Managed Vs. Hosted Vs. On-Premise VoIP

Updated: April 30, 2009



Today's VoIP-seeking businesses have a choice of three options: managed , hosted or on-premise systems.




Managed VoIP

With managed-VoIP services, a third-party provider offers all the equipment, software, operations facilities and technical expertise needed for a company to reap the benefits of an IP-enabled phone system without the costs, risks and headaches of an on-premise VoIP solution. A managed VoIP-service package typically includes the design, integration and deployment of IP-telephony equipment and software, along with management and maintenance of existing telephony solutions and the new VoIP network.

Network management and maintenance offerings usually consist of remote fault monitoring with network surveillance, customer-defined service-level agreements for response and resolution, moves and changes, comprehensive customer reporting and service management, guaranteeing a certain percentage of network uptime. Pricing may range from usage-based to a fixed flat rate, depending on a company's needs and preferences. In most cases, companies can keep tabs on their costs of operation through regular reports.

Managed VoIP is designed for SMBs with limited IT resources and a burning desire to leave telephony headaches and hassles to a third-party service provider's team of experts.


  • Round-the-clock access to experienced staff that can help deploy and manage a VoIP network in accordance with a company's unique business needs.
  • Faster time-to-market by allowing for a rapid VoIP migration in order to take advantage of market opportunities.
  • A third-party provider typically boasts an aggressive product-development cycle, ensuring that a company enjoys access to the latest technology and that equipment doesn't lapse into obsolescence.
  • Low up-front capital expenditures without any need to acquire expensive equipment and software. Plus, a managed service lets a company leverage its existing technologies alongside a new system.
  • Predictable operating expenses thanks to services that are contracted and based on monthly charges or fixed flat-rate billing. The result is that companies can easily make budgetary accommodations.
  • Because managed-VoIP services feature a service-level agreement, companies can rest assured that a managed-VoIP system will perform at peak levels in the face of security threats, business continuity and disaster recovery.
  • Flexibility that accommodates a company's fast growth, anticipated seasonal peaks and unexpected economic downturns.
  • Many managed-VoIP services include value-add capabilities through the availability of mobility, communications and productivity applications.


  • Recurring fees mean the total cost of ownership may be higher over the course of several years.
  • System improvements and upgrades may take longer to execute than if the equipment were housed internally.
  • There is always the possibility that a vendor may go under or consolidate with a competitor.

Sample solution:

Avaya Inc.'s Remote Managed Services for IP Telephony service ensures that a company's IP-telephony applications, platforms and underlying data network are working together for optimal reliability, stability and availability. Companies can choose the amount of operational responsibility they want to farm out to Avaya.

Hosted VoIP

Some of the most feature-rich systems available, hosted-VoIP services rely on a service provider's hosted-PBX equipment to route a company's voice and data traffic. Calls are routed over the PSTN (public switched telephone network) to the hosted-PBX system.

This method is best suited for small and medium-size businesses with limited IT resources and budgetary funds that want the perks of a powerful VoIP system without the hefty price tag.


  • Greater adaptability that allows features to be added and changes to be made in order to accommodate the fluctuating needs of a growing business.
  • Easy to increase and decrease capacity in accordance with seasonal peaks and economic swings.
  • Troubleshooting is conducted remotely, eliminating the lengthy wait time typically involved in service calls.
  • By not involving the participation of a company's internal staff, providers can deliver a faster and more reliable deployment schedule.
  • Integrates seamlessly with most legacy systems, allowing for an easy migration from traditional telephony to VoIP.
  • No need to purchase VoIP hardware or software for lower initial capital expenditures.
  • Round-the-clock monitoring ensures ongoing peak performance.
  • Per-seat licenses mean companies only pay for the technology they're using.


  • Recurring fees mean the total cost of ownership may be higher over the course of several years.
  • System improvements and upgrades may take longer to execute than if the equipment were based internally.
  • There is always the possibility that a vendor may go under or consolidate with a competitor.

Sample solution:

Qwest Communications International Inc .'s OneFlex Hosted VoIP uses business-class IP technology to bring voice and data together in a single solution. Qwest hosts the voice server and messaging hardware off-site. A company makes and receives calls while being able to check voice messages online, filter incoming calls, add new employees to the system in minutes and more.

On-Premise VoIP

An on-premise VoIP system is a phone system whose equipment — including servers, cables and routers — must be installed and maintained by the company purchasing the system. All hardware associated with a traditional on-premise PBX system is deployed and maintained by a company's IT staff.

The right audience for this type of VoIP system is large enterprises interested in systems that can be easily tweaked, swiftly modified and uniquely configured for optimal control and customization.


  • Upgrades can be executed immediately and internally.
  • Favorable long-term total cost of ownership.
  • Highly customizable, especially when it comes to administrative functions.
  • No need for costly service-level agreements.
  • Internal IT teams know the system inside and out.
  • Allows a company to call all the shots regarding system specifications, so that every detail and configuration matches the purchaser's needs.
  • Because the system is located on-site, modifications to telephony configurations can be made swiftly and to the purchaser's specifications. Adding a new line or extension, for example, are tasks that can be completed without the assistance of a service provider, granting companies greater control and flexibility.


  • Costly up-front capital expenditures on hardware and software.
  • Ongoing maintenance fees and operational expenses.
  • Costs of keeping an in-house IT team with the right skills.
  • Necessary to pay for a soups-to-nuts solution even if the system's full potential is never realized.

Sample Solution:

Nortel Networks' Communication & Application Servers portfolio of telephony and converged IP-telephony solutions deliver seamless, scalable real-time customer and business communications with the flexibility and reliability that enable enterprises to migrate to packet-based networks. For example, the Communication Server 2000 can be applied to new networks or to existing DMS-based networks to allow them to migrate to a VoIP network solution.

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