Focus Research Insight: Why On-Premise buyers emphasize Vendor Background more than Hosted Buyers?

It is so much easier to get rid of a hosted company than it is an on premise product. As a genreal rule the upfront costs for hosted is less than on premise. On pemise is also more network "invasive" than hosted. Hosted is viewed more like a commodity the way CLECs and ISPs are a commodity and easily changed. On premise is a 10 -15 year investment so there is much more due dilligence done.

Simply put (I being the IT/Telecom Manager);
On-Premise will mean that I have to fix any issues that arise with just my staff and any vendors I can involve.
Hosted will mean that, even though the service is my responsibility to my company, the hosting company must fix it to my satisfaction and I am not left to find the technical solution.
For this reason alone, I will be more concerned about the On-Premise equipment provider's reputation.
Truth be told though; I should be concerned in either scenario, because in the end, the buck stops here.

There are three primary reasons:

1. Premise based solutions are more perceptually permanent than hosted solutions since there is more upfront hardware to purchase. IF you miss the mark with a premise based solution you're likely stuck with that system for the life of your lease or amortization. With hosted, if you miss the mark and service/support does not meet your needs you can simply switch providers without much downside, since most hosted providers are SIP based and WILL (regardless of what you say) use your own devices.

2. The hosted customer is typically much smaller than the premise based customer. The overwhelming majority of hosted customers are SOHO, with less than ten seats. Thus they likely don't have the time or resources to fully vet potential suppliers.

3. Hosted providers are in the business of "managing" and "supporting" by their very nature. So perceptually consumers assume that they are experienced and stable. Premise based providers, however, make a portion of their profits from hardware sales and can survive on just that. Therefore customers often think that premise based providers simply "ship a box" or "install a box" then leave.

A hosted solution is exactly the same technology as an on-premise solution... except the processor, switch, or server (whatever terminology you want to use) lives off-site. You still need a call processor somewhere. I think most end-users don't grasp that concept and believe it's something completely new & different. When something's new and different, you're more willing to take a risk on unknown or unproven technology. Not that the technology is good or bad, but you’re more willing to take the risk.
I tend to view hosted solutions as more temporary, because if a company does a long-term financial analysis, on-premise is typically much less expensive over the life of the system. So most people looking into hosted solutions figure:

1. They’re confused about the future and want something temporary that allows them to move away from it without losing their investment.
2. I don’t want to mess with the phones at all. If I use hosted somebody else will take care of it (although good companies with real support staff will also make all those MACs with an on-premise solution).

I think a real issue that’s going to start surfacing is “what happens when the market consolidates and the small hosted providers die off?” One day, you can wake up and have no service. At least with the on-premise solution, you could continue to work… albeit without support.

An on-premise solution requires more due diligence because a business will have to live with the equipment and the vendor for a very long time. Another reason why this may be happening is that companies that opt for an on-premise solution tend to be larger more sophisticated organizations that have a dedicated IT staff and require a telecommunications system that has more customization options than is available from a Hosted VoIP solution.

The same due diligence should be applied throughout the process, be it a fully hosted solution, or hardware to buy to run an on-premises PBX plus a good trunk provider.

Good quality is always paramount to obtain a good and quick ROI, plus lower OPEX for similar CAPEX.

Furthermore, many businesses now moving into VoIP don't have the full skillset to run an IP PBX in-house, or to manage the hosted solution themselves.

Many hardware vendors - especially if they are not tied being exclusive resellers of one brand or the other - are providing turnkey solutions, where everything (hardware and services) is bought from the same people.
Usually this type of approach comes with assistance in configuring and maintaining the PBX.

Hosted solutions are usually managed by the VoIP hosting experienced technicians, that take input and needs from the clients, guide them through the available choices, and then provide the solutions.

Larger companies that might invest to obtain - or be lucky to have - the necessary skillset to run an IP PBX in-house, are more concerned that their investment in human and monetary capital is not wasted in an unreliable solution.
That's why larger companies are looking at the reliability of an on-premises IP PBX, the wrong choice can be painful.

What should be said though, is that a known brand is not automatically synonymous of good VoIP hardware, so a known name is not enough.

To answer this question I will give an example of a potential customer who has a large number of serviced offices throughout the UK. We have approached him offering him an asterisk based on-site PBX especially designed for the serviced environment that is significantly less expensive than Avaya or Mitel, easier to maintain and no need for cards licences etc. Entirely future proof can switch from ISDN to SiP without changing anything, call recording, cost recrding etc all included. However he will not consider them as the support is less easily available, even though they are far more reliable than the name brands and really don't need any support other than a log-in for remote access.

With hosted, the customers are buying the technology and features and benefits that the service will bring to them and are far more likely to trust the vendor as they are unlikely to have heard of the hosted platform or their owners.

Most of the product we sell is because our clients trust us to supply the technology suitable to support their business, not because we are selling brand names.

I do believe that some points and comments in previous answers hit the key reason. You "live" with the vendor in the "on-premise" mode. Also the comments that hosted sites can be engaged and disengaged easier, the
"on-premise" vendor is more embedded.

To me Bil hits on one of the key diligence issues with hosted - where are they getting funding and are they going to be around. Even though hosted solutions can be switched easily, the risk is that they can simply "go away" if the worst happens, leaving you in the lurch while you try to "easily switch" your system. On premise, as mentioned before will likely still work, just without support, giving you time to find a different solution if required.

Easy is not always pain free.

I have taken both approaches in different environments, and as everyone suggests, more DD typically happens on purchased systems because they will be with you for several years, even if it is not the ideal solution once you launch.