This post was most recently updated on March 15, 2024.

How To Choose The Right Phone System For Your Small To Medium Sized Business in 2024

In today’s fast-paced business landscape, effective communication is vital to success. The choice between on-premise phones or cloud-hosted phones can have a huge impact on your small business. This decision can impact your company’s efficiency, scalability, and bottom line.

Small to midsize businesses (SMBs) have to find the right communication system for their unique goals and needs.

In this blog post, you will learn about the pros and cons of on-premises phones and cloud-hosted phones. That way, SMBs can make an informed decision.

How Traditional PBX Phone Systems Work

An on-premises phone system operates as an independent communication network within an organization’s premises. People also refer to them as a PBX (Private Branch Exchange) system.

This system includes physical hardware such as servers, switches, and routers. They are all strategically set up to facilitate both internal and external communication.

Within the organization, each team member has a unique internal extension number. This allows them to make and receive calls directly within the system.

For external calls, the PBX system uses predefined call routing rules to direct them to the appropriate internal extension, such as voicemail. This also includes other destinations, such as an auto-attendant menu that guides callers to different divisions or individuals.

This system also enables features like voicemail, where callers can leave messages if their calls are unanswered. PBX supports conference calling, allowing multiple participants to join a single call, which is particularly useful for virtual meetings and collaborative discussions. These systems connect to the Public Switched Telephone Network (PSTN) for traditional telephone capabilities.

These types of PBX phone systems have many features just like the ones named above and more.

Administrators have the power to control the system’s configuration, including adding new extensions, configuring call forwarding, and implementing security measures. These are all services Constructure provides with their business advanced service contracts.

On-premises phone systems offer organizations greater control over their communication channels. However, these systems necessitate the organization’s technical team to maintain the hardware and operating system.

Pros of Traditional Phone Systems

• Call Quality: On-premises systems often offer superior call quality because of their direct connection to the local network. 
• Privacy and Security: With data stored within the company’s premises, businesses have greater control over their sensitive data. On-premises systems offer a higher level of security and compliance, ideal for industries with strict regulations. 
• Control: Companies have full control over the system’s configuration, allowing for tailored solutions to meet specific needs. 
• Customization: Businesses can choose hardware and operating system components that fit their requirements.  
• Cost Predictability: The initial investment may be higher, but long-term costs are generally predictable as they primarily involve maintenance. 

Cons of PBX Phone Systems

• High Initial Costs: Setting up the infrastructure can be capital-intensive, including hardware, applications, and maintenance. 
• Limited Scalability: Expanding or upgrading the system can be complex and costly. 
• Maintenance Burden: The company’s technical team or an external provider is responsible for ongoing maintenance and updates. 
• Geographical Limitations: Company members can only access the system while on-site, potentially restricting remote work flexibility. 

How Cloud-Hosted Phone Systems Work

A cloud-hosted phone system operates via remote servers, offering scalability and flexibility. People also refer to these as cloud PBX or virtual PBX. Calls transmit through VoIP phone systems, allowing efficient communication across various devices. VoIP services simply refer to a Voice Over Internet Protocol, and it uses IP phones that plug directly into the internet.

Operated by providers, these systems feature auto-attendants, call forwarding, and integrations, relieving businesses of maintenance.

However, a stable internet connection is essential, and subscription fees apply. Cloud based phone systems streamline communication for modern businesses seeking convenient and cost-effective solutions. 

Pros of Cloud-Hosted Phone Systems

• Core Functionality: Cloud-hosted systems offer standard phone features like call management, voicemail, and call forwarding. They also offer advanced features like call recording.
• Call Mobility: Users can access the system from various devices, such as cell phones and mobile devices.
• Cost-Effectiveness: Cloud-hosted systems offer to spread the cost out over a subscription model. This eliminates the need for an initial upfront investment.
• Scalability: Adding or removing lines and features is easy and cost-efficient, making it ideal for growing SMBs. 
• Remote Work: Cloud-hosted systems enable remote work. Staff can use the system from anywhere with an internet connection, including their mobile phones.
• Automatic Updates: Service providers handle updates and maintenance, ensuring the system is up-to-date and secure. 
• Advanced Features: Cloud-hosted systems often include advanced features like video conferencing, integrations with other applications, and analytics.

Cons of Cloud-Hosted Phone Systems

• Dependence on Internet: Call quality and reliability depend on the stability of the internet connection. 
• Privacy Concerns: Storing data off-site may raise privacy and security concerns for businesses in regulated industries. 
• Subscription Costs: While the monthly subscription model reduces upfront costs, long-term expenses might accumulate. 
• Limited Control: Businesses have less control over the system’s hardware and operating system configuration. 

Choosing the Right Option for Small to Mid-sized Businesses (SMBs): 

When deciding between on-premises and cloud-hosted phones, SMBs should consider their specific needs, goals, and resources. 

On-Premises Phones Are Ideal If: 

• The business requires complete control over the system’s configuration and security. 
• Industry regulations demand on-site data storage and control. 
• A predictable long-term budget is more favorable than immediate cost savings. 

Cloud-Hosted Phones Are Suitable If: 

• Scalability and flexibility are crucial for accommodating growth. 
• Remote work is a significant part of the business model. 
• You need to minimize upfront costs and would prefer a subscription-based model.

What Is The Best Phone System For Your Business?

Choosing between on-premise or cloud-based phone systems is critical for small to medium-sized businesses. This choice shapes how your business communicates, provides customer service, and grows.

On-premises phone systems offer a traditional approach with control and security. Cloud-hosted phones provide modern agility and scalability for your business.

Ultimately, the right choice comes down to your business’s unique priorities, aspirations, and constraints. Either way, it is critical to align your communication strategy with your company’s goals.Your communication tools are a catalyst for efficiency, innovation, and success in the evolving realm of business. Let Constructure help you and be your provider for phone services.