Cloud PBX vs on-premise PBX: differences, running costs and when each makes sense

Cloud PBX and on-premise PBX: what they are

An on-premise PBX is a phone system that physically sits in your building: a cabinet or a server in a comms room, wired to your phone lines and desk phones. It might be an older analogue or ISDN system, or an IP PBX running on a server you own. Either way, the brain of the system lives with you, and someone has to install it, patch it and fix it when it breaks.

A cloud PBX, also called a hosted PBX or virtual phone system, does the same job but runs on a provider’s servers. All you keep in the office are the endpoints: IP desk phones, softphones on computers, or a phone that runs straight in the web browser. Routing rules, such as who answers, at what time and what callers hear while they wait, are managed from a web portal you can reach from anywhere.

The core features are much the same on both sides: extensions, transfers, call queues, IVR menus, business hours and call recording. What differs is where the system lives, who is responsible for it and how you pay. If you want to understand how internet telephony works first, start with What is a VoIP phone system.

The main differences at a glance

Putting the two options side by side makes the trade-offs easier to see. The table focuses on what matters day to day rather than on spec sheets.

Running costs: what to compare

Cost is where most comparisons go wrong, because people look at the entry price rather than the total cost over the life of the system. An on-premise PBX tends to have a high upfront cost followed by unpredictable bills; a cloud PBX usually has a low upfront cost and more predictable recurring charges. Neither is automatically cheaper: it depends on how many people use the phones, how often you change the setup and how long you plan to keep it.

For a fair comparison, list every cost item over the same period, say five years, and get a written quote for each.

• Hardware and licences: the PBX itself, line cards, licences for extensions and add-on features. With a cloud PBX this usually disappears or turns into a subscription.
• Handsets and headsets: needed either way, but a cloud system lets you use softphones and browser phones, so you may buy fewer desk phones.
• Installation and setup: engineer time to get the system running and build menus, queues and schedules.
• Maintenance and support: a support contract, call-out fees, replacement parts and security updates.
• Changes over time: every new extension, schedule or greeting that needs an outside engineer costs something, even if it is small.
• Call charges: what you pay to call landlines, mobiles and international numbers, which depends on your carrier.
• Power, space and resilience: electricity, a UPS and cooling for the comms room if the hardware is on site.
• Connectivity: a decent internet connection is essential for a cloud PBX and, these days, for most on-premise IP systems too.

Subscription, pay as you go or prepaid credit: how cloud PBXs are billed

Cloud phone systems are billed in different ways. Some providers charge a fixed monthly fee per user with a bundle of minutes; others charge purely for usage; many mix a base fee with usage-based extras. Before you sign, check exactly what the subscription covers and what is billed separately, such as call recording, SMS or automated voice agents.

Usage-based billing works well when your call volume swings through the year, for example in a seasonal business or a contact centre that runs campaigns. A flat per-user fee is easier when headcount and call volume are stable and you want the same bill every month.

Robottino, for instance, uses prepaid credit: you top up by card, PayPal or bank transfer and each service is deducted from the balance according to your price list, which you can check item by item. Every charge shows up in your transactions, and an email warns you when the balance drops below a threshold you set.

Maintenance, updates and security

An on-premise PBX is a computer, and like any computer it needs updating. If it is reachable from the internet, for instance so remote staff can connect, security patches are not optional: a neglected PBX can be abused by others to make calls at your expense. Keeping it in shape is your job, or your installer’s if you have a support contract.

With a cloud PBX, server maintenance, software updates and platform security are the provider’s job. Your side is about people: strong passwords, sensible permissions and correctly configured phones. It is also worth asking where the servers are located and how data is handled, which matters most if you record calls (see Call recording and GDPR).

Both options raise the question of resilience. On-site hardware can fail and stay down until a replacement part arrives; a cloud service depends on your internet connection. For the first, a support contract with clear response times helps; for the second, a backup connection or the ability to divert calls to mobiles.

