Choosing the Right Phone System: Hosted vs On-Premises for Small Businesses

Are you a small business looking to enhance your customer communication? A reliable phone system serves as the backbone of any business’s communication and lays the foundation for memorable customer experiences. When it comes to selecting the right phone system for small business, you’re likely to encounter two primary options: 

1. Hosted phone systems
2. On-premises phone systems 

While for many businesses, selecting a hosted phone system is a no-brainer, there are some that still struggle to choose one. We are going to show you why hosted phone systems are the best phone system for small businesses. 

What is the importance of an efficient small business phone service? 

Before delving into the specifics of hosted and on-premises phone systems, you must understand the significance of having an efficient small business phone service. Customers now expect prompt and reliable communication from the businesses they engage with.  An efficient phone service enables businesses to provide excellent customer support, handle inquiries effectively, process orders efficiently, and resolve issues promptly.  

What are the best small business phone systems? 

Let’s dive into the specifics of each: 

Hosted Phone System

A hosted phone system, aka cloud based phone system, hosted PBX, or VoIP phone operates using the internet and is hosted off-site by a third-party provider. VoIP phones eliminate the need for physical hardware and are managed remotely. One of the primary roles of hosted phone systems in customer communication is to provide a reliable and efficient means of communication between businesses and customers. 

Pros of Hosted Phone System

1. Accessibility: Hosted phone systems for small businesses help them communicate with customers from anywhere with an internet connection. Whether employees are in the office, working remotely, or on the go. They can make and receive calls using one phone system, ensuring consistent communication
2. Professionalism: Hosted phone systems offer features such as auto-attendants, voicemail-to-email, and call forwarding, enhancing professionalism in customer communication. Automated greetings and call routing strategies ensure customers are greeted promptly and directed to the appropriate agent, improving customer experience
3. Scalability: Phone systems for small businesses often experience fluctuations in call volumes and staffing requirements. Hosted phone systems are highly scalable, allowing you to easily manage phone lines and features as your needs evolve. This scalability ensures that your business can adapt its communication infrastructure to meet changing customer demands without significant upfront costs. 
4. Advanced Features: Hosted phone systems come equipped with a wide range of advanced features that empower your small business to deliver exceptional customer services. Features such as call recording, call analytics, and CRM integration let you track and analyze customer interactions, identify trends, and make data-driven decisions. 
5. Reliability: Phone systems for small businesses are often hosted in secure data centers with redundant systems, providing high levels of reliability and uptime. This reliability allows you to maintain consistent communication with customers, even during unforeseen circumstances such as power outages or hardware failures. 

Cons of Hosted Phone System 

1. Dependence on Internet Connection: Hosted phone systems rely on a stable internet connection, making them susceptible to disruptions during internet outages. 
2. Security Concerns: Storing sensitive client data in the cloud raises security concerns, although reputable providers implement robust security measures. 
3. Potential for Downtime: While generally reliable, hosted phone systems for small businesses are not immune to downtime due to technical issues or maintenance activities. 

On-Premises Phone System 

An on-premises phone system, also known as a PBX (Private Branch Exchange) system, is located within the business premises and operates using physical hardware. They can comprise physical wires around the office or IP technology to connect the calling devices to their servers through the internet.  

Pros of On-Premises Phone System 

1. Control: On-premises systems offer businesses full control over hardware, software, and configuration, allowing for customization according to specific needs. 
2. Security: Data and communication remain within the organization’s premises, offering greater security and privacy compared to cloud-based systems. 
3. Reliability: On-premises systems are not dependent on internet connectivity for basic functionality, reducing the risk of downtime during internet outages. 
4. Long-term Cost Savings: While upfront costs are higher, on-premises systems may result in lower long-term costs compared to monthly subscription fees. 

Cons of On-Premises Phone System 

1. Higher Upfront Costs: On-premises phone systems for small businesses require significant upfront investment in hardware, software licenses, and installation. 
2. Maintenance and Upgrades: Small businesses are responsible for maintaining and upgrading their on-premises systems, requiring specialized IT expertise and resources. 
3. Limited Scalability: Adding new phone lines or expanding the system can be complex and expensive compared to hosted phone systems. 
4. Vulnerability to Hardware Failure: On-premises phone systems are susceptible to hardware failure and damage, necessitating backup and disaster recovery measures. 
5. Lack of Mobility: On-premises systems are typically limited to the physical location of the business premises, reducing mobility and flexibility in communication.

Which is the right phone system for your Small Business?

The choice between a hosted and on-premises phone system depends on various factors such as budget, scalability requirements, security concerns, and IT infrastructure. Companies should carefully evaluate the pros and cons of each phone system and choose the most suitable small business phone service. It ensures your communication system aligns with your business requirements. By selecting the right phone system for small business, you set yourself up for success. 

Ritwik Raj

Ritwik is a fitness enthusiast with a bachelor’s degree in computer applications. He discovered his passion for storytelling while writing articles for his fitness blog. After which, he decided to switch to full-time writing, exploring his capabilities as a professional writer. He is now practicing his skills as a senior content writer at Acefone Software pvt ltd. to bring words to life.