards remote and hybrid work models. PBX systems have always been the solution to this emerging challenge. But the dilemma and debate over on-premise PBX systems and Hosted PBX System have been consistent over years. While both have their pros and cons, businesses must evaluate them in light of their requirement to choose the ideal communication solution for their business.

Cloud-based PBX has come into the limelight today. However, it is undeniable that on-premise PBX provides a greater advantage to specific industries. Before deciding on the most suitable solution for your business, let’s dive into a comparative study.

On-Premise PBX

For on-premise PBX systems, business needs to set up hardware installation at a physical location. This traditional phone system makes inbound and outbound calls through a dedicated network over the business’ call server. You need to recruit an in-house IT team for the management and maintenance. Also, you need to purchase the hardware and server equipment.

On-premise PBX can be routed through traditional phone lines or Session Initiation Protocol or SIP trunking.


  • Greater control over the system reduces downtime
  • Lower operational cost in the long run when coupled with SIP trunking
  • Creates a backup channel with VoIP integration to avoid disruption during internet outages


  • High initial installation charges
  • Lower flexibility and higher cost to adopt new features
  • Higher maintenance costs owing to full-time IT teams
  • Limitation to switching vendors due to lock-in contract terms
  • Limited or lack of capabilities to provide call insights

Cloud-based PBX

A cloud IP PBX is the latest business communication solution that falls under the category of Software-as-a-Service (Saas). Hosted PBX System use internet networks to offer VoIP services. The entire PBX system is managed and maintained by a third-party vendor. These vendors offer unique sets of features such as call routing, audio conferencing, real-time analytics, etc. 

Hosted IPPBX software provides a virtual communication channel along with robust features. It also facilitates better CX for customers by ensuring zero latency with real-time customer engagement capabilities over the cloud. 


  • Flexible scalability ensures cost-effectiveness
  • Saves cost as the maintenance and support are undertaken by a third-party service provider
  • Advanced features to ensure seamless omnichannel communication
  • No expenses on infrastructure and in-house team


  • Depending on the internet connection; Internet interruption may disrupt the work.
  • Limited control over the service
  • Expenses on staff training 

Factors that You Must Consider Before Choosing

Most companies are shifting towards Hosted PBX System. However, you should not go with the herd but decide by assessing your business needs. When deciding on cloud-based PBX vs on-premise PBX, there are a few points that you must keep in your mind. 

  • Communication Requirement of Your Business: Every business has its own communication needs. For instance, if your business has seasonal spikes, the communication demands vary unpredictably. If you have adopted on-premise PBX in such a case, you may have to incur more charges due to the lack of flexibility to scale down or up as per your business needs. On the other hand, cloud PBX solution provides you with the flexibility to modulate your telephony capacity along with its pay-as-you-go payment model. Another aspect that falls under communication needs is the privacy of customer data. When a business is subjected to stringent industry standards or government regulations, the security of customer data is of utmost importance. In such a case, choosing on-premise PBX over hosted PBX is a wise decision as it offers a private database. Other areas that can help you in evaluating business communication needs are the requirement of specific features, integration requirements, control over service, and business model (on-premise, remote or hybrid). Cloud PBX solutions are a better choice when it comes to meeting business demands for remote and hybrid work models.
  • Size of Business: Usually, the budget for PBX solutions is proportional to the business size. A large organization can easily set up an on-premise PBX system to ensure long-term cost-benefit. However, for a small or medium-sized business, this option is not viable. A small business can fetch gains only when it chooses cloud IP PBXA medium-sized business can either choose between cloud-based PBX and on-premise PBX. If the mid-sized business has trained IT professionals, it is profitable to choose on-premise PBX. However, if the business demands customized communication capabilities or frequent feature updates, hosted PBX is the ideal solution.
  • Availability of resources: On-premise PBX solution requires in-house IT teams for support and maintenance. Most businesses do not have the IT resource to adapt existing PBX with SIP trunking or set up a new on-premise PBX. However, if your business restricts you from adapting the remote work model, recruiting a dedicated team of IT professionals for on-premise PBX can be a good choice. On the other hand, hosted PBX eliminates the dependency on your business resources. It’s easily configurable and can be activated from anywhere. Hosted IP PBX software usually has a user-friendly dashboard that facilitates employees to easily understand and perform the tasks.
  • Nature of revenue model: Business communication serves as a powerful tool when it comes to generating revenue by providing quality CX. Most businesses are relying on data-driven insights to provide essential information for equipping their agents to improve conversion rates by enhancing CX metrics. If the revenue model is sales-driven, Hosted PBX System is the best choice. It leverages data to drive conversation insights and identify best practices of high-performing agents. This information is distributed through internal communication to enhance agent productivity and improve customer experience. On the other hand, when a business has a product-led revenue model, on-premise PBX provides greater engagement. It provides essential call analytics that helps in improving your engagement practices. However, this is only profitable if your business is in the product testing phase.  A product-led revenue business model that already has a market-fit product can utilize a cloud IP PBX system. For instance, it can use the speech analytics feature to generate reports and derive actionable insights to improve conversion rates.
  • Employee experience: Happy and motivated employees are the backbone of a successful business. If you have unhappy employees, it will surely impact your customer experience. Therefore, when you are in the dilemma of hosted PBX vs on-premise PBX, it is essential to assess employee experience. What would be an easier path for the employees? Cloud-based PBX helps in integrating CRM platforms, thereby providing swift adaptability for employees.
  • Future demands of Business: The business needs are evolving to meet the ever-changing customer expectations. Agility has become an essential factor for the sustainability of the business soon. Therefore, it is essential to evaluate the future business needs while deciding on an on-premise PBX vs Hosted PBX System. In the current business scenario, the cloud PBX solution provides the flexibility, scalability, and agility to adapt to the evolving customer needs to provide premium CX.

Customer experience has become a top priority for businesses to rank up in this competitive age. Choosing the right PBX phone system for business is essential to providing the best customer service experience. Hodusoft PBX is an IP PBX-based system that has helped multiple brands to enhance their CX metrics through seamless communication and AI-led analytics. The blog covers all the important factors differentiating on-premise PBX and hosted IP PBX solutions. Hope this blog helps you in making an informed decision on business communication. For more details about Hosted IPPBX Software, call us at +1-707-708-4638 or email on: [email protected] 

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