PBX vs VoIP: What’s the Difference and Which is Right for My Business?

shutterstock_54558844One of the biggest expenses for any business is phone calls. Businesses are always looking to reduce their communication costs and with new technologies, such as VoIP (Voice over Internet Protocol), there are now real alternatives to the traditional PBX (Private Branch Exchange).

So, if you are looking for ways to simplify your phone system and reduce your costs but are not sure where to start, here is a rundown on what each system has to offer and which one might be best for your particular situation.

What is a PBX?

PBX is a private telephone network used within a company and most large businesses have been using this phone system for many years. It is an internal switchboard that routes multiple calls to their correct destinations.

PBX has always been useful for large enterprises, with multiple departments and extensions, and because it is expensive, it has generally been beyond the reach of most SMEs.

The main functions of a PBX are to provide:

  • A single access point (and number) through which incoming callers can reach any person in the business
  • Receptionist services, such as on hold music, customised on hold messages and voice direction through a menu of options
  • Call management features, such as message recording, internal call transfers and automatic call distribution (ACD), where incoming calls are distributed to the next available operator.

What types of PBX are there?

There are four main types of PBX, each with their own strengths and weaknesses:

  1. Traditional PBX – Traditional PBX uses analogue phone lines to route calls, but initial equipment and ongoing maintenance costs can be high.
  2. IP PBX IP PBX is a PBX that routes VoIP calls, rather than analogue calls and is an upgrade from a traditional PBX. While initial setup costs are still high, call costs are much lower and the number of lines you can have is only limited by the amount of available bandwidth.
  3. Hosted PBX Hosted PBX is an IP PBX that is hosted by an offsite service provider. The advantage is no initial setup costs, no hardware to maintain and one low monthly fee.
  4. Virtual PBX – Virtual PBX is an IP PBX that is not a hosted but rather an automated PBX in the cloud. It is cheaper than a hosted PBX but offers fewer features, making it better suited for small businesses with fewer employees.


A traditional PBX and a VoIP-based phone system each have their own pros and cons. Large businesses that have used a traditional PBX for many years, often opt to stay with this system because it is more expensive to install a whole new system than to maintain the one they have.

A traditional PBX also offers a large range of features, some of which are not always available with VoIP systems, unless you pay extra for them.

Until recently, call quality was also distinctly better with traditional PBXs but due to advances in VoIP systems, both now offer virtually comparable call quality.

A good rule of thumb is that if you have more than 20 employees needing connections, then an IP PBX is probably your best bet. Alternatively, if you were a small business, with a small number of employees and had little need for advanced services and features, then a VoIP-based phone system would probably suit you better.

The main advantages of a traditional PBX are:

Features Multiple numbers connected to the one line, call management Voicemail transcription, simultaneous ringing, video chat, customer management tools
Call quality Good Excellent
Call reliability Good Excellent
Cost High setup cost Low setup cost and very cheap cost per call
Scalability Limited amount of lines As many lines as your bandwidth will allow can be added
Maintenance High maintenance Low maintenance due to software-based nature
Accessibility From any mobile device, wherever you are From any mobile device, wherever you are

While there seem to be more advantages to a VoIP system, the kind of phone system you opt for really comes down to the size and type of business you are running and the type of infrastructure you already have in place.

For large businesses with a traditional analogue PBX and the need for advanced call-handling features, it might be worth upgrading to an IP PBX, in order to at least reduce your call costs. You would still have to pay for new equipment, but the long-term benefits of much cheaper calls would soon offset the initial expense.

Another option would be to look at a hybrid PBX; one that incorporates both analogue and VoIP endpoints in order to reduce costs.

A blending of on-premises and virtual systems is another option. If you choose a service provider that runs the same software on both its dedicated server and its virtual service, then your office can be connected to the dedicated server, while your outlying branches connect through the cloud. This creates a uniform experience, regardless of which technology is used.

On the other hand, if you are a small business with few employees and you require only basic features, such as voicemail, then a virtual PBX would probably suit you best, as it is cheap, maintenance-free and can be accessed from wherever you are.