An on-premise system often means the hardware equipment resides on location in your office, like a computer equipment room, phone closet or comms cabinet. In this setup, your company owns or leases-to-own the hardware, giving you greater control over hardware, software devices and increased customization of features.
Using VoIP with an on-site server has a much higher cost upfront for setup (purchase of hardware, software & services), but then typically no recurring monthly fee (except for any maintenance and support you have contracted for). Adding more phones to an on-premise PBX is as simple as purchasing more IP phones and any associated PBX system licensing.
The drawbacks with an On Premises deployment are limited flexibility for scaling up or down and you need in-house resources to maintain and manage the system as well as a robust and secure environment to house the equipment. In the chance that you lose power or the PBX fails, there may be a period where calls can’t come through without a solid backup plan in place. On-premise is typically the most cost-effective in the longer term but requires careful cash flow planning and additional skilled resources to support and maintain the on site hardware and software installation.