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On-Premises Versus Hosted VoIP PBX Services

There are two main ways of using VoIP PBX telephony for your business. Both provide the features and functions that businesses need; features such as multiple extensions, call queues, call conferencing, call divert, music-on-hold etc. but in different ways:

  1. In a Hosted PBX service you plug VoIP telephones directly into your internal network (your LAN) or internet router. The clever PBX services are then provided virtually via an enterprise scale virtual PBX in distant data centres - 'the cloud'.
  2. On-Premises PBXs are physical VoIP PBX 'boxes' (a PC or specialised server) which sit in your cupboard at the back of the office. The software running on these boxes provide the PBX services. All your phones then connect to this box. Just like hosted PBXs they must then be connected to your LAN and internet.

These two methods have various advantages and disadvantages but whichever route you go, VoIP will save you money and give you more features and flexibility than traditional telephone systems.

Heads Up

At this point we need to declare an interest. Voipfone's business is built around our own virtual, cloud-based, hosted PBX. We are a telephone company and developer and have built an extremely secure and reliable telephone system and network.

We therefore believe that a hosted service is going to be the best solution for most small businesses and we set out our reasons below. Having said that, Voipfone supports both types of service, so if the on-premises PBX is best for your particular circumstances we can still help.

The Hosted VoIP Service

There are several immediate and obvious advantages of the hosted service solution over the on-premises box:

These are the usual reasons you will find as you research the subject, but there are several more which are equally, if not more important:

Customer Service

Service is vitally important. VoIP PBXs are necessarily highly sophisticated systems which are rarely anything less than difficult to set-up correctly. Your ability to use the system to its best advantage depends on how good customer service is at supporting you. At Voipfone we provide free support anytime by phone, email or live chat. We'll spend as long as it takes getting you working and keeping it that way. This service is always a charged-for product for 'on-premises' PBXs, often requiring a site visit.

The telephony industry is reliably bad at customer service, regularly topping the index of worst performers across all industries. Voipfone is an exception; we are the only company to have won the Institute of Customer Services Award for customer satisfaction.

Flexibility - Use Anywhere

One of the wonderful things about hosted VoIP is that it's natively non-premises dependent. This means that you can plug a hosted VoIP telephone into any internet connection anywhere in the world and it will work exactly as if you were in your home or office. This isn't just a party trick, it's really useful. It means that you can take your office phone home or on holiday and it will work fully with all its PBX features just as it does in the office. An inbound call will be sent to the phone wherever it is - AT NO EXTRA COST. You can make calls at the same call prices as in your office. It means that you can work from anywhere, you can even build a business like ours where all of our 40+ employees work from home - we have no offices and therefore no accommodation costs. Not only that, all calls between all Voipfone customers are free - no matter where they are.

None of this is possible with an on-premise PBX because, like the name says, it's restricted to the premises it's in.


Security is VoIP's dirty secret. Here's what Comms Council UK, the VoIP industry's trade association - has to say about on-premises VoIP and security:

"... you need to be aware that whilst it's relatively easy to set up a PBX, keeping it safe is not at all easy.

Because your PBX can make almost unlimited chargeable calls very quickly, it is a high worth target for professional hackers. All VoIP PBXs are found and scanned for weaknesses within hours of connecting to the internet and continuously thereafter.

So, unless you, or your engineer, fully understand what you're doing and are prepared to keep your PBX permanently maintained, you are putting yourself at financial risk and you should go no further.

Instead, think about using a hosted VoIP or fully managed service from an established Comms Council UK member where any risk is normally borne by them, not by you."

Comms Council UK

If you do go down the on-premises road, please be sure to use a suitably qualified installer and take out a regular maintenance contract to ensure your service is safe, the risk is very real and very large.

"A small UK business ended up paying over £50,000 in call charges as a result of their office telephone system being hacked. The staff closed business one Friday afternoon for a long bank holiday weekend, switching their office telephone system to 'automatic attendant'.

After the long weekend the staff opened the office, operated business as normal. At the end of the month the postman delivered the mail including the latest telephone bill:

£50,107.35 including VAT

On further inspection it appeared that £45,356.90 of calls were made to International destinations, which began over the bank holiday and had continued every evening since that time. The business telephone system had been 'hacked' which allowed fraudsters to route telephone calls through their system to high rate destinations."

"The Little Book of Big Scams", Metropolitan Police (2014:47)

Anybody Can Do It

It used to be the case that PBX boxes where proprietary, that is, tied to one manufacturer eg Mitel, Panasonic, Cisco. But with the advent of VoIP, most PBXs used by small business use variants of a free development called Asterisk. Popular versions of this shareware are 3CX, Elastix, FreePBX and Trixbox.

A major problem with this is that it's now possible to download free PBX software, plonk it on a aging PC and Bob's your cross-dressing aunty, you have a PBX. Sadly, without the know-how, that box will be hacked within a few hours. A small industry has developed made up of local IT firms installing such devices which may be set-up and correctly protected at first but quickly get out of date or changed by users. This practice regularly ends in tears.

As a result, the hardware PBX market has changed very quickly. A large ecosystem of PBX installers have suddenly been created from the totally DIY - business people having a crack at it themselves; IT companies that traditionally performed PC and network maintenance for small businesses turned their hand to it; traditional telecom retailers switched over to VoIP when they realised that they needn't be tied to a manufacturer. Under these conditions not only can installation and maintenance be of very variable quality - with the security problems this brings - but often the Service Provider that the PBX box is plugged into is totally unknown to the user and can also be of varying quality and reliability.

