Hosted vs. On-Premise Call Center Software: A Look at Pros and Cons

cloud computing

Before the advent of cloud computing, all software was on premise. On-premise software  is installed on site and locally managed by a company’s IT staff, while hosted or cloud-based software is located and managed offsite by a third-party vendor.

Each type has its pros and cons, although hosted call center software is eclipsing premise-based systems in terms of popularity. Nearly two-thirds of call centers operate at least partially in the cloud, and experts predict almost no call center will be cloudless by 2015. Here, we’ll compare the two to help you make the best buying decision.

Cost of Premise vs. Hosted Call Center Software

Cost is one of the biggest drivers of the rise in popularity of hosted call center software. Cloud-based software requires little – if any – upfront investment. The software is typically pay-as-you-go, billed on a monthly, per-agent rate.

Premise-based call center software requires a heavy upfront investment for hardware, software licensing and more. However, for some companies, the total cost is actually lower in the long run. The only way to find out for sure is to price both options and do a side-by-side comparison of the long-term costs.

Flexibility and Customization

With hosted call center software, the system can be scaled up or down to meet your needs. Pay for only the number of agents you have. Premise-based software is more difficult to scale up – you have to contact the vendor for additional software licenses and the phone company for additional lines – and almost impossible to scale down.

However, premise-based software does allow for greater customization. Some vendors will customize the software to meet your specific needs. With hosted call center software, customization options are fewer.


Many companies that opt for on-premise software do so because of security concerns. They feel more comfortable with the data stored in-house, rather than with a third party over the internet. These days, cloud-based software is widely considered secure and safe, but companies with extremely sensitive data might still prefer an on-premise system.

If you’re opting for hosted call center software, make sure to ask the right questions about security before selecting a vendor. Is the data encrypted? Is it transferred over a secure channel? What access controls are in place?

Maintenance and Control

With premise-based call center software, the responsibility for maintenance and updates relies in-house with your IT staff. With hosted call center software, all of that is taken care of for you by the vendor. Each of these can be a positive or negative, depending on your viewpoint. Some companies prefer to handle their own maintenance, while others would rather not deal with the hassle and/or don’t have adequate IT staffing.

Small vs. Large Call Centers

Hosted call center software was once considered primarily a small business solution, but attitudes have changed. Granted, the cloud offers small businesses access to software they might not otherwise be able to afford. But 80 percent of large companies in North America surveyed in 2012 by McKinsey & Company, a global management consulting firm, said they already used or were looking at cloud-based software.

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