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There are two main types of phone system: on-premises systems, and cloud-based phone systems.


Businesses choosing on-premises systems want the security of having the equipment on site. But these systems carry an up-front cost and visits from engineers for upgrades or extra lines.


Cloud systems use the internet to manage your lines and calling, your only on-site hardware is the phones. Upgrades are automatic, and you can add additional lines yourself. You pay an initial set-up fee, then a monthly fee per user.


So let’s look at your two basic options:  


  • On-premises 
  • Cloud-based 




For many years the only solution was to have a phone system on your premises. This box of kit connects up all your phone extensions and links them to the phone network, often using PSTN or ISDN telephone lines. 


Typically, a phone system is a capital purchase with a one-off up-front cost, although you might be able to spread your payments through a leasing agreement. Some customers don’t feel that they’re ready for the cloud, and like to have the security of having the actual phone system located on their premises. 




A cloud system, sometimes called a hosted phone system, uses the internet to connect all your extensions to each other and the public phone network. There is no actual physical phone system hardware on site (apart from the phones). The system itself is easy to set up (often with a plug ‘n’ play option) and you usually pay for each user on a monthly basis (at least you do with our cloud-based systems: BT Cloud Voice, BT Cloud Phone, and BT One Phone) so there are no significant up-front costs.


Now, there is a quasi-third option. You can sometimes link to VoIP services on an on-premises system. This hybrid gives you the reassuring presence of an on-premises system with the cost savings of being able to make calls over the internet - take a look at the Avaya IP Office.


Let's compare these options.


Usability and features


Both types of system will give you tons of features like call transfer, voicemail, ring groups, hunt groups and all of the stuff a busy business needs to keep the calls flowing smoothly. The main difference is when it comes to upgrades.


With a cloud-based system, upgrades are automatic and remote. No-one comes to your premises, because there’s no kit there. The system is in the cloud. So you don’t have to even think about upgrades, new features, and maintenance, they’re all taken care of for you as part of the service. You can also add new users to your system whenever you want, through an online portal. 


With an on-premises system, you usually have to pay for upgrades or any expansion of the system. And you need an engineer to visit and physically upgrade your equipment.


Call quality


People who haven’t (knowingly) experienced it before sometimes tell us they’re concerned about the call quality of a cloud-based system. You don’t need to worry: with a cloud based system you'll get the same level of clarity as with a regular landline. In fact, depending on the set-up of your system, you might even get calls with high definition clarity.




A cloud-based system usually has a small set-up cost but you’ll need to buy handsets. These systems generally attract a monthly rental cost for each extension. So, with a high number of users over a lengthy period, the costs might equate to the cost of an on-site system. 


An on-site system generally has a higher up-front cost, as you have to buy the equipment. On the positive side, though, you can often lease the system to spread the costs.


Talk to us about what’s best for you


At BT Business, we’ve got both types of phone systems and years of experience in helping businesses choose, install, and use them. We’ve got a network of telecommunications experts across the UK, which we call our BT Local Business partners. There’s one in your area.  


Find my BT Local Business.


Which phone system works for you? Do you have any questions? Get in touch here.