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On-Premises vs. Cloud-Based Call Center: 12 Differences to Know

There are enough phone system terms out there to make your head spin. You constantly need a dictionary to understand what you're paying for. Not knowing the nuances of VoIP and business phones isn't ideal when you're trying to run a call center.

We wanted to set the record straight with two of the most popular types of call center software: on-premises and cloud-based call centers. The goal? To help you determine which of these your business needs.

In this guide, we'll cover how each works, and the differences between the two, including:

Types of call centers

1) On-premises call center

An on-premises call center is a traditional setup for offices. It uses physical equipment, including desk phones and servers.

The desk phones are connected to your server through a PBX system. It’s known as an on-site call center for this reason — the equipment is stored in your place of work.

The number of businesses using on-premises call centers is declining.

Why? Because the setup is complex, and your team is responsible for maintaining it. And, if something goes wrong, you’ll need to make an appointment with the phone system provider to get it back up and running.

Related Post: Call Center vs. Contact Center: Which Does My Business Need?

2) Cloud-based call center

A cloud-based call center is the opposite of an on-premises setup. You don’t need physical equipment in your place of work; the server is online.

Many cloud-based call centers usually run using a cloud-hosted PBX. Inbound and outgoing calls are made through a VoIP (Voice over Internet Protocol) connection. That means your customer support agents can make and receive calls through the internet rather than an analog phone system.

Agents using a cloud-based provider can communicate with customers using any internet-connected device. They can use personal cell phones, laptops, or desktop computers. So long as they’ve got an internet connection like 4G or Wi-Fi, they’re good to go.

On-premises vs. Cloud-based call centers: Top 12 differences

Below, we break down the main differences between on-premise and cloud-based call centers. By the end of this list, you should have a better grasp of which solution is right for your business.

Don't feel like reading? Check out our three-minute video breaking down the differences between these two call centers:

1) Setup and ongoing costs

One of the most important factors to consider when building your call center is the costs associated with each.

Traditional on-premises phone systems typically have a higher setup cost. You need the provider to come to your place of work and install the equipment. Charges can accumulate with the installation time and the cost of the equipment itself.

However,  a cloud-based call center could save you up to 60% of that cost. That’s because a cloud-hosted PBX system is virtual. You don’t need an engineer to fit any equipment, nor fork out expensive costs for desk phones.

Simply contact your cloud-based provider and ask them to set you up virtually, using the equipment you’ve already got.

The best part? The cost savings of a cloud-based system don’t stop there. The virtual phone numbers that come with your call center make it cheaper for your customers to call you. No more sky-high international calling rates; they’re using an internet connection to call you.

Read more: What is a SaaS Call Center? (And Why You Need One)

2) Installation time

We already know that an on-premises call center needs physical equipment. You’ll need to contact your service provider and ask them to install the system.

That’s a stressful situation in itself. Not only will you need to agree on an installation date (that could be weeks away), but they’ll need to come into your office to fit it. That could wipe out an entire day for installation alone.

However, call center software is online. You won’t need an engineer to come to your place of work; they can set up your virtual call center online. All you’ll need to do is download a mobile app to your agent’s device or fire up the service on your browser.

3) Maintenance and upkeep 

Physical phone systems need maintenance. You might have a wire accidentally snap, or a server that overheats. You’ll also need to upgrade the equipment every few years; phone technology depreciates.

Each of those problems means you’ll need to call maintenance — resulting in another costly trip that disrupts your office. Each trip could cost each of your agents more than 23 minutes in lost time, according to FastCompany. That’s how long it takes for them to get back on track after being disrupted.

A cloud-based phone system doesn’t have that problem because they don’t always need a desk phone. You can use softphones instead — a computer software installed to your device.

Should your virtual call center software stop working, just call your service provider. They can fix the problem without coming to your office.

Here are more pointers on how you can troubleshoot business phone lines that aren’t working.

4) Agent productivity

Chart showing productivity stats at the workplace
Source: McKinsey Global Institute

Did you know that productivity increases by 20-25 percent when businesses have connected employees?

