Hosted PBX Vs SIP Trunking: Top 7 Differences & Why It Matters
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Hosted PBX Vs SIP Trunking: Top 7 Differences & Why It Matters

You want to connect your company’s phone system to the cloud and enjoy the benefits of VoIP. One of the first questions that comes up: should I go with hosted PBX or SIP trunking?

First things first, here’s the essential difference between the two:

Hosted PBX is a cloud-based phone system solution entirely handled by a third-party service provider. SIP trunking connects your existing on-premise PBX equipment to the internet.

When you know you’ll be making calls over the internet instead of the traditional copper wires, you need a setup that will serve your company’s needs now, as well as in the future as you potentially grow.

To make your decision, it’s important to look at VoIP from all angles: finances, logistics, business expansion, and implementation. In this guide, we’re taking you through them all and helping you make the most informed decision.

You can jump straight into each difference between hosted PBX and SIP trunking right here:

  1. Initial cost of setup
  2. Ongoing costs
  3. Maintenance and technical expertise
  4. Your company size and expansion
  5. Geographical flexibility
  6. Call quality
  7. Security

What is a Hosted PBX Service?

A hosted PBX service is a telephone system that’s managed completely off-site by a third-party service provider. It connects directly to the public switched telephone network (PSTN).

In other words, a company that implements a hosted PBX solution doesn’t have to own or maintain any infrastructure, equipment, or software just to have a reliable voice communication solution.

You may also come across virtual PBX, cloud PBX, cloud phone system, or hosted VoIP as other names for hosted PBX.

Benefits

Hosted PBX is deployed quickly and easily, often within a day. Because it’s provided by an Internet Telephony Service Provider (ITSP), all you need for hosted PBX to start using VoIP communications are:

  • IP connectivity
  • Internet connection

With hosted PBX, there’s no need for on-premises PBX (Private Branch Exchange) equipment. You’ll never have to worry about maintenance costs, PBX software upgrades, or service downtime.

Hosted PBX offers many benefits that extend to standard VoIP (Voice Over Internet Protocol) services, such as:

  • Managing and routing incoming calls
  • Handling transfers and holds
  • Call recording
  • Conference calling
  • Automated messages
  • Voicemail

There’s no high setup cost of new hardware, equipment upgrade, or replacement. This offers  cost savings and efficiency. Hosted PBX allows small businesses to receive PBX service easily.

Diagram showing a VoIP business phone system

Related: What Is PSTN and How Does It Work?

What is SIP Trunking?

SIP trunking is a VoIP service that connects your existing PBX to the internet.

It enables you to use your company’s on-premise hardware PBX. It’s already installed and managed on-site by your own IT staff. A SIP trunk is a direct virtual connection between the two infrastructures: your PBX equipment and VoIP.

SIP trunking replaces traditional landlines and offer huge versatility. They don’t just carry voice, but also video, emails, and other data, all on the same line. This eliminates the need for additional lines you’d otherwise need to access the internet or send faxes.

Unlike hosted PBX, where a third-party provider handles all required equipment and software on their premises, SIP trunking requires one of two things:

  • An IP-enabled PBX on-site, or
  • A VoIP gateway to connect your traditional PBX to the cloud

This will depend on your current business phone system.

Benefits

Without SIP (Session Initiation Protocol) in place, your business communications will rely on separate structures of voice and data communication. This old system can’t handle large volumes of calls. You might be unreachable to your customers in crucial moments.

As a result, you might see business continuity breakdown.

With SIP trunking, communication becomes reliable and speedy. This includes:

  • Immediate call routing and recording
  • Multimedia messaging
  • Video conferencing
  • Instant data exchange

In other words, if you already have PBX equipment in place, switching to SIP trunking is not only easy, but recommended. You’ll enjoy more features and a better telephone service compared to traditional phone lines.