Numbers, lines and phones: what you can keep

Businesses moving from an on-premise system to the cloud often ask whether they have to change numbers or throw away their phones. Usually not. Numbers can be ported to a VoIP carrier, or, if you already have SIP trunks, connected directly to the new system.

In Robottino each phone number is connected with your carrier’s SIP details: host, port, username and password. The number stays yours and your carrier’s, while the cloud PBX decides where each call goes according to the rules you set in the portal.

On the handset side, cloud PBXs use SIP, the same protocol as most IP phones. Analogue phones can keep working through an adapter, while the proprietary handsets of some traditional systems often will not work elsewhere. Many IP desk phones support auto-provisioning: you enter one address in the phone and it downloads its own configuration.

• IP desk phones: for people who spend hours on calls and prefer a real handset.
• Softphones: an app on the computer or mobile that acts as a phone, handy for people on the move.
• Browser phone: nothing to install, just a headset. More in Making calls from the browser with WebRTC.

Remote work, multiple sites and growth

This is where the cloud shows the clearest difference. With an on-premise PBX, a colleague working from home needs external access that must be configured and secured; a second office needs its own hardware or a link back to head office. Each new extension may need another licence, and once the box is full you have to replace it.

With a cloud PBX, someone working from home uses the same extension as in the office, with the same queues and rules. Several offices become one phone system, and transfers between colleagues work as if they sat in the same room. Adding a new agent means creating them in the portal and handing over their login.

In Robottino agents work from the agent panel, which opens in the browser with a built-in phone and shows who is calling, which queue the call came from and what the caller has already said. Anyone who prefers can use a softphone or an IP phone with the same SIP details: the last device to register takes over from the previous one.

Data, recordings and reports: who looks after them

With an on-premise PBX, call logs and recordings live on your hardware or a server next to it. That gives you direct control, but also makes you responsible for storing, protecting and deleting them when they are no longer needed. A failed disk with no copy means losing your history.

With a cloud PBX the data sits with the provider. Before choosing, check which reports are available, whether you can export them, how long recordings are kept and whether you can keep a copy of your own. This is also your protection against lock-in: if data exports easily, switching provider later is simpler.

In Robottino call reports export to CSV, Excel or PDF, recording retention is set in days, and backups copy the call log and recordings daily, weekly or monthly to your own FTP or SFTP server or an S3 bucket. A backup is a copy: nothing is deleted from the platform.

When a cloud PBX makes sense, and when on-premise still does

There is no single right answer. It depends on how you work today and how you expect to work over the next few years. These typical situations are a starting point for your own assessment.

• Go cloud if you have home workers or people on the road, several sites, a headcount that changes through the year, or nobody in house to look after a phone system.
• Go cloud if you change hours, greetings and routing often and want to do it yourself without waiting for an engineer.
• On-premise may still make sense if your site’s internet connection is unreliable and there is no alternative, or if internal calls between departments make up most of your traffic.
• Keeping an on-premise PBX can make sense if you bought it recently, it works well and your support contract runs for a few more years: plan the move for the end of its life.
• Take extra care if internal or industry rules dictate where data must be stored: ask the cloud provider where its servers are and get it in writing.

How to move from on-premise to cloud without downtime

Plan the switchover so customers are never left unanswered. A practical order looks like this.

1. Take stock

   List today’s numbers, extensions, queues, IVR menus, schedules and forwards. You will often find rules nobody remembered.

2. Check your connection

   Make sure your bandwidth and network stability can handle the number of simultaneous calls you get at peak times.

3. Rebuild the rules in the new system

   Set up business hours and holidays, queues and menus. There is a dedicated guide on business hours and holidays.

4. Test every path

   Call each number and route before moving live traffic, including out of hours.

5. Move the numbers

   Start number porting or connect your existing SIP trunks at a quiet time.

6. Train your team

   Show people how to answer, transfer and go on break. Half an hour of practice prevents a lot of missed calls in the first week.

Frequently asked questions