Buy a PBX or Host in the Cloud?

Buy a PBX or Host in the Cloud?


What do you do when your business needs a phone system? Whether you are a small company that’s growing every month with more telephone lines strewn on the floor or an established business that is having problems with its current phone system, there comes a point when you need to think about what to do next.

The options of office phone systems available today have gotten even wider with the introduction of cloud-hosted PBX systems alongside the traditional on-site PBX systems. Knowing what to look for enables you to decide which solution works for you and your business. The following are some practical questions you need to ask yourself when considering a cloud hosted or on-site PBX system:

What is the cost of ownership?

Traditional On-site PBX: There is the capital outlay, which is not just the price the system, but also any installation costs. If you have multiple branches, there would be PBX required for each of your branches, not just your head office. Being the owner of the system also means there is on-going maintenance costs which depending on the complexity of the PBX can be expensive if only a select group of experts can maintain it. Ongoing maintenance costs occur it If the system as any problems, if you need to change any configurations, or if you need any upgrades.

Cloud-Hosted PBX: A cloud-hosted PBX service is a ‘software as a service’ which do not take the risks and costs of ownership of – these remain with the service provider who manages and maintains the PBX in the private data centre. The main on-site equipment required are VoIP enabled phones to connect to the hosted PBX over your internet line. Your internet connection may need to improve to cater for greater usage and a back-up access point like a 3G Router should your primary internet line go down is essential. The capital outlay would still be significantly less.

What is the cost of phone calls?

Traditional On-site PBX: You need a PBX to make calls, so these rates should be made clear upfront. Look carefully at the details. Is there a connection fee? Is there minimum amount payable on each call? Do you have to buy a bundle of minutes to get access to the lower rates and if you don’t use the bundle by the end of month, do you loose it? The telecoms regulations in South Africa are lowering the rates to call mobile phones every March for the next 2 years – will you get the benefit of those rate drops?

Cloud-Hosted PBX: VoIP is used to make calls in a hosted PBX, giving you access to highly competitive calling rates. VoIP calling rates are in general more aggressive than the rates from the incumbent operators. VoIP rates are also now more competitive than the rates you used to get on Least Cost Routing devices (LCR), which were the boxes with SIM cards to make calls to mobile phones.

How does the system scale as my business grows?

Traditional On-site PBX: There is a limit to the number of extensions the PBX can support. When your company grows beyond a certain size, like 10 or 20 or 50, you would need to buy a totally new PBX or pay for an upgrade. But you also need to think about scale if you have multiple branches. An on-site PBX is exactly that – its ‘on-site’ so everywhere you have a ‘site’ you will need a PBX system if you add a new office or branch too which incurs additional capital outlay.

Cloud-Hosted PBX: There is no limitation to adding more extensions as the service provider can manage their scale of operations without a physical limitation of a box. Because its irrelevant to a hosted PBX where each person is connecting, as you add more branches or offices, locally or internationally, they can all still connect to the same system.

What happens if I need more telephone numbers?

Traditional On-site PBX: Typically, each additional number must be ordered, which can take few weeks and incurs and monthly line rental fee for as long as you use the number.

Cloud-Hosted PBX: Additional numbers can be obtained for a small activation fee or at a significantly less rental as you do not need to pay for a physical line connection.

What happens if I don’t like and want to change?

Traditional On-site PBX: Contracts are typically for 24 months and can be even longer if you are tied to financing agreement to pay of the PBX over a few years, making getting out very difficult. With this kind of lock-in you are precluded for benefiting from new products and technologies that become available.

Cloud-Hosted PBX: Contract terms are month to month, as with most ‘software as a service’ products. So you are not tied down to system you don’t like or that ceases to meet your needs.

How flexible is the system to change settings to suit work patterns?

Traditional On-site PBX: Changing any configurations would require an understanding of PBX equipment and most businesses simply won’t maintain that expertise in house. This means you would need to call on your service provider to make changes even as small as changing an IVR or changing extensions.

Cloud-Hosted PBX: Hosted PBX’s expose their features and functions through a web interface, so you can log into your account online and opt to change settings like IVR’s and extensions without waiting on someone else.

Can the system help me control and manage my costs?

Traditional On-site PBX: You can only control costs are made fully aware off. Getting a bill at the end of the month makes it impossible to be proactive about your telecoms expenditure. To block things like international calls, or cancelling a number you don’t need generally require making a call to the call centre and writing letters. If you need to breakdown your costs per staff member, or per department is generally impossible without getting an additional system.

Cloud-Hosted PBX: Access to real-time reporting to the costs you are incurring puts in control of your expenses. Cloud systems can even allow you to set a maximum expenditure budget for specific people if you need to contain costs. Through the online interface you can subscribe and unsubscribe for services on the fly.

What happens when I need an additional feature?

Traditional On-site PBX: A PBX box will have the same features it had when you first bought it and unless you purchase an additional module or upgrade, you would not be able to get more features as you need them. Generally, functions like call recording, telephone management system (TMS) that provides costs breakdowns per department, and SMS messaging are completely separate systems.

Cloud-Hosted PBX: The hosted PBX would typically have a comprehensive set of features that you would previously only get in the top end PBX that were too expensive for most businesses. Furthermore, the features and functions are developed on an ongoing basis and you would be automatically upgraded when a new service is rolled out without purchasing a new system.

As with any new concepts and ideas, there is that initial reluctance from many to use a cloud-hosted service. We like to ‘own’ things, but building expertise in and maintaining systems that could just as easily be sourced from the cloud will begin to make less and less sense as it diverts critical resources from core business areas. Why do you want to be in the business of phone systems in addition to your main business? Eric Schmidt, CEO of Google said “Conventional wisdom on cloud computing was that: these were toy systems, that were not going to be reliable, and that people would never store their information in the cloud. But that is all wrong… think about what is really going on here. Wouldn’t it better to have a qualified professional who is operating at absolute scale with a very strong incentive to keep you happy and trust them to do what they do? It actually works.”

Rapelang Rabana
Rapelang Rabana is the co-founder and CEO of SA based software development organisation, Yeigo. She oversaw the company’s integration into the TelFree Group of companies in 2008. Now as Global Head of R&D, she and her colleagues in Cape Town continue to ensure that the telecommunications pioneer remains at the forefront of alternative communications through highly innovative software applications across the telecommunications spectrum. Visit and for more information.