Diagram showing how SIP trunking works

Hosted PBX vs SIP trunking: 7 Differences

Hosted PBXSIP Trunking
1) Initial cost of setupLow if you have no PBX equipment on-premiseLow if you already own PBX equipment on-premise
2) Ongoing costs$15-$50 per phone line per month$20-$50 per user per month
3) Maintenance and technical expertiseHandled by your providerHandled by your IT staff (internal expertise required)
4) Your company size and expansionRecommended for <20 employees, slow expansionRecommended for >20 employees, expansion to remote locations
5) Geographical flexibilityFlexible and self-reliantOften dependent on licensing and support of the PBX platform
6) Call qualityGreat for smaller number of concurrent callsGreat for sizeable workforce and a high volume of calls
7) SecurityDepends on the provider’s security standardsSuperior, more secure infrastructure

Let’s look at each of the main differentiators between these two options.

Diagram comparing hosted PBX and SIP Trunking

Difference #1: The initial cost of setup and hardware

The first factor to consider when it comes to hosted PBX and SIP trunking is the cost to get your setup in place.

Hosted PBX and the cost of setup

You’ll need phones, routers, and a broadband service to set up a hosted PBX. What you won’t need are the PBX servers. As we mentioned earlier, your service provider is the one looking after the servers.

Thanks to this setup, your phone system lives on the cloud. You save money on initial setup as you don’t need to purchase extensive hardware to begin with.

With this in mind, your setup costs with hosted PBX might sit as low as several hundred dollars.

This will depend on the number of employees that will be using a VoIP phone and their need for headsets. Routers and switches to support the infrastructure you have are another factor.

SIP trunking and the cost of setup

SIP trunking, on the other hand, comes with a different set of costs compared to hosted PBX. This especially depends on the on-premise PBX equipment you already have.

Certain costs can come from having to retire old equipment and purchase new one.

Your legacy PBX technology that wasn’t previously used for IP telephony will require a VoIP gateway in order to leverage SIP trunking. Costs of the gateway and any installation and configuration will vary.

You could pay anywhere between $500 and $2000 for this PBX or gateway equipment investment.

Takeaway:

If you have no PBX equipment as of yet, your lowest-cost option will always be hosted PBX.

If you have on-premise PBX equipment, it may be worthwhile taking it to cloud with SIP trunking. You’ll be able to repurpose a lot of the equipment you’ve already invested in, reducing your current PBX bill.

As a rule of thumb, always check with available providers to compare all the setup costs you may have to incur.

Difference #2: The ongoing and monthly fees

Recurring and ongoing fees are the next element you need to look into.

Hosted PBX and ongoing costs

Hosted PBX providers typically offer a range of packages and charge by the number of users and specific features. Some providers might also charge you a certain fee per minute, too.

You can expect to pay anywhere between $15 and $50 monthly per phone line. Depending on your provider, this may include unlimited local and international calls, too.

SIP trunking and ongoing costs

SIP trunking services can charge per channel, meaning you can make one phone call on each channel simultaneously. These are typically charged at a flat monthly rate.

Alternatively, some providers might offer two SIP trunking plans side by side. One consists of a monthly fee with an additional metered rate based on calling minutes. Another one is an unmetered monthly plan that includes unlimited calling.

At Nextiva, we provide SIP trunking that reduces the current PBX bill by up to 70%. It includes local, toll-free, and international calls without per-minute charges.

Similarly to hosted PBX, you’ll pay between $20 and $50 monthly per user if you choose SIP trunking.

Takeaway:

The cost of subscription turns out to be almost identical with hosted PBX and SIP trunking. Your cost will come down to your current setup and the initial costs outlined earlier.

Even though the rates may work out to be similar, remember that your monthly cost will depend on:

  • Being charged by SIP channel or DID number
  • Rates per call or per minute for calling landlines and mobile, locally and internationally, if not included in your monthly plan
  • Add-on features that may be charged extra, for example call recording

Keeping this in mind is extra helpful when you take the next difference into consideration.

Difference #3: Maintenance and technical expertise

With the above in mind, the next thing to keep in mind is the technical expertise and resources required to maintain the system you choose to go with.

Hosted PBX and maintenance

With hosted PBX, you’ll only have to maintain internal changes. These include adding users or changing features.

Your hosted PBX service provider is the one handling server and software maintenance. They also handle any technical challenges that come up. This includes outages, disruptions, system-wide upgrades, and more.

For you, this means you won’t have to hire a technician, both in-house or a contractor. You’ll be able to avoid extra maintenance costs. You can make any changes you want through a web-based admin interface without having to be an expert.

