If you’re choosing between an on-premise vs cloud phone system, you’re really deciding how much control you want to keep in your own comms room and how much you want a provider to handle for you. For some UK SMEs, an upgraded on-premise PBX still makes sense. For many others, a hosted or cloud-based system now offers better flexibility, lower risk and a smoother path to hybrid working. This guide walks through the key decision factors, gives a simple small business phone system comparison, and helps you decide which way you should lean.
The basics: what are you actually comparing?
Before you dive into cost and features, it helps to be clear about what we mean by each option.
On-premise phone system
An on-premise system usually means:
- You’ve got a physical PBX box or server on your site
- Handsets and local lines plug into that box
- You or your IT provider maintain the hardware and software
This is the traditional phone system vs VoIP picture many businesses still have in place, especially where they’ve used the same supplier for many years.
Cloud or hosted phone system
A cloud phone platform means:
- The call handling brain lives in a secure data centre, not in your office
- Handsets, softphones and apps connect over the internet
- Your provider is responsible for upgrades, resilience and capacity
This covers hosted vs on-premise phone system setups and what people often call hosted VoIP. There’s no PBX box on site, only network equipment and handsets.
Decision factor 1: Cost today and over five years
The cost of on-premise vs cloud phone system can look very different depending on whether you focus on upfront spend or ongoing value.
On-premise cost pattern
You typically see:
- Larger upfront capital spend for hardware, licences and installation
- Lower monthly fees, often line rental and support only
- Occasional extra costs for upgrades, cards, modules or expansion
This can appeal if you like to own equipment outright, but it does mean you carry the risk of that kit ageing or becoming difficult to support.
Cloud cost pattern
Cloud-based systems tend to be:
- Subscription based, per user per month
- Lower upfront cost, mostly handsets or headsets and set-up time
- Easier to scale up and down by changing licence counts
If you’re weighing business phone system upgrade options, it can help to sketch a simple five-year view of both patterns rather than only comparing first-year costs.
Leans on-premise if:
You prefer capital spend and your system is stable, with little expected change in users or sites.
Leans cloud if:
You want predictable monthly costs and expect to grow, shrink or move sites during the next few years.
Decision factor 2: Control, customisation and responsibility
A central part of the on-premise vs cloud PBX decision is how much control you want and how much responsibility you’re happy to hand over.
On-premise control
With on-premise equipment you usually have:
- Full control of the hardware and software in your building
- The ability to integrate specialised hardware for example, legacy door entry systems or analogue lines
- Responsibility for resilience, upgrades and power
This level of control can be helpful in complex environments, but it also means you must plan for failure and maintenance yourself.
Cloud control
With a hosted system, you:
- Control numbers, users, call flows and basic features through a web portal
- Don’t need to worry about server operating systems, physical cards or local power issues
- Rely on the provider for resilience and upgrades
Modern platforms give a high degree of logical control while removing the need to nurse physical equipment.
Leans on-premise if:
You’ve got specific hardware integrations on site that are hard to move and an IT team that’s comfortable owning telephony infrastructure.
Leans cloud if:
You want control over how calls are routed and handled, but don’t want to run phone servers and hardware.
Decision factor 3: Flexibility and remote work
One of the main advantages of cloud phone systems is how easily they support remote and hybrid work.
On-premise and remote work
An on-premise PBX can support remote users, but it often involves:
- VPN access or site-to-site links
- Extra configuration and security considerations
- Limited flexibility if staff are moving around regularly
It can be done well, but it’s usually more complex and relies heavily on your network design.
Cloud and remote work
A cloud phone system for small business UK users will normally offer:
- Softphone apps for laptops and mobiles
- Built-in support for users working from home or on the move
- Easier routing rules for time of day, location and team membership
If supporting a phone system for hybrid workforce use is a priority, cloud-based options are usually ahead from day one.
Real-world example:
A marketing agency with 12 staff moved to a cloud-based phone system when they adopted flexible working. Now their account managers take client calls seamlessly whether they’re in the Newcastle office, working from home, or meeting clients on site. With their old on-premise system, remote calls meant fumbling with VPN connections and call forwarding, now it just works.
Leans on-premise if:
Most users work from fixed desks, in one or two sites, and you don’t expect this to change.
Leans cloud if:
You’ve got a mix of office, home and field-based staff and want phone access to feel the same wherever they are.
Decision factor 4: Reliability and business continuity
Both on-premise and cloud solutions can be highly reliable, but they handle physical failures in different ways.
On-premise reliability
An on-premise PBX is tightly connected to your building. It usually works well as long as:
- Local power is stable
- Local network hardware is healthy
- Inbound lines into the building are working
If there’s a power cut, building issue or major local line fault, calls may be affected until that’s fixed.
Cloud reliability
In a cloud model:
- The core phone platform is in resilient data centres with backup power and multiple links
- Your handsets and apps reach that platform over internet connections
- If your site has an issue, calls can still route to mobiles, other locations or voicemail
When you consider business phone system upgrade options, it’s worth looking at how each approach behaves during a power cut, fire alarm or local outage.
