What Are the Differences Between VoIP and On-Premise Phones?

December 18th, 2023 by admin

A hand grabbing an office desk phone

In today's competitive business world, it's important to stay on top of the latest technologies. Whether you are operating a small or large-scale business, it's time to upgrade your telephone system.

You have probably heard the buzzword VoIP. The future demands that businesses either invest in VoIP or cloud-based services.

Now that we have convinced you to step into the digital age, you need to determine the phone system's deployment method. The following information will help you make a decision:

What Is VoIP?

VoIP – Voice over Internet Protocol is a technology that allows the transmission of multimedia content and voice over the Internet, as opposed to traditional telephone networks. It has become an essential part of modern communication systems, offering a cost-effective alternative to on-premise phones.

In a traditional telephone system, voice signals are transmitted over a circuit-switched network through a communication path established between the receiving and calling parties. This method is efficient but can be expensive and less flexible. VoIP, on the other hand, leverages packet-switching technology, where voice data is broken into packets, transmitted over the internet, and reassembled at the destination.

VoIP Features

  • Call Routing
  • Call Analytics
  • Call Notify
  • Call Transfer
  • Call Forwarding
  • Call Park
  • Call Pulling
  • Call Presence
  • Call Queues
  • Call Screening
  • Call Rating and Recording
  • Caller ID
  • Anonymous Call Rejection
  • Advanced Call Management
  • Auto Attendant
  • Conference Bridge
  • Business Text Messaging
  • Custom Music on Hold
  • Do Not Disturb (DND) (Turn your ringer off and direct calls to voicemail)
  • Custom Ringback
  • Extension Dialing
  • Free Local Phone Number
  • Follow Me / Fine Me (Receive call anywhere, allow a customer to reach you on multiple phone numbers)
  • Hot Desking
  • Interactive Voice Response (IVR) (Interacting with a voice menu)
  • Instant Messaging
  • Mobile App
  • Online Fax
  • Number Porting (Save existing phone numbers)
  • Priority Alerts
  • SIP Trunking
  • Push to Talk
  • Softphone
  • Three-Way Calling
  • Speed Dial
  • Toll-Free Number
  • Voicemail
  • Voicemail to Text
  • Voicemail Greetings
  • Voicemail Forwarding
  • Voicemail to Email
  • Voice Calls
  • Upgrade Options
  • Video Conferencing
  • Switchboard

What Is PBX?

Private Branch Exchange (PBX) refers to a private telephone network used within a company. The primary purpose of a PBX system is to facilitate internal communication and provide a means for external callers to connect with the appropriate internal extension.

The internal network of phones is connected through a series of lines and switches. These phones can be desk phones, softphones (software-based phones), or a combination of both. The external lines are connected to the public switched telephone network (PSTN). These lines enable external parties to make calls to the internal extensions of the organization.

VoIP vs. On-Premise Phones


VoIP: VoIP relies on an internet connection to transmit voice data. This leads to cost savings as it eliminates the need for a dedicated phone line.

On-Premise: On-premise phone systems, also known as Private Branch Exchange (PBX) systems, are physically installed and maintained on-site. They require specific hardware, such as servers and phone lines, to operate. This infrastructure demands a more substantial upfront investment.


VoIP: As mentioned above, VoIP systems often come with a plethora of features. These enhance productivity and collaboration within the company.

On-Premise: On-premise systems also offer various features, but their ease of integration and availability vary. Despite offering more control over customization, the implementation of new features requires additional investments in software and hardware.


VoIP: VoIP is more cost-effective, especially for businesses with a high volume of long-distance and international calls. Since it utilizes the internet, there are no separate charges for local and international calls, contributing to potential savings.

On-Premise: On-premise systems often involve higher upfront costs due to the need for purchasing and maintaining the physical infrastructure. However, over the long term, the operational costs might be lower compared to VoIP, particularly for large enterprises.

Maintenance and Upgrades

VoIP: VoIP systems are generally easier to maintain as updates and patches are applied by the provider remotely. This can result in less downtime and fewer disruptions to business operations.

On-Premise: On-premise systems necessitate more hands-on maintenance. Businesses are responsible for managing and updating their hardware and software. While this provides more control, it also requires technical expertise, leading to increased downtime during updates.


VoIP: VoIP systems are susceptible to cybersecurity threats, including eavesdropping and hacking. It's essential for businesses using VoIP to implement foolproof security measures, including regular software updates, encryption, and executing strategized protocols to mitigate risks.

On-Premise: On-premise systems provide businesses with more direct control over security measures. However, this also means that the responsibility for implementing and maintaining security measures falls on the business itself.


VoIP: VoIP reliability is contingent on the quality of the internet connection. In areas with unstable internet, call quality may be compromised.

On-Premise: On-premise systems can offer a high level of reliability as they are not dependent on external factors like internet connectivity. If the business has a reliable power supply and proper backup systems in place, on-premise phones can function even during internet outages.

Opportunity for Growth

VoIP: VoIP systems offer greater adaptability, making them suitable for businesses with fluctuating communication needs. Adding or removing users is typically more straightforward and is managed by the provider.

On-Premise: On-premise systems are less flexible in terms of adaptability. Expanding the system requires additional hardware, which is a more time-consuming and complex process than asking the VoIP provider to install additional features.

The decision between VoIP and on-premise phone systems ultimately depends on the unique needs and circumstances of each business. Small to medium-sized enterprises often find on-premise phone systems to be cost-effective. Larger enterprises or those with operations spread across the world may lean towards VoIP because of the various options they offer.

Technology evolves, and so should your communication infrastructure. Future-proof your business by choosing Nova Technologies. Our VoIP solutions are designed with scalability in mind, ensuring that you are always at the forefront of innovation.

If you want to learn more about the differences between VoIP and On-Premise Phones, contact us today.

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