Service Provision

The Service Provider is the telephone company that the PBX sends and receives its calls to and from. Vitally, it hosts your telephone numbers. Obviously the quality of this provider greatly affects the quality of the service that the PBX user will get - and also the security of the PBX itself. It's extremely important that you know the qualifications and experience not only of the installer and maintainer of your PBX but also of the Service Provider you are plugged into. This is because your Service Provider is your last defense against fraud; their operating standards and fraud prevention systems guard against excessive bills. Or not.

How Do You Know Your Service Provider Is Any Good?

Obviously you will ask for recommendations - word-of-mouth is a good start. But often your installer will just lumber you with the one he gets the best back-hander from. This needs to be an important factor in your selection of a Service Provider; is your installer truly independent and working in your best interests or is he simply getting a percentage of your telecoms spend? (Voipfone does not pay commission or 'white label' its services to third parties.)

You should also check that your Service Provider is a member of the trade organisation, Comms Council UK. This provides a basic level of protection for your telephone numbers and the reassurance that you can at least send any unresolved complaints to an independent arbitrator.

Needless to say, Voipfone is a founder member of Comms Council UK and was the first to hold its quality mark. We have also won several industry awards and hold the Queen's Award for Enterprise. You can be sure that you are in good hands.

Here at Voipfone we have spent many years learning the hard way how to protect your services. We have multiple levels of security, which for obvious reasons we can't discuss here, but which give a high level of protection to all our customers - both hosted and on-premises boxes.

No matter which service you attach to our network we can protect you, but hosted VoIP services are our responsibility - the installation and maintenance of your on-premises PBX is yours.

Scalability & Flexibility

If you're a new business you may only need one telephone, but as you grow you'll need to add more. There's no point buying an expensive PBX box for one or two people, so for very small companies it's rarely sensible to use on-premise PBXs.

You also don't want to buy an expensive PBX with limited users which you'll grow out of quickly and then have to replace.

Hosted systems don't have these problems. There's no practical limit to the number of extensions you can add; nor how few. You can buy them one by one if you need to. You can also reduce them without penalty if you need to too.

Business Continuity & Disaster Recovery

If your office burns down, gets flooded or your PBX simply breaks, you could be out of business. Recreating your PBX system somewhere else or even in your own office is expensive and takes time. But with hosted VoIP it's a trivial job because your entire system is held in our (duplicated) data centres - we'll send you new phones by the next day and you plug them in anywhere you like. (Or use our free softphone while you sort yourselves out.)

Disaster Recovery is a whole area in itself, which we discuss at length on our website.


No matter which system you choose it can't work if someone puts a JCB's bucket through your telephone line or more likely, your broadband goes down. What you can do is discussed in Disaster Recovery above but the immediate effect on your on-premises PBX is that everything external will stop working.

However, with a Voipfone's system we detect that your phones are no longer registering to our site within 60 seconds no matter what the reason and your inbound calls are immediately redirected to whatever numbers you've told us - usually mobiles and off-site landlines.

Our Network

Our Network

Although anyone can use our service, we run a network particularly for small business users and you have told us that reliability of service is your number one requirement - we are aware how much you rely on us; as we do ourselves. You are also concerned about call quality because for business use, call quality must be excellent at all times.

Consequently we have built a very robust network. Our up time since 2007, as measured independently by Monitor Us, has been 99.99%.

Read More

Disadvantages of Hosted VoIP

It's not easy to find serious disadvantages with a hosted VoIP solution for most small business - it's a flexible and cost effective solution to modern business telephony. It gives small businesses more powerful telephony than was available to even large corporations 10 years ago - and very cheaply too.

The major disadvantage quoted by most reviewers is the charge per user which is normally applied by hosted VoIP companies.

For Voipfone this is extremely small - £1 per user (ie per PBX seat) per month. It does mean though that if you have a very large number of extensions, the on-going costs mount linearly. This is why very large companies tend to go down the 'box-on-the-wall' route. This incremental cost must be set-off against the capital and installation costs of an on-premises box and its on-going maintenance of course and crucially, the cost of the connection to the internet needs to be factored in too.

This connection is called the SIP (Session Initiation Protocol) trunk.

SIP Trunks

SIP Trunks are the modern equivalent of telephone lines. It used to be the case that one call required one line, so that to have ten simultaneous calls ten expensive exchange line rentals were necessary. VoIP changes all that; it's now theoretically possible to carry unlimited calls down a single internet connection - all you need is enough bandwidth.

In general, a modern internet connection can deal with at least 30 or 40 high quality calls simultaneous which is normally enough to support 100+ telephones (because all the telephones are not in use at the same time.)

In order to combat this threat to the lost revenue associated with the loss of line rentals, telephone companies often limit the number of calls that can be made by selling 'channels' on their VoIP service. So you may find yourself having to pay significant monthly sums just to send your calls to the internet from your on-premises PBX.

Voipfone doesn't do this; we sell an extension for £1.50 per month which is in effect a single SIP trunk. So you get the PBX services AND the SIP trunk for the single £1.50 charge. (And by-the-way, we don't use the internet to deliver your calls; it's a long story but with Voipfone, we connect directly to other providers such as BT, so your calls are not at the vagaries of the public internet.)

If you need to discuss this with someone, give us a call on 0345 868 5555 or email support@voipfone.co.uk. Voipfone does not employ sales people, our technical support team will give you impartial, practical advice - on everything except who the best UK Service Provider is...

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