Cloud solutions are essentially phone systems where the software and switch required is run from the 'cloud', this means they are hosted on the servers of the company providing the system and accessed via your internet connection.
There are costs benefits of buying a Cloud Hosted solution just are there are costs and benefits to buying an On-Premises Solution.
The initial and setup costs for a hosted solution will be lower than for an on-premises solution, the variables that affect the lifetime cost of the system include the lifetime of equipment, how quickly technological updates will outdate existing equipment and the ease-of-use and flexibility of the solution.
The concerns around a system's potential for future expansion are more about of control and timeframe than locking yourself into any fixed limitations. Hosted and On-Premises solutions leave you room for expansion and growth, and both will incur higher costs along with growth at a rate that will reduce your cost/extension but will still mean a higher total bill.
Control is often at the heart of a decision between a Hosted or On-Premise solution in terms of strategy. You may prefer to keep control as much as possible internally, even if it means added cost, work and complexity. You may want to outsource as much as possible to keep internal focus on core business – even if that decision ends up costing more.
While there are differences for an between a hosted and on-premise solution in terms of flexibility, they are mostly related to timing. A hosted solution will be prepared to work with you to add the features you need and will be prepared to become more flexible as market needs arise. The disadvantage in using a hosted solution is that it will always be a common solution designed to meet the needs of all the provider’s customers and it will take the service provider longer to implement changes than you could do yourself with an on-premise solution.
Similar issues occur with features and options as they do with flexibility – if you own the solution you will always have the ability to add more features and options – for a price. But spreading the cost across thousands of customers makes it easier for a large provider to add features at a lower cost. Often however the individual solution matters far more in this area than specifically whether it is a hosted or on-premise solution. Your business has a required set of features, a desired set of features, a nice-to-have set of features and you don’t care about the rest. Finding a solution that meets these needs is the important thing.
This is an area where Hosted versus On-Premises makes a big difference. A hosted service is generally to be cheaper, easier and sometimes quicker to implement. You have to weigh that against the advantages in control of options and flexibility with an On-Premises system. However if you aren’t certain about what you future needs are likely to be then a hosted solution is often the better option.