Location-based vs. Hosted VoIP PBX?

Hosted VoIP solutions are becoming much more popular among small and large businesses. The following four benefits are what make hosted VoIP solutions increasingly more popular:

  1. No requirement for the higher upfront investments
  2. Flexibility to add, change or delete users on the fly
  3. No need for maintenance contracts or dedicated IT staff
  4. Ability to have remote extensions for your telecomuters

Opting for a hosted IP PBX may be the right decision for some companies, but there are also several limitations that buyers need to know about:

  • In a hosted system, the “brain” of the system lives in a network cloud and is dependent on the last mile broadband connection to the customer location for signaling, feature operation, unified communications and related features. This impacts the availability and quality of the service. Even service providers that control the underlying infrastructure, such as top tier provider like AT&T, at best can deliver five-nines service quality, which is much more inferior in comparison to the location-based solutions.
  • In most cases, hosted solutions are more expensive than buying and maintaining a location-based PBX. Even at the lower price of $30 dollars per month per hosted VoIP line, over a period of seven years the Net Present Value (NPV) of a hosted solution is twice that of a location-based PBX – including expenses to manage the PBX by a third party. When doing an analysis, if a business is predicted to exist more than three to five years, buying and maintaining a location-based PBX is more economical and attractive.
  • Developing a custom application which has specific system behavior (for example, CRM integration) can be very challenging with a hosted PBX solution. Hosted service providers usually will not agree to support custom applications developed because the risk of introducing problems to their network is too high. One single problem may impact thousands of its customers at the same time.

Despite the limitations, most businesses can still benefit from hosted VoIP solutions. These businesses usually fall into one or several of the following categories:

  • Very quick set-up or the need to scale operations quickly
  • Having to deal with frequently moving a system, plus adds or changes
  • Multiple locations with only a few employees per location
  • Avoiding the need to manage a PBX system

As telephony technologies evolve, hosted VoIP limitations gradually disappear and price becomes more attractive, hosted VoIP solutions will gain traction and more popularity among businesses of all sizes.

If your business is at a crossroad between hosted VoIP and location-based solutions it would be best to make a decision on a per application basis.

The best approach to deploying a VoIP infrastructure is perhaps a hybrid, with a combination of location-based and hosted applications. For companies that occasionally run audio and web conferencing, it would be more economical and efficient to subscribe to cloud-based conferencing services, while maintaining a location-based PBX.  If the agility of deployment, pay-as-you-go, and the ability to stay focused on the core business is critical, hosted solutions would be the right choice. And in some situations, a traditional location-based solution would be a better option which provides higher service availability, flexible customization and better long term economics.

On hold messaging can be used with any phone system solution, which always improves communication with your customers by keeping them informed of changes in your business such as new products/services, different hours, new technologies, etc. Messages on hold can be a critical component in the marketing arsenal of small and Fortune 500 companies alike.