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On-premise vs Cloud: Which Phone System is Best for My Business?

January 11th, 2023 | 3 min. read

By Jordan Pioth

Man talking on phone and working on computer

If you are looking for a new phone service you may want to learn about the differences between on-premise and cloud-based phone systems.

If you do not know the difference between the two before purchasing, you may end up selecting a service that is not the best fit for your business.

Coeo has helped thousands of customers with their phone services and wants to provide you the information on the differences between on-premise and cloud phone systems.

This will help you make a better buying decision on which service is right for your organization.

By the end of this article, you will know what an on-premise phone system is, what a cloud phone system is, the differences between the two, and which one is best for your organization.

What is an on-premise phone system?

An on-premise phone system also known as a PBX, is a physical phone system that is on the premises of the customer’s location and owned by the customer itself.

Phones are available at the location of the customer and the customer is responsible for all upgrades and maintenance needed to keep up with the production of the phone system.

Features of an on-premise phone system

The main feature that an on-premise phone system has that a cloud phone system does not is customer control.


An on-premise phone system is a phone system that is set up at your company’s physical location. The data server of the phone system resides in your office.

Because of this, your IT team may know your network better than a phone service provider. This allows your company to control the phone system and personalize it to your company’s needs.

However, with the on-premise phone system, your company is responsible to manage and maintain your phone system and provide updates on your own.

Not only does this include management and maintenance of the server but also any software and hardware that is part of your on-premise phone system.

Data backups, disaster recovery, and any other issues that arise are the responsibility of your organization.

What is a cloud-based phone system?

A cloud-based phone system is based entirely on the internet. Cloud-based phone systems are delivered by a third-party phone service provider.

Most cloud phone systems are also managed by the phone service provider but in some cases, you can manage or partially manage along with your phone service provider.

This benefit allows you to have more flexibility to personalize your solution with the assistance of your managed service provider.

Features of a cloud-based phone system

There are at least two main features that a cloud-based phone system gives your company that you can’t accomplish with an on-premise service. The two features are scalability and flexibility.


Cloud-based phone systems help your organization with scalability. With traditional phone systems, it can be harder to scale up or down when adding or taking away phones because the solution doesn't use copper lines.


A cloud-based phone service provides significant flexibility for an organization.

Because a cloud-based phone system is connected to the internet, you can connect your phones from anywhere that has an internet connection.

With today’s unique and diverse work environment, whether your company works completely on-site, fully remote, or in a hybrid environment, your employees can almost always use their phones no matter where they are working from.

Which phone system is best for your organization?

Learning the differences between an on-premise and a cloud-based phone system is important. However, you may still have a difficult time deciding which phone system is best for your particular organization.

If your company needs a specific solution that is controlled internally, you may want to use an on-premise phone system.

However, your company needs to make sure there is a team or individual within your organization that has time to dedicate to managing and maintaining your phone system.

If your organization does not have a team or individual that can dedicate time to managing and maintaining your phone service, you may want to look into a cloud-based phone system.

You may not have an IT team or your IT team may have other company initiatives that they are working on. If this is the case, a cloud-based phone service might be a better fit for your organization.

Additionally, a cloud-based phone service may be a better fit for your organization if your company is growing or downsizing.

A growing company must add phones for its new employers in the same way that a company that is downsizing must eliminate unnecessary phones.

The cloud-based phone system will allow you to scale with your growing company or shrinking company by easily adding or eliminating phones.

Next steps to purchasing a phone system best fit for your organization

Now you know what an on-premise phone system is, what a cloud-based phone system is, the differences between the two, and which one is best for your organization.

This will help you make a better buying decision when it comes to picking the best phone service for your organization.

With the number of phone services on the market, choosing the right phone service for your organization is important but can also be a difficult decision to make.

Learning about the differences between phone services can help you make a better buying decision for your company.

Coeo has helped thousands of clients with their phone services. We want to provide you with information about phone services to help you make the best buying decision for your company.

If you would like to speak with our team to learn more about phone systems or ask any questions you may have you can schedule an appointment.TALK TO AN EXPERT

Now you know the differences between on-premise and cloud phone systems. Read the article below to learn about cloud communication and if it is right for your organization:

Jordan Pioth

When he's not creating content for Coeo, Jordan loves to watch sports, hang out with friends and family, and anything sneaker-related.