Hosted VoIP or IP-PBX?

How often do you “Google”?  If you’re like most, it’s probably a few times a day.  So that makes it virtually impossible to avoid voice over IP (VoIP) advertisements while browsing the Internet.  Sometimes I can’t help but think that Google is using some form of artificial intelligence in their strategic target marketing; and since I’m a VoIP specialist, they’re bombarding me with VoIP advertisements.  As if I were a photographer, I’d be getting barraged with digital camera & Photoshop ads.  I digress.  So what’s the difference between hosted VoIP and a premise-based IP-PBX; and what’s best for your company?  That’s a great question that many people are asking.

Voice over IP, which we’ll refer to as VoIP, is no longer a “future”, nice-to-have technology; it’s today’s technology that is revolutionizing how we all communicate in the “present”.  VoIP has evolved and become the de facto standard in voice and unified communications over the past few years, and there’s absolutely no reason to turn back.  Yet shockingly, we still find situations where legacy telecom vendors who haven’t updated their skills and made the transition to VoIP are recommending digital phone systems that offer some integration to VoIP; usually unreliable and in the form of a 3rd party add-on.  This is not VoIP and should not be confused with a unified VoIP solution.

So what is a VoIP solution?  There are 2 types – hosted VoIP and premise-based VoIP.  And although they are both inherently comprised of packet network technology, they are very different in terms of cost,  functionality and reliability.  To prevent a lengthy technical discussion here, we’re going to keep it light and just cover the basics.

Hosted VoIP (aka cloud-based)

1. Your phone system lives in “the cloud”.
2. You purchase special VoIP phones from your provider, and these phones reside on your local area network (LAN) so they can access the Internet.
3. Every phone requires an Internet connection to operate – for making and receiving calls, calling between extensions, checking voice mail, accessing your paging system, etc…  Without the Internet, your hosted phone becomes an expensive paperweight.
4. You pay a monthly fee per phone.  This fee ranges on average from $25.00 to $50.00 per month, per phone based on the feature / functionality that you’re paying for.  This monthly fee also includes dial tone for inbound and outbound calling, which replaces your current carrier services.
5. Someone (your VoIP provider, your IT vendor, or your IT staff) will install your new VoIP phones and test.  Remember, VoIP phones require a category 5e or 6 data cable or equivalent to operate on your network.
6. System administration and programming changes are accomplished by submitting a request to your hosted VoIP provider.

Premise-based VoIP (aka IP-PBX)

1. Your phone system resides in your office; typically in your IT Server Room, and is connected to your local area network (LAN).
2. You purchase or lease the IP-PBX from your vendor of choice.
3. Premise-based VoIP phones are connected to a separate voice LAN and do not require an Internet connection in the office.  However, if you’re installing phones in a home office for telecommuting, those remote phones will need an Internet connection.
4. There is no monthly fee per phone as hosted VoIP requires.  Feature functionality is provided via licensing in your IP-PBX voice server.  Monthly charges for your existing carrier services &/or new VoIP phone services will provide dial tone for inbound and outbound calling.
5. Your VoIP vendor-partner will provide a turnkey system installation.
6. System administration, programming changes and running reports can be done by you or by submitting a request to your IP-PBX vendor.

Keep in mind, there’s a lot more to this discussion to help you identify and acquire the right solution.  This includes needs assessment meetings, site surveys, design sessions and system demo’s.  This is why we find it so appalling when a vendor tries to “sell you something” over the phone or on their website.  Unless you’re only buying a few phones, this approach is very risky.

What concerns us most is when the “right fit” is disregarded so the potential vendor can “sell” you their one and only solution.  As a provider of both hosted VoIP and premise-based IP-PBX’s, we can tell you from experience that there are times when one solution is better than the other; or when either solution would be sufficient.  And in full disclosure, the market that we specialize in benefits 90% of the time from premise-based IP-PBX’s, and 10% from hosted VoIP.  Are we biased towards premise-based IP-PBX’s?  No, we look for the best fit in every situation.  Our experience and our market size has proven over and over that when you look at long-term cost of ownership, functionality, and reliability, a premise-based IP-PBX dominates in all 3 categories just about every time.

Every client has 2 types of needs – some that are unique to them and some that are common to many other companies.  So you have to do your due diligence up front to make sure that you’re informed and getting what’s best for you.  But you also have to cut through all the hype and align yourself with a caring & experienced vendor-partner that’s looking out for your best interest; not just their own.

There can be many challenges when it comes to hosted VoIP and premise-based IP-PBX; especially when it’s time for installation.  At IDeACOM, we’ve been deploying VoIP solutions for over 10 years and we still find new challenges to this day that we need to overcome for our clients.  So beware when someone tells you “it’s plug-n-play”.

Stay tuned next month and we’ll discuss some of the truths that VoIP vendors are stretching, and what you can do to inform and protect yourself.  In the meantime, continue the discussion by submitting your comments.  And feel free to share this post with your colleagues, or contact us for more details.