Cloud-Based vs. Premise-Based Phone Systems: Which One is Right for your Business?

phone systems
phone systems

Every business needs a way to communicate with customers and vendors, so phone systems are usually the first method of communication that comes to most owners’ minds. Obtaining phone services seems like a straightforward task, but there are different options that businesses can consider when obtaining these communication services. Business owners should be aware of these options and carefully consider each to make sure they are getting the option that best fits their business’s needs. These options are premise-based phone services or cloud-based phone services. 

Cloud-Based Phone Systems  

Cloud-based phone services use an off-site host company to manage a business’s communication needs. With just desktop phones, an internet connection, and a computer, if desired, businesses can rely on the host company to make and receive calls, store data, and manage communications. The host company is responsible for maintaining, updating, and repairing all servers, and they are in control of what features are offered and how the systems will work. Business owners who choose this option pay a monthly fee to access these services. 

Premise-Based Phone Systems  

Premise-based phone services are more traditional dial-up systems that require business owners to purchase and set up their own equipment. Service is located on the business’s property rather than through an off-site server. Business owners who choose this option will need to employ an IT department to manage all maintenance and repair of equipment and set up any extra needs the business may have, such as an automated phone menu to reach different departments or the ability to make conference calls. 

Choosing a System  

Business owners should consider certain factors when trying to determine which system is best for their needs. 


Cloud-based systems require very little up-front cost as there is little equipment that is needed, but there will be a monthly fee associated with using the services. Premise-based systems require business owners to pay for every piece of needed equipment up front as well as hire an IT team to keep the system up and running. As the equipment breaks down or becomes obsolete, business owners will incur the cost of upgrading or repairing the equipment. 

Bottom Line: Businesses that are just starting out and are not interested in hiring an IT team may find cloud-based systems to be a better choice while already established businesses may have the funds and the proper IT department to support a premise-based system. 


Business owners who choose cloud-based systems will have access to the most up-to-date equipment and services, but they will not have control over what features that are provided or how the systems will work, outside of choosing a company that speaks to their needs. Premise-based customers have control over every aspect of their telephone systems, but they are responsible for choosing and implementing each of those aspects. 

Bottom Line: Cloud-based systems are great for businesses that have reliable internet service and want to have the most up-to-date system but not necessarily customized services. Premise-based services are more suited to businesses that have specific communication needs that may not be offered through a host company. 


Cloud-based systems need very little equipment. Business owners may want to provide each workspace with a telephone, but no other equipment or space is needed when all communication needs are taken care of off-site. Premise-based systems require all necessary communication equipment to be on location and space needs to be made for an IT department who will be responsible for the system’s upkeep. 

Bottom Line: Cloud-based systems are perfect for businesses with smaller physical space. All data is stored virtually and can be accessed by phone or computer. Premise-based systems are better for businesses that have the space to not only host equipment but an extra department of employees. 

While both options are great, business owners must determine what they want and need to choose the phone service that is right for their business, not only as it is now but how the business will grow in the future. Contact us for a consultation to help you choose the right system to address all of your business communication needs. 


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