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OnPrem SIP Trunking or Hosted PBX

To Host or not to Host - That is the question. Since the time SIP was commercialised, there has been a religious war raging, a fierce war with two staunch opponents - On-Prem (on-site) PBXers, and Hosted (off-site) PBXers.

There are benefits to both methods, it depends on how many channels and features you want (remember, in the world of VoIP, channels = lines), and how you are going to use them. If you run your local takeaway, then you could get away with a couple of channels, and a Hosted PBX solution would work fine if you don't need anything more than very basic PBX features, but if you need advanced features, unlimited voicemail storage, have more than a couple employees, have an attached warehouse, large office space, or your business is on multiple floors, then having your own local PBX phone system on-site makes much more sense.

Imagine being the boss who cant buzz his PA in the next office, or the sales manager who can't contact the storeman to verify stock without walking all the way down to the warehouse - all because the Internet's dropped out, can you guess what they are ?????

If you have a bigger business and large office space you don't just use the phones for external business, you use it for internal business as well.

Having an on-site PBX prevents those issues and lets you have all the features you could want at no extra cost, since most Hosted Solutions do not offer anywhere near the full suite of features you could get with on-site PBX like FreePBX where you have full control, you enable the features you want, and how you want, you have far more freedom and control than a Hosted PBX, done right you have better security too.

If you are a larger business, then an on-site system wins hands down as you will use those handsets a lot for internal voice and video calls, but if you're a small business most your calls will likely be external, where it's not as clear cut, the only way to know which method is best for you then, is to establish how your phones are going to be used, estimate call usages, then plan how you want your phone system to work, most PBX's, even hosted, in basic form are simple, a typical setup is pretty basic like this Flow Chart shows, or you can get more creative, such as multi level IVR's and much more. Once you've completed your plan, you need find out if your Hosted PBX provider allows you to accomplish what you require, and, at what cost, most of them charge you for anything more than very basic PBX features, then, you compare those costs to an on-site SIP Trunking PBX and its costs, and don't let someone talk you into believing you need a $5K PBX system, that's so 1990's, but I guess that's all those high commission sales agents know.

Anyway... It's time to do some homework, yep, sorry kids, Schools in!

So Lets take a look at two businesses, Alpha and Bravo companies.

Footnote: This post was spurred on from a conversion I had with someone following a debate he was having about it on a forum, so I'll use that Hosted providers charges, I am aware of the company and it has a reasonably good name and reputation, their call charges for Hosted PBX are fairly average, so I'm not singling out any one provider here.

Lets get started, the costs are $0.09 per minute per mobile call, $0.11 untimed for local and national calls. They charge extra for IVR, Call Recording, Conferencing, and $2.95 a month per DID, I don't know how many channels they allow, but they do not appear to charge by number of extensions, I guess it means unlimited number of channels and just pay for calls?


Welcome to Alpha Company
Alpha uses the Hosted PBX Solution so has no local PBX

Alpha has 10 agents concurrently making calls, so we're going to need 10 channels

Each agent makes 10 x 5 minute mobile calls, and it's a slow day, so they only make 10 local/national calls

10 x 5 x $.09 = $4.50, and 10 x $0.11 = $1.10, so $5.60 per agent each day

x 10 agents, that's $56 every working day x 20 working days a month, which is $1,120

Because we all need holidays, we have 11 months of the year x $1,120, coming in at $12,320 a year

Remember, we are not including costs for DID's IVR, call recording or conferences which are extras, so keep that in mind, although compared to call costs, they would be pretty negligible, so lets just go with $1,120 a month and $12,320 a year


Now...

Welcome to Bravo Company
Bravo uses an on-site FreePBX Phone System so uses SIP Trunking

Bravo identically has 10 agents concurrently making calls, but this is a SIP Trunk with 10 unlimited call channels, so the costs are simple, whether Bravo makes 2, 20, or 200 calls a day per agent to either mobile or local/national, the costs remain the same.

There is a myriad of SIP Trunk providers out there, and since pricing varies quite wildly, I'll list a few here, but will use Telstra for the costings, since crazily most clients prefer them, not the cheapest, but not the most expensive either.

MNF at $630 a month
Telstra $540 a month
Maxotel at $495 a month
Crazytel $300 a month


Lets do some sums YUK!


In 12 months using a Hosted PBX, with 20 calls a day per agent Alpha pays $12,320

In 12 months using on-site PBX, with unlimited calls a day per agent Bravo pays $5,940

BUT WAIT! Bravo bought a nice new Intel Nuc, that cost them $900, and $100 for a consultant to install and configure FreePBX on it, so, in the first year, Bravo actually paid $6,940, however Bravo's second and subsequent years will only be the Trunk costs of $5,940

(Ohh, and yeah, for the purpose of this exercise, I'm assuming no price increases)

Even in the first year with the cost of purchasing the PBX hardware, the savings are still substantial in using your own PBX with a SIP Trunk service, and if you use a cheaper Trunk provider than Telstra, the savings are even greater, how much greater? That's an exercise for you, the reader ;-)

TCS after 5 years for Alpha is $61,600
TCS after 5 years for Bravo is $30,700

It's no wonder Voice Service Providers and their reseller agents push their Hosted PBX solutions hard - especially with those types of margins!