Real-world example:
A professional services firm in Gateshead experienced a power outage during a January storm. Their cloud-based phone system automatically diverted calls to their staff’s mobiles and their second office. Clients got through first time, every time. With their previous on-premise system, similar outages meant a “closed for business” experience until power returned.
Leans on-premise if:
You’ve got very strong local resilience and line diversity already in place and your building is the only place where calls ever need to land.
Leans cloud if:
You want calls to be able to move quickly to mobiles, home workers or other offices if something happens at your main site.
Decision factor 5: Future-proofing and ISDN replacement
Many UK businesses are still running ISDN-based systems that are approaching end of life. If you need to replace ISDN phone system with VoIP, you’ve got a natural trigger point to decide whether to invest again on site or move to a hosted model.
Moving from PBX to cloud phone
If you’re already planning a significant upgrade, moving from PBX to cloud phone can give you:
- A cleaner path away from legacy lines and cards
- Easier integration with collaboration tools and CRMs
- The option to unify numbers and presence with solutions such as Teams calling
If you stay on-premise, you may still modernise with SIP trunks and IP handsets, but you’ll continue to own and manage more of the physical infrastructure.
Leans on-premise if:
You’ve recently invested in on-premise kit and it still has a long support life ahead, or compliance demands that certain functions remain fully on site.
Leans cloud if:
You’re planning a major change anyway and want to avoid another big hardware replacement cycle in a few years.
Decision factor 6: Experience for customers and staff
From your customers’ point of view, the phone experience matters more than the technology behind it. Both on-premise and cloud can deliver a professional experience, but ease of change can differ.
With on-premise systems, you may need engineer time or on-site visits to:
- Change IVR menus
- Add new call queues or hunt groups
- Introduce seasonal messages or routing rules
With hosted platforms, these changes are usually made in a web portal, often by internal admins without needing a visit.
For staff, pros and cons of hosted VoIP include:
- The ability to take calls on different devices
- Better integration with address books, CRMs and collaboration tools
- New features arriving through regular platform updates
If you want to experiment with new ways of working for example, blending calls and chat or routing calls to a phone system for hybrid workforce in a new department, it’s often easier to pilot on a cloud platform.
Simple decision guide: which way should you lean?
Use this as a quick small business phone system comparison for direction.
You may lean towards on-premise if:
- You’ve got a single main site and most staff work there all the time
- You’ve got very specific on-site integrations that are difficult to move
- You’ve already invested in modern on-premise kit and simply need minor changes
- You’ve got internal IT resources who are comfortable managing telephony hardware
You may lean towards cloud or hosted if:
- You’re planning to replace ISDN phone system with VoIP in the near future
- You want simpler support for hybrid and remote workers
- You prefer a subscription model and don’t want to own phone servers
- You want faster access to new features and integrations
In many cases there’s also a sensible hybrid path, where you keep some on-premise elements for specific needs, and add hosted VoIP for new sites or teams. A partner that understands both models can help you take a phased approach rather than a big-bang change.
FAQs: on-premise vs cloud phone system
1. Is a cloud phone platform always cheaper than on-premise?
Not always. Over five years, cloud often works out cost-effective for growing teams because you can adjust licences. In stable environments with little change, an on-premise system can still be competitive, especially if it’s already in place.
2. Can we keep our existing numbers if we move to cloud?
In most cases yes, numbers can be ported from your current provider to a hosted solution. Your partner should plan number porting carefully as part of the migration.
3. Is call quality better on-premise or in the cloud?
Call quality depends mainly on connectivity and configuration. Hosted systems can deliver excellent quality as long as you’ve got suitable internet connections and quality of service on your network.
4. How long does it take to move from PBX to a cloud platform?
It varies by size and complexity. Smaller businesses can often move in a matter of weeks. Larger or multi-site organisations may take longer, especially if they want a phased transition.
5. What happens if the internet goes down with a cloud-based system?
Calls can usually be diverted to mobiles, other offices or voicemail until service is restored. Many organisations combine cloud telephony with resilient connectivity so that full outages are rare.
6. Can we integrate phones with Microsoft Teams or our CRM?
Cloud-based platforms usually have an easier time integrating with tools such as Teams and common CRMs. On-premise systems may be able to integrate, but often require more bespoke work.
7. Can we start small with cloud and move more users later?
Yes. Many SMEs start with a pilot group or a single site, then extend cloud telephony as confidence grows and on-premise kit reaches the end of its life.
Not sure which route to take? Get a phone system comparison session
Choosing between on-premise vs cloud phone system options doesn’t have to be an all-or-nothing decision. The right answer depends on your sites, staff, existing kit and growth plans.
Whether you’re based in Newcastle, across the North East, or elsewhere in the UK, Unite can help you:
- Review your current system and contracts
- Map out business phone system upgrade options, including hybrid approaches
- Compare practical pros and cons for your specific environment
- Plan a low-risk move, whether that’s refreshing on-premise kit, moving from PBX to cloud phone, or a mix of both
We’re not here to push you towards the most expensive option. We’re here to help you find what actually works for your business.
Book a short phone system comparison session and we’ll help you decide whether to stay on-premise, move to the cloud, or take a phased hybrid approach that fits your business. Local expertise, honest advice, no tech jargon.