SIP trunking and maintenance

When you have locally installed PBX equipment, things are a little different compared to hosted PBX.

The servers are stored on your property. Your own IT team must look after upkeep, updates, and troubleshooting.

For you, this might include a yearly cost of an IT manager’s salary. It’s a recurring investment in their training and leveling up as technology evolves. This person will understand your on-premise setup inside and out, so quality staff is essential.

Takeaway:

Whichever option you decide to go with, make sure you know what your VoIP provider can do to guarantee as high-quality service as possible.

You need a stable business phone system for your company to operate smoothly. Any investment you can make to ensure that will be worth it — it all comes down to budget and resources available to you.

Difference #4: The effect of your company’s (potential) expansion

Another crucial factor is your size. Are you at 5 or 5,000 employees? What will that number be in the future?

Furthermore, analyze if your company has remote or on-the-move staff. If so, your business communication must be available safely and reliably wherever they are.

Hosted PBX and your company size

The general consensus: small businesses will make the best decision if they take the hosted PBX route in most cases.

This is particularly true if they have up to 20 employees, they’re self-contained, and are based in a single location. If that sounds like you, you can implement hosted PBX and enjoy a high-quality telephony cost at an affordable rate.

Hosted PBX won’t be the ideal option only if you’re expanding rapidly. But if you’re starting small (and likely without PBX equipment) and are likely to stay that way, hosted PBX is the way to go.

SIP trunking and your company size

If your company has more than 20 employees, you’ll benefit greatly from the flexibility and VoIP security that comes with SIP trunking.

This is also true if you’re looking to expand in the near future, including to new locations or with remote staff. SIP trunking offers unlimited connectivity and it will enable you to connect with your customers using a single phone number.

Larger businesses are also likely to already own PBX equipment and reuse the investments they’ve already made. They’re also often capable to absorb initial start-up costs.

Finally, SIP trunks will allow you to choose the exact number of channels that you need. This isn’t the case with other technologies such as ISDN, where you’d have to add 15 or 30 lines at a time.

Takeaway:

To identify the best solution, take note of the following factors in your company:

  • Current number of employees
  • Current number of locations
  • Planned number of employees and their locations in the future
  • Current on-premise PBX equipment

Difference #5: Geographical flexibility

Right after the question of expansion comes the matter of location.

Here’s what you need to consider if you:

  • Are based in more than one location (or are looking to take that route in the future)
  • Have remote employees
  • Your workforce travels often

Hosted PBX and geographical flexibility

A hosted PBX enables your employees to access your phone system even when away, such as when traveling or working from home.

This is possible because your phone system runs through an internet connection. As long as they have access to the internet, your staff can use features such as web phones, VoIP apps, and softphones to make and receive calls.

SIP trunking and geographical flexibility

SIP trunking offers this flexibility on a larger scale, with unlimited connectivity.

With SIP trunking, you can support the work of remote and mobile workers. A good SIP provider will equips home office workers with a dedicated home phone mapped to their work number. This way, they can receive calls to their extension at home.

From a customer perspective, your customers will be able to reach anyone they need with a single phone number.

Takeaway:

Both options  a good solution for remote employees across a large geographical area. Hosted PBX will provide more apps available on multiple platforms (such as iOS, Android, Mac, PC). Your employees can still use their phone service remotely and don’t depend on IT staff in case of technical issues.

Some SIP trunking solutions provide this as well, but is dependent on licensing and support of the PBX platform.

The biggest benefit with using a hosted PBX solution is that your provider can use multiple nodes that can be registered to as the phone’s proxy (we do this at Nextiva!).

Nodes that are closer to your employees’ locations ensure the call quality isn’t lowered because of network jitter.

Difference #6: Call quality

VoIP comes with the advantage of call quality that’s as good or even better than the one that comes with traditional phone lines.

However, there’s a difference in the behind-the-scenes setup of hosted PBX and SIP trunking specific to call quality, and here’s what you need to know.

Hosted PBX and call quality

Although VoIP has become a reliable solution over the recent years, there are issues it comes with. The biggest one stems from unreliable internet connectivity.

With a hosted PBX solution, everything happens through your internet connection. Unstable connectivity or an outage can be detrimental to your business. Your customers could see you