Ok, Schools out, have a great weekend!


  • Most Voice Service Providers sell both Hosted and SIP Trunks, so I'm not suggesting you leave your Hosted provider, maybe just alter the way you do business with them

  • If you have an existing PBX, it may very well be possible to not have to replace it. I wrote an article about that a couple years ago in NBN And PABX Phone Systems

  • Also keep in mind some Hosted PBX providers may offer volume tiered charges, although our example above is very low call volume so likely would not affect our example to any great degree if at all

  • You can also purchase PAYG SIP Trunks that suite low volume outbound call traffic (I actually use one myself since most of my usage is inbound), but ensure when doing this, you are on a Trunk service, Trunks do not come with IVR's, Voicemail, Follow Me and so on, they provide the path only, often have a single network login, or access by IP address, it is not the same as hosted PBX service.



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Wayne Strauss on :

Your costings for on site are flawed, where are the ongoing PBX management costs?
and 100 dollars to set up Freepbx? Really?

NoelB on :

How are they flawed?
It takes 20 mins to install the freepbx and OS, it takes, 10 mins to ensure everythings updated, you are not sitting there constantly watching it, you do other stuff at same time, it takes 2 minutes for a set-up restore - an overall template configuration for trunks, IVR's queues, everything, it takes 10 seconds to add each extension, 30 seconds to alter trunk auths, pretty much every install is that because its pretty industry average, occasionally I need to do multi level IVR's, whoopie takes an an extra few minutes, nothing overly time consuming and the system is up and running, why should I charge more than 100 bux for that? The cabling work is where the money is.

And even if I did sit there and watch it and charge for all the time, even if I installed and configured freepbx from scratch, it would take maybe 60 minutes tops, so thats an hours time plus service call to them, the thing runs overnight before I install it so if theres a problem i'll pick it up - why should I charge for that?

I have a conscience

As for ongoing pbx maint? What exactly do you think there is to do, ongoing?
Most businesses want a phone system setup and be done with it, they concentrate on their business, they don't sit there and say ohhh what can I tinker and change today, each client gets a cheat sheet to add/del an extension thats pretty much all that happens, there are hundreds and hundreds of clients out there over the years from lawyers, accountants, hardware stores, retail outlets, doctors, dentists, real estates, retirement villages, hotels, motels, caravan parks, local and state govt offices, and funnily enough even a phone shop, and only call backs I get is to install more cabling every now and again for new outlets, they are all happy with how things run, if you want something done that takes 30 seconds i'll guide them over the phone, if they want complex changes, I'll charge time, christ, even if they changed stuff every month, thats not even an extra 1200 a year, still substantially cheaper than hosted, but just like hosted, the onsite pbx clients, can make these changes themselves if they want to without involving me, just like without involving a hosted provider, this is 2020, not 1990.

so again I ask, what ongoing maintenance costs?


I provide a service, I dont exist to fuck people over any and every way I can to drain that last bit of coin from their wallet.

I dont include the service call above because thats not a direct PBX cost, since I spend more time configuring phones and any cabling changes, if I dont need to, the service call applies, 88 and includes the first 15 minutes so if you want to be pedantic and say I'm configuring freepbx and taking and installing it only with no phone programming or cabling, well call the 100, 188.

So Wayne, which hosted pbx provider do you run/work-for?

Antony Callebreio on :

We used a hosted voice service few years ago when Telstra turned off the lines after we had to connect to NBN, not the sort of expenses your examples give, but we used them for about three years, with 9 staff, it cost us about 200 a month, but the quality drove us insane, we have a lot of intra office calls so we couldn't continue to run like that, our actual phone calls were good enough, so our hosted voice company kept blaming our local area network, the same network that works fine with everything else except our voip, then they tried to blame NBN, our IT company finally put in a grandstream UCM phone system and problems all went away, our IT company recently moved us to crazytel with trunking, by default we get 10 lines but can get more from the portal at no extra cost apparently, and pay per calls, our phone number cost us $1 a month, we only have that one number, but can make many calls at once, so now our monthly bill is 1/5th of what it used to be as well, we are happy and our accountant is happy we changed to a local PBX.

Marcus Dellrey on :

What about multi sites? Hosted would be better for them yeah?

NoelB on :

How would it be better? especially if your remote sites are in the same state? since basically all hosted providers have their servers located in Sydney, the laws of physics says this increases round trips latency, not to mention introduces many more possible points of failure.

Even if they are not in same state as you, someones data has to traverse multiple network hops across the country and back again, so long as the head office has the bandwidth, it's exactly the same as if you were connecting to a hosted solution but you have absolute control, and since most A-law calls are typically about 90 kb/s, even a shitty but stable cheap 25/5 nbn connection will easily accommodates this.

Marcus Dellrey on :

Right, so my brother runs a news agency, pretty busy one and gets about 80 calls a day, but probably only makes half that many calls, one phone at the counter and two phones in the back, what are you suggesting?

NoelB on :

In your brothers case, it makes more sense to use a hosted solution. News agencies are not huge shops, so he wouldnt be using it for internal calls all that much i'd imagine.

40 calls a day really? That seems a lot for a newsagent hope he's on an unlimited plan.

Shane T on :

Hey dude, back from Rocky this morning, another happy on-site PBX system in another medical centre, refurb took 2 days longer than we thought, builders. say. no. more. Looks like after posting link on whirlpool, and some bad mouthing the blog, a couple of them decided to bring up their arguments with you, glad to see you answered them, nicer than I would have haha
You should rejoin on whirlpool and set them straight, maybe they will unban you to have right of reply.

NoelB on :

Ahh builders, gotta love em, to be fair most are pretty good, but some age me a year in a week.

I have no idea whats been said over on whingepool, not looked at it in, must be 14 or 15 months, I'm happy with overclockers, they are not run by power trippers like critical mass, thor, and co, they don't accuse you of being fake user and ignore the evidence and explanation (a member at the time - my now ex partner actually, logged into WP using my VPN), overclockers are cool with it, unlike whingepool, and trying to escalate only brings their mates like Waz and others jump to their mates defence, hey, I get it, they probably hear all sort of stories all the time, but to outright refuse to listen (or give me a reason as to why I would ghost when I was never banned or binned) pffft yeah so right of reply over there wont happen :-) Some of them at least seem to know they can post their comments here and get answers should they desire them, even if its not the answers they want to hear.

Derrin Stahl on :

Hello, I thought I'd share my experiences, I am an IT officer with a company that employs 17 staff, but we have contracts with a couple big companies, so we have about 30 subbies who are in regular contact with our field operations staff, we don't make that many out going calls, only to chase subbies overdue on time, mostly these guys are good so they call us, often those operators need to liaise with accounting. This was a hosted phone service set up in consultation with the hosted provider and myself.

It was acceptable for outside calls, but was not so good for inter office calls, I borrowed a mypbx U200 from a supplier on condition if it worked better we bought it, so on a weekend we changed some phones over to it, which our voice provider MyNetFone allowed us to use a free SIP trunk (free as in no contract period) for that weekend for testing, it worked better than we could hope for, even the quality of audio was amazing, the ability to have much more features was a big winner too.

On that Monday morning, we bought the mypbx proper, and MyNetFone moved everything to the SIP trunk, by Monday afternoon we had everything changed over. The article only mentions MyNetFone for calls inclusive plans, but they do have pay as you go as well for a SIP trunk with unlimited channels, limited only by the internet connection, this company does use the NBN, it uses 12/1 as its the most stable profile here.

Four years later, the only regret we have was not using the local PBX from the get go.

Terry on :

I've come from whirlpool to read the full article, I work for an employment services provider, ours is an office of one receptionist and five consultants and manager, all calls come through reception, we were with a well known hosted provider but changed to onsite PBX because of quality, there is something stupid about going from a counter 10 metres from us, down to Sydney, and returning back to North Lakes to our desk phones, the costs were about the same as before since we don't make that many calls, but latency is gone, and quality is much improved.

I.T. provided us with a PBXact system, real tiny thing, about the size of a pack of cotton buds, cost us 900, works great with our Yealink phones.

I guess you can say I agree with your blog that onsite PBX is better depending on each use case, in my current employers it is way better, but my last employer had about the same number of people and same number of calls, but we gave our clients our direct numbers so no reception and we had little intra calling, only to transfer the occasional overflow call, so in their case it would make no difference so hosting worked.

Maurice Camdeb on :

I thought I would add my comment on this thread, we were some of the lucky ones to get NBN many years ago, I run IT for a regional privately run Medical Centre, the best NBN would provide is like most other people, fibre to the node, it is fast, ample for our centre's calls and internet usage, we were sold a hosted pabx solution, it worked well enough, we had a few dozen calls a week that were like using mobile phones on the edge of the network, not to bad considering the high call volume numbers.

But the above was when it worked, we had no doubt that NBN was mostly responsible for errors and SIP provider, who is by the way a well known provider and very popular on whirlpool forum that has been around for long time, for the smaller remainder percentage.

As you can think, this is not very desirable, Sunday is a quieter day for us, one day I loaded freepbx on it and played around, setting it as though it was our real phone system, and with practise manager approval, late one night I swapped the phones of duty doctor, nurse and reception after firing up freepbx PC, essentially running on site, the call quality was out of sight better for internal calls, even when quiet we al partylined and had zero blips spits or farts, and no delays, external call quality remained same.

I was then asked to configure all phones to use the new design.

A week later when we had the monthly meeting, everyone complimented the new phone design, there were no repeat this repeat that, no drops, clear call quality all round - except external calls, which whilst stuck on fibre to node nothing will fix.

This was 3 years ago, and we are still using that design today much happier with it, also saved lots of money over the time since we dont have to pay for per feature, with freepbx it is all there, we did stay with that provider just freepbx talks to them instead of 27 handsets, will never go back to hosted pabx ever again.

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