Cloud contact center solutions use Conversational AI to do that. The goal is to make your call center agents more productive.

Take the predictive dialer feature, for example. It analyzes previous calling behaviors to predict which number an agent will call — saving them time. They don’t need to remember the full number, nor type it all out when dialing.

On-premises call center solutions, however, don’t have an auto-dialer. Staff will need to remember which numbers to call on their desk phone.

And that’s on top of the hours they’ll be distracted during installation and maintenance.

5) Scalability

As your business grows, the number of customers calling your support line will increase. You’ll inevitably be hiring new customer support agents to help you deal with those calls.

The only problem? An on-site phone system isn’t easily scalable. You’ll need to pay extra money every time a new desk phone is installed. That desk phone needs wiring to the on-premises server by another callout engineer. On top of that, it could take hours to add their new desk phone to your call routing flow.

However, a cloud-based contact center solution is easier to scale. It grows with you as your outbound call center grows.

You don’t need any additional hardware when onboarding a new member of staff. They’ll be able to take calls from their existing work computer once you set them up with call routing.

To give them access to your virtual call center, you just need to add more users to your online account.

Most times, you don’t even need to call your service provider. Simply download the software to a device they’re using, give them access, and they’re ready to go.

Related: How Call Center Software Made Phat Scooters Wildly Successful

6) Reliability and downtime

Your business can’t afford downtime. When your call center software is glitchy or completely unavailable, you can’t really do anything. But your customers are still calling, and you’re still paying your agents’ salary.

Luckily, cloud contact center software helps reduce the risk of that downtime seriously affecting your business. At Nextiva, we’ve got a record of 99.999% uptime. It’s extremely rare for your agents to be unable to make calls.

An on-site phone system can’t always guarantee that uptime. Your server room might overheat on a warm day. An engineer might’ve installed a wire incorrectly. Your maintenance team might be off sick when those disasters happen. Each of those situations compromises business continuity.

And, even worse: that downtime will last even longer than a virtual system. You’ll have to wait for an engineer to fix it.

7) Security against hacking

Hacking is a major concern for businesses; a single hack costs small businesses up to $25,000 on average, per insurer Hiscox.

You don’t want your call center to fall victim to a data breach and have a hacker spying on all of your customer communication.

On-site phone systems are typically seen as the most secure option. The servers and connections are in your office. A hacker would need to bypass your office security and come into the server room to gain access to that information.

Some businesses doubt virtual call center software because, on the surface, it doesn’t have that level of security.

But you don’t need to worry about call hacking if you’re using cloud solutions. Some providers, including Nextiva, have military-grade data centers. Those systems are monitored 24/7. Any potential threats are spotted — and resolved — immediately.

Read more: What Your Business Needs to Know About Social Engineering Attacks

8) Flexibility for mobile teams

An increasing number of businesses are allowing their staff to work remotely. Some 29 percent have employees that work from home, and a further 20 percent have staff that is mobile (working on the go).

On-premises phone systems are totally out of the picture for those businesses. You need your employees in the office to take calls from wired devices.

However, cloud-based call center software allows them to work from anywhere. Inbound call center agents can be on the other side of the world and still take business calls from their devices.

They only need an internet connection, and a device (like a cell phone) to make outbound calls.

This offers another advantage for businesses: you can hire remote support agents. Your staff doesn’t have to be in the same office and commute to your place of work.

That means you’ve got worldwide access to the best talent, and employ the best customer service agents — regardless of their location.

Related Post: Remote Teams: The Pros & Cons of a Virtual Workforce

9) Collaboration

Chances are, you’ve got customer support teams that handle specific issues inside your call center. For example:

  • Five staff handle billing inquiries
  • Eight staff help customers set up their account
  • 15 staff help with random requests

Virtual phone systems have an Automatic Call Distributor (ACD). This asks customers what they need help with, and directs a customer to the most relevant support team — so long as they’re available.

Automatic call forwarding makes it easy to collaborate. You don’t need to pass the caller around the office to find the right person like you would with an on-premises phone system.

Plus, there’s no need to remember complex line extensions for each team member, nor keep tabs on each agent’s specialty.

With cloud contact center software, you just need to click the person you’d like to forward the call to, using the software on your device. That’s it.

10) Integrations

Software integrations are critical to your business strategy. That makes sense — we’re using more tools and software than ever. Spending time manually doing things app-by-app is a colossal waste of time.

On-premises call center software doesn’t help that problem. The standard wire connection does little more than answer and make phone calls.

All of your notes from each meeting have to be done by hand. It’s down to you to copy those notes to your computer, and email them to your team when needed.

That’s where cloud-based software really shines. Since it’s virtual, all of your call information is already stored on your device. This data can be integrated with other tools, such as your CRM.

Let’s say you’re on the phone with Customer A. The CRM integration pulls their call history when an incoming call matches their details. It pulls up their customer information, such as:

  • The date and time of their previous call
  • Which problem they’ve called for help with before
  • How many times they’ve called about a specific issue

11) Analytics and call stats

We’ve already mentioned that a cloud-based call center platform offers productivity benefits.

That isn’t just a theory — you can actually check your agent performance with real-time analytics.

It’ll show you important data about your call center campaigns, such as:

  • Which agent answered the most calls
  • The agent with the highest customer satisfaction rate
  • Which agent spends the most time on each call

None of those metrics are visible with an on-site system. That makes it impossible to accurately track your call agent’s performance, and reward your best staff.

Plus, virtual call centers have call monitoring features. You can record conversations your agents are having with customers, and replay specific customer interactions.

That’s gold dust for training purposes. You can show new hires the best (and worst) ways to provide good customer experience.

12) Customer preference

What good is a call center if your customers don’t like the technology you’re using?

The goal of a call center is to solve problems for your customers. You want to make it easy for them to get in touch and have their issues resolved. That builds a great customer relationship.

It’s crucial to think about the communication channels your customers would prefer when choosing whether to use a cloud-based or on-premises solution.

A study from West shows that 77% of customers think speed to resolution is the best indicator of good service. In other words: they want their issues resolved fast — and aren’t willing to wait around for agents to answer the phone.

With an on-site call center, you don’t have access to key features that make fast resolution possible. You can’t transfer calls easily, and if an agent is away from their desk, the line going to their phone will head to voicemail.

A cloud-based system doesn’t have that problem because it offers an Interactive Voice Response (IVR) system. That combines two essential features:

  • Auto attendants: Customers calling your virtual phone number will be greeted with an auto attendant. This message asks them what they need help with, rather than waiting for a receptionist to answer the phone. (Think of it as a help desk with the self-service approach.)
  • Call forwarding: The customer says they need help to add someone to their account. So, the cloud-based system directs them to the right agent specializing in this area.

Remember: Americans will pay 17% more to do business with companies with excellent customer satisfaction expectations. That could net your more customers in the long run.


As you can see, there are many differences between each type of call center software. But the benefits of a cloud-based call center massively outweigh those of an on-site solution.

Virtual call center systems are more reliable and scalable. Plus, it works for teams with a growing workforce choosing to work remotely. That’s important in these turbulent and uncertain times.

Build your inbound call center in the cloud with Nextiva. Pricing starts from just $50 per month. That gives you unlimited access to call recording, AI-powered call distribution, and unlimited call queues — all of which are bound to increase customer engagement.

It’s everything your business needs to run an efficient (and profitable) VoIP call center!

About the author

Gaetano DiNardi is the Director of Demand Generation at Nextiva and has a track record of success working with brands like Major League Baseball, Pipedrive, Sales Hacker and Outside of marketing, Gaetano is an accomplished music producer and songwriter - he’s worked with major artists like Fat Joe, Shaggy and loves making music to stay turbocharged. To get in touch, follow him on LinkedIn.