Choosing the right phone system for a small business is crucial, and it is increasingly common for enterprises to migrate from Public Switched Telephone Network (PSTN) to other solutions, like a modern PBX Phone System.
Why? That way, they can access a range of features and functionalities to improve internal and external communications.
PBX are available for organizations in two forms:
- Cloud-Based PBX systems.
Below, we will explore both options to help clarify which features will meet your needs as a business owner.
What is a PBX phone system?
A Private Branch Exchange (PBX) phone system is a business telephone that allows organizations to manage internal and external communications efficiently. It’s an alternative to common landlines.
It connects multiple phone lines within the company and links them to the outside world. PBX systems can be either On-Premise or Cloud-Based, each offering unique features and benefits tailored to different business needs.
Have a few extra minutes? Hit play on the video below to understand how PBX solutions can adapt to different business needs:
PBX streamlines communication without relying on external, analog phone lines, providing a cost-effective solution while maintaining call quality and functionality.
In a nutshell: it allows employees within the same organization to communicate directly without routing calls through the public telephone network.
It also enables the addition of extensions or lines without requiring additional external connections.
Businesses can also use fewer external phone lines for outgoing calls, sharing a limited number of external lines among all users and contributing to significant cost savings.
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On-Premise PBX vs. Cloud PBX: Learn the difference
When choosing a PBX phone system, businesses must decide between On-Premise PBX and virtual PBX. Both options have distinct advantages and drawbacks, and the right choice depends on factors such as budget, control, and IT resources.
Here, we will analyze the differences to help you make the best decision for your business.
Benefits of On-Premise PBX
If you are looking for complete ownership and control over your phone system, On-Premise PBX might be the perfect fit for your business:
- Full Control: With an On-Premise PBX, the hardware is installed at your office (a.k.a on-site), giving you complete control over the system.
- Custom Security: Your IT team can implement additional security measures to protect your communications.
- No Third-Party Dependence: You are not reliant on a service provider for maintenance or upgrades.
Click here to explore the different types of PBX in detail!
Cons of On-Premise PBX phone systems
While On-Premise PBX offers control, it comes with its own set of challenges. Here’s what to keep in mind:
- High Costs: On-Premise PBX requires significant investment in hardware, servers, and networking equipment.
- Maintenance Responsibility: Your IT team must handle all updates, repairs, and system preservation.
- Limited Scalability: Adding new lines or features can be time-consuming and costly.
Benefits of Cloud PBX
A Cloud PBX phone system could be the solution for businesses seeking an easier and lower-cost phone system.
- No IT Expertise Needed: The service provider handles all maintenance and upgrades, reducing the need for an in-house IT team.
- Cost-Effective: Since all technology is managed by a third party, the solution reduces upfront costs and requires minimal hardware.
- Scalability: Adding new phone lines or advanced features is quick and easy.
Cons of Hosted PBX phone system
Cloud PBX offers flexibility, but it also has drawbacks. Here’s what to consider:
- Less Control: Since the system is hosted off-site, you rely on the service provider for updates and maintenance.
- Internet Dependency: Cloud PBX requires a stable internet connection, and blackouts can disrupt communication.
- Ongoing Costs: While upfront costs are low, monthly subscription fees can add up over time.
What About IP PBX and Hybrid PBX?
You might also come across the term IP PBX—a modern phone system that routes calls over IP networks like the internet or a private data network.
Unlike traditional PBX systems that rely on physical phone lines, an IP PBX uses VoIP (Voice over IP) to manage both internal and external calls. It’s often software-based and can run on standard servers or be hosted in the cloud.
With features like voicemail, auto attendants, call forwarding, and more, it’s a flexible option for many businesses. Meaning, as you may have noticed, it’s also compatible with VoIP.ms’ services!
There’s also Hybrid PBX, which blends traditional phone systems with IP PBX capabilities. These systems can support both older analog/digital lines and modern VoIP, making them ideal for businesses transitioning to newer technologies without replacing all of their existing hardware at once.
RELATED: 5 Strategic advantages of adopting a VoIP phone system
How to choose the right PBX solution for your business
With many options and all benefits and cons analyzed, it can still be confusing to determine which PBX provider is the best fit. When choosing the ideal solution, consider some factors:
| Current Set Up | Consider your current phone system and assess your needs to choose between On-Premise and Cloud PBX – or even go the middle path and opt for a Hybrid system. |
| Budget | Your communications budget will determine how much you can spend with providers and hardware. |
| IT Resources | Be sure you can afford a dedicated IT team or if a managed solution better fits the company’s capacity. |
| Scalability | Cloud PBX is more flexible for growing businesses, while On-Premise PBX may require costly upgrades and not offer many CRM integrations |
SIP Trunking vs. PBX
Although SIP Trunking and PBX are both modern communication solutions, they serve different purposes and offer distinct advantages.
As we learned earlier, PBX is a phone system that manages internal and external calls within a business, whether it’s on-premise or cloud-based.
SIP Trunking, on the other hand, replaces traditional phone lines by using the internet to connect a PBX system to the public telephone network.
Here, you find the main difference between both systems:
| SIP Trunking | PBX |
| A virtual phone line that connects your PBX to the internet for VoIP calls. | A phone system used within an organization to manage internal and external calls. |
| Reduces costs for international/long-distance calls, eliminating PSTN fees. | Reduces costs by using the internet for calls and avoiding hardware expenses. |
| Easily scalable; allows adding or removing lines as needed. | Scalable; supports adding phone lines as the business grows. |
| Connects mobile devices via VoIP apps, enabling remote work and constant reach. | Allows employees to take calls from anywhere using internet-based systems. |
| Highly reliable; calls can be rerouted during outages for seamless operations. | Reliable, but on-premise systems may require IT support for maintenance. |
| Consolidates voice and data networks, simplifying management. | Requires some network management, especially for on-premise systems. |
Making the right choice for your business
PBX phone systems are essential for efficient business communication, offering features like call management (including call routing and even auto-attendants), scalability, and integration with modern technologies like SIP Trunking and VoIP.
RELATED: Learn the 5 benefits of SIP Trunking
Whether you choose an On-Premise or a Cloud PBX phone system for cost-effectiveness and ease of use, the right solution can transform your business operations.
By evaluating your budget, IT resources, and growth plans, you can select the system that best aligns with your business goals and provide you the unified communication platform you dream of.
Ready to explore more? Learn about our Reseller Program and discover how you can offer these solutions to your clients!
PBX Phone System FAQ
Have a question that you don’t see answered here? Contact our Sales Team to get free support.
1. What is the difference between PBX and VoIP?
A PBX phone system is a private telephone network used within an organization, while VoIP (Voice over Internet Protocol) is a technology that allows voice calls to be made over the internet. PBX systems can operate using traditional phone lines or VoIP technology.
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2. How does a PBX Phone System Work?
A PBX system connects internal phones within an organization and routes calls to external lines. It can be On-Premise, requiring physical hardware, or Cloud-Based, where the system is hosted and managed by a service provider.
3. What is the purpose of a PBX phone system?
A PBX business phone system improves communication beyond simple telephony by managing multiple phone numbers and lines, enabling features like call forwarding, voicemail, and conferencing, reducing costs for internal and external calls.
RELATED: Unlock the Benefits of VoIP Call Recording for Business
4. How much does a PBX phone system cost?
The cost of a PBX phone system varies depending on whether it’s On-Premise or Cloud-Based. On-Premise systems require higher upfront costs for hardware and maintenance, while Cloud PBX phone system offer lower initial costs and predictable monthly fees depending on additional features.
You can learn more about Cloud PBX costs with our VoIP Pricing blog article.