Let’s run the numbers using the above example of 25 phone users (or ‘stations’) so you can see for yourself. 

Iowa City  319-333-7714

Call us... 

Contact us about an onsite 'Hosted' service in which you have complete control without the ongoing monthly cost of a Hosted system.

Waterloo  319-229-7454

Cedar Rapids 319-393-0585

Contact us about an onsite 'Hosted' service in which you have complete administrative control, without the ongoing monthly cost of a Hosted system...   that you will 'pay forever'  without the benefit of ownership. 

For more on this topic, click here

Des Moines  515-331-0444

Dubuque  563-213-5784 

​​So you have heard about hosted or cloud based phone systems but are not sure that you understand the differences between a hosted phone system and an on premise phone system.  Providers like to call it cool things like a hosted system, cloud system, server based or virtual system, but at the end of the day,



There is a myth that a hosted phone system costs you less money.  That is simply not true.  A hosted system can cost you twice the price of purchasing your own phone system.  

“Hosted” phone service - the new Centrex

"Hosted” service, or now "Cloud" based service to make it sound cool, is a ‘virtual’ phone service offered by an Internet Service Provider.  It is phone service that provides users with basic telephony features voicemail and automated attendant for a monthly fee.  It uses the Internet or other high speed broadband connection to deliver service to IP phones on the customer premise.

Like Centrex service if a company has 25 employees they will need to purchase 25 Hosted ‘stations.’  Hosted service providers talk about managing costs and budgeting communication expenses rather than saving money because Hosted service is not inexpensive.  Like Centrex, a Hosted solution will result in higher long term costs because monthly payments never end.  Like Centrex service,Hosted service users will pay forever with no benefit of ownership.  Hosted service customers will pay forever just like their Centrex service predecessors before them. And your Hosted service sales representative will collect their ongoing residual forever as well.  It is a good deal for them; not for you. 

Centrex – the original “Hosted” phone system 

Call us to find out more!  If you are considering a Cloud based or Hosted service, we hope you will want to compare the numbers.  Complete your new system with SIP trunks to help you pay towards a new telephone system that will serve you for years to come!  ​​

In the beginning there was Centrex service, a PBX-like service offered by the local phone company.  Popular before companies could buy their own phone system in the mid-80s, the phone company sold Centrex on a per-line basis. If a company had 25 employees, they would rent 25 Centrex lines.  While an individual Centrex line was less expensive than a standard business line, it was still not inexpensive because of the number of lines needed – one for each phone user.   

Centrex resulted in higher long term costs because it was an ongoing charge – customers paid the same price for as long as they used the service.  It was referred to as a ‘pay-forever’ service for monthly payments never ended.  Once customers discovered they could significantly reduce their ongoing communication costs with the purchase of their own phone system, Centrex was phased out.

For Hosted service -

  • A very competitive ongoing rate for Hosted service is $10 per month per station.
  • The monthly charge would be: 25 users x $10 per month or $250.00 per month.
  • On an annual basis this would equate to $3,000:  $250 x 12 mo. = $3,000.
  • Over five years this would equate to $15,000:  $3,000 x 5 yrs. = $15,000 for five years of Hosted services. 
  • You will still need to buy phones.  Let's use $100 per phone.  25 phones x $100 = $2,500.
  • This puts your five year cost of Hosted service at $17,500.                     

For an On-Premise system

  • It has been our experience that an On-Premise phone system will price out at around $500 per station for an installed   system. (Usually less than that actually.)
  • But let’s use $500 per station as the price of a new phone system.
  • This means that a 25 station phone system would cost $12,500.         

Let’s compare the two options.

~ Hosted service for five years = $17,500.

~ On-Premise phone system    = $12,500

~ This is a savings of $5,000 over five years, or 28.5%. 


Run the numbers out to seven years or longer and the savings become even more dramatic.

Those selling Hosted service will tell you that is too long to run the comparison.    

Really?  How long have you had your present phone system?  Our guess is 7-10 years.    

The Myth behind a 'Hosted' phone system