Voice Over IP (VoIP) telephones are popular options for modern businesses, and they can offer huge advantages.

For example, in one survey, businesses who had access to modern phone system features (such as with a Unified Communications solution) reported a 49% increase in productivity.

But buying a VoIP phone system can be challenging.

One critical decision that must be made is determining which is better for your business:

• A premises-based solution (in which the hardware is kept on-site in your server closet),
• Or a cloud phone system (where your phones connect through your Internet connection to a provider that maintains the equipment at an off-site “cloud” data center)

Educating yourself on the benefits and potential challenges that come with using either a premises-based or cloud phone system can help you make a good decision to ensure your business needs are met and you get the greatest value for your investment.

Hosted Overview

Hosted phone systems rely on your Internet connection to operate and typically do not require your business to purchase hardware beyond the phones. All of the physical infrastructure (servers and wiring) and the IT specialists who oversee them are offsite. With a hosted provider, you can shake these responsibilities, get IP phones, plug the phones into your Internet jacks, and manage your phone system from a web portal.

On Premise Overview

The key benefit that an on-premise phone system offers your business is maximum customizability and ongoing value. If you are a systems administrator, or have one on your team, who is an Asterisk or Elastix whiz, for example, you can take full advantage here. You will be able to add and configure as many phone applications as you like— and at no additional cost if you select an open source solution.

Some businesses also choose an on-premise system and PRIs due to their Internet connection speed, as pointed out in this Getvoip.com blog. "VoIP requires about 90Kbps for good quality...If you use VoIP while surfing the net and your connection isn’t strong enough, you will have poor sound quality and dropped calls." Keeping phone calls on the phone lines will ensure that calls are not dropped due to your staff's Internet usage patterns.