On-Premise vs. Cloud Based Business Phone Systems
We recently received an email from RingCentral with an attached "white paper" titled "Cloud Business Communications vs. On-Premise PBX: It’s no Contest". Being the makers of an on-premise business communications system ourselves, we were anxious to see where we fell short! The answer: Nowhere.
It turns out the title was a little misleading. They are comparing their cloud offering to legacy PBX systems, not to a modern IP-PBX with unified communication features like FacetPhone. We made many of the same arguments they make in our own blog post: "How much is Your
20th Century Phone System Technology Costing You?". So let's take a real "apples to apples" look at the differences between on-premise vs. cloud based business communication systems.
The RingCentral paper makes the case that their cloud based solution is cheaper when compared to an on-premise PBX that requires an IT staff to maintain it. I suppose if your phone system requires that, it would be pretty expensive! Certainly, some companies using FacetPhone have IT staff but it isn't to maintain FacetPhone. They can either use the FacetPhone administration interface or just ask us to do it for them. When comparing equal phone systems, the cost of support should not really be influenced at all by being on-premise or cloud based.
Phone service is usually bundled with a cloud based phone system so that it is difficult to determine how much you are paying for the phone service versus the hosted PBX service. Of course with an on-premise phone system, you bought (or are leasing) the phone system and the phone service is a completely separate expense. Cloud based systems use inexpensive SIP trunking service but an on-premise IP_PBX can too. There isn't any reason to believe that you will get your phone service significantly cheaper through a cloud based phone system.
Finally, regarding the cost, the cloud based service with a fixed monthly cost is certainly the most predictable but probably not the least expensive over the long run. There are many factors for a business to consider when deciding to "buy or rent". However, when comparing business phone systems with similar feature sets, I think that you will find the on-premise solution to be less expensive in the long run.
This is where the RingCentral paper is really misleading. There is no business communication feature that can be provided by a cloud based phone system that cannot also be provided by an on-premise system and vice-versa. The main difference between a cloud based phone system and an on-premise phone system is where the communications server is located, who owns it and how you pay for it. This has zero influence on feature sets.
For most companies, their phone system is crucial to their operation, so anything we can do to keep it running 24/7 is usually worthwhile. In the case of a cloud phone system service, it is safe to assume that they have redundant servers in a data center with redundant power and redundant sources of phone service and Internet connectivity. The weak points for a cloud phone service are the power and Internet connection at your office. If employees are already setup to work from home or some other location, then an outage at the office might not cause much disruption. If they must be in the office, then all the reduncancy of the cloud phone system does them no good.
An on-premise phone system can have redundancy as well. For most systems we highly recommend having a backup server ready to take over if the primary server has a failure. The phone server should also be on an uninterruptible power supply (UPS) so that brief power outages don't affect it. Beyond that, it depends on the situation that you are trying to prepare for. We have had some customers put their "on premise" FacetPhone server in a data center where it will have all the redundant power and communications that a cloud system would have. If enough employees are already setup to work from somewhere other than the office, this can be a good solution for the case where power is out at the office for an extended period of time. On the other hand, if everyone must work at the office, the server in the data center won't help you much. We have a customer in south Florida with a large call center. Of course, they must be concerned about extended outages due to hurricanes. They had a salesman trying to convince them move their servers to a data center. Once they realized that servers still running in a data center wouldn't help them if all their PCs and phones were cold and dark at their facility. The solution that makes sense for them is backup power generation at their facility.
As you can see, when choosing between a cloud phone system and an on-premise phone system, just about every factor other than your particular buy vs. rent decision is irrelevant!