The PBX is Back, Baby (It Actually Never Left)The PBX is Back, Baby (It Actually Never Left)
On-prem solutions have adapted, incorporating the flexible pricing, advanced AI, and hybrid capabilities that once seemed exclusive to SaaS.
July 15, 2025
For most of this century, the narrative has been that SaaS will replace premises-based servers. More specifically, UCaaS and CCaaS will replace the PBX or premises-based UC and CC systems. The narrative seemed obvious. Cloud-delivered communications solutions arrived with compelling benefits, including a pay-as-you-go opex model, evergreen software, inherent work-from-anywhere capabilities, and built-in outsourcing. New UCaaS and CCaaS vendors grew rapidly at the expense of "legacy" premises-based vendors.
However, the PBX remained steadfast in several sectors, such as hospitality and healthcare. Large implementations, especially contact centers, didn’t find the benefits of SaaS as compelling as smaller firms for several reasons. For example, the price-per-user model often loses its appeal with larger quantities. Also, large enterprises place more value on retaining control over their systems.
Premises-based solutions didn’t die and likely never will. The only thing legacy is the term “PBX” which conjures images of a bygone era. The concept of owning equipment and licenses rather than renting a service remains viable. The distinguishing moniker of “premises-based” was invented after the rise of the cloud but was never accurate. These single-tenant, private systems are typically software that can be installed on a local or remote server, in a data center, or on public cloud infrastructure. I’ll refer to them as private instances for the rest of this post. Market penetration estimates vary but seem to suggest that about 40% of the contact center market remains on private instance systems.
Private instance solutions have returned to growth for several reasons outlined below. First, it’s important to acknowledge that these are not legacy systems, as they have evolved from their pre-cloud days. Private instance solutions now match many of the features that cloud-delivered services pioneered, including opex pricing models and AI capabilities.
Some use the multi-tenant capability to distinguish modern SaaS solutions from private instance solutions, but that’s tricky, too. Few enterprises want, require, or desire multi-tenancy as a feature. Making matters even more fuzzy, several public cloud providers now offer (single-tenant) dedicated-instance implementations for larger customers. We’ve reached a point where distinctions between a public cloud dedicated service and a private single-tenant implementation are hard to explain.
Many organizations that jumped to public cloud services during the pandemic are returning to private instance solutions. 37signals and GEICO are two high-profile companies that illustrate the cloud repatriation movement. These companies moved most of their workloads from cloud-delivered services back to their data centers due to cost and reliability concerns. 37signals expects to save $2 million annually, while GEICO's cloud bills increased 2.5 times with reduced reliability.
Cisco and Mitel are consistently reporting growth with their private instance solutions. In the contact center, some of that growth can be attributed to customers looking to replace their Avaya and Genesys systems. Avaya has had significant financial problems and staffing changes. In addition to customer defections, former Avaya employees can be found at most of its competitors. Genesys transitioned to cloud-first, causing many customers and partners who desire to stay with a private instance solution to find alternatives.
There are also several external factors favoring private instances; for example, borderless cloud services are increasingly subject to data sovereignty requirements. The EU has also raised antitrust concerns against Microsoft. SaaS interrupted a long trend in communications of buying local. In the PBX era, European companies such as Alcatel, Ericsson, and Siemens did very well in Europe, and NEC, Panasonic, and Toshiba did very well in APAC.
Cisco and Mitel are also regularly updating their private instance solutions. Cisco recently announced Release 15 of its flagship UCCE solution, which promises reduced opex, hybrid access to advanced capabilities, and AI. Mitel has made numerous improvements, including a hybrid strategy with Zoom, and it recently launched a new contact center solution that leverages a long history of innovation from its Mitel and Unify brands.
An ironic driver comes from the CCaaS sector as it distances itself from cloud as a distinguishing characteristic. The sector is shifting from CCaaS to CX, which has a larger vision but little or nothing to do with the deployment model. An example of this is Five9 dropping its cloud logo late last year.
While AI has become a major driver for investment in communications, security and privacy concerns are increasing too. Many AI services are now available to private instance solutions, some via a private-public hybrid model, and some as appliances. For example, AudioCodes recently launched Meeting Insights on Prem, a meetings and calls transcription product without cloud-delivered components.
AI services, tightly associated with cloud-delivered services, are even starting to drive the growth of private instances. Cisco cited a large enterprise trend where companies are implementing in-house AI models. With massive capex investment in AI, it can be architecturally attractive to keep the contact center in the same private data center.
In hindsight, it’s become clear that the narrative of a complete cloud takeover was always an oversimplification. With a resilient and evolving private instance model proving its worth time and again. The "PBX" only died in name. More accurately, it adapted, incorporating the flexible pricing, advanced AI, and hybrid capabilities that once seemed exclusive to SaaS.
Private instance is not just a viable alternative but a strategic choice for many organizations. The future of enterprise communications isn't a binary choice between on-premises and cloud, but a sophisticated, hybrid landscape where control, cost, and cutting-edge features coexist. Simply stated, enduring ideas evolve.
Dave Michels is a contributing editor and Analyst at TalkingPointz.
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