When considering a hosted VoIP solution or an in-house IP-PBX some consideration should be given to the fundamental differences of each system and the pros and cons of each.  Moving to an IP based business phone system is a good choice regardless which type of system you choose, but understanding the differences can be an important step for making the right choice and ultimately your satisfaction with your new VoIP business phone system.  With the spread  of open source Asterisk™ as the PBX software driving down costs for both hosted VoIP providers and some IP-PBX manufacturers there are significant benefits for users to get a late technology business phone system with more features at a lower cost.

What is an Internet business phone system or Hosted VoIP?

Traditionally, an Internet Business Phone System (also known as a hosted PBX or hosted VoIP) is a phone system where the provider houses most of the equipment and handles the technological needs and resources which the phone system requires to operate.  The IP phones or desk-sets usually plug into a router on premise and almost all the signaling, calls and and features are handled by the provider's IP-PBX server residing at the provider's location.  The hosted VoIP provider's service usually charges you monthly for the service and includes a package of minutes and features.

What is an IP-PBX business phone system?

An IP-PBX business phone system is like a traditional PBX residing in an on-premise location (usually a phone closet/computer equipment room), but with later technology using IP routing.  Signaling takes place from the IP phone to the PBX server over your LAN.  Calls can go out through a traditional Bell like company (PSTN) they you may have had for years or over the Internet (VoIP) or a combination of both.  These traditional connections can be regular copper lines or a T1 with a PRI circuit.  The IP-PBX is purchased (and possible installed) from a telecom equipment company and connects up to providers who handle your calls (AT&T, Verizon, Nuvox, etc.).

Understanding the fundamental differences between hosted VoIP and an IP-PBX will help in understanding the benefits and limitations of each business phone system. 

Hosted VoIP vs an IP-PBX.

 

Let's compare costs.

Purchasing an IP-PBX phone system usually consists of buying hardware including a server incorporating the correct interface cards needed to connect to your telephone company and IP phones.  For hosted VoIP the only hardware usually needed are the IP phones, although in many cases a router may additionally be needed, specifically one that is good for VoIP.  A summary of the positives and negatives for comparing the costs for the two are:

Hosted VoIP

• Lower initial equipment cost and lower setup cost.
• Lower to no maintenance costs.
• Higher potential on-going monthly service provider's cost.

Asterisk IP-PBX

• Higher initial equipment cost and higher setup cost.
• Higher long term maintenance costs.
• Lower potential on-going monthly cost and no risk of monthly user fee increases.

 

Initial outlays can be identical for IP phones (i.e. 12 Polycom 550 SoundPoint IP phones could be either for an IP-PBX in house system or for a hosted VoIP solution), but other equipment such as the IP-PBX server with PBX software and/or routers can be specific for the service.  A few thousand for a server with software and cards is typical.  On-going maintenance of the server with hosted VoIP will rest with the provider, while if purchasing an IP-PBX then after an initial time period will be a cost burdened by the user.

Costs to expand.

Adding additional phones (users) to an IP-PBX can be as simple as adding another IP phone, but with hosted VoIP you will need to add both the cost of the hardware (IP phone) and add to your service plan, which will increase your monthly cost.  Both can be easy to do.  An Asterisk based IP-PBX will have an administrators GUI interface where you can create another extension. 

Let's compare other important considerations.

With any system whether it will be a hosted VoIP service or an in house IP-PBX the feature set is critical for your satisfaction.  If it won't do what you need it to do, then look at another system.  Given that caveat, there are some more important considerations.  Here are some pros and cons:

Hosted VoIP Positives

• A provider has many more resources than a user.  So new feature sets are a possibility.  (Yet may come only for an additional charge.)
• Implementation of new features will be handled entirely by the provider.
• Ease and quickness of picking and canceling virtual numbers.
• Ease of moving your phone system.  Plug in the IP phone to a broadband connection and your back to extension dialing, making and receiving calls.
• Hosted providers usually have edge border controllers that can better navigate NAT allowing easier implementation of remote users.

Hosted VoIP Negatives

• Connections (signaling) and voice quality are directly related to your Internet connection.
• Loss of Internet will result in loss of phone service.  (Although calls will still go to voice mail.)
• Flexibility and/or customization and new future features may be slow or non existent for some providers.  Hosted VoIP providers are unlikely to change or adapt services for single users.
• Control is in the hands of your provider.
• Fee increases can be charged and/or cancellations fees imposed.
• Your provider's stability, both operational and financial. 

Premise based IP-PBX Positives

• Having a IP-PBX gives you complete control* allowing you to adjust, create, delete users, extensions and turn on or off feature sets.
• Possibility of adding new open source feature sets without license fees (with Asterisk systems) as they are developed by the open source community.
• No need to change your current carrier.
• Ability to add VoIP trunks for savings on calling.
• Ownership of server reduces costs over a period of time.

Premise based IP-PBX Negatives

• You have an IP-PBX and should have someone who can manage it.
• Expansions can increase complexity.
• Your IP-PBX manufacturer goes out of business and your left without the ability to manage the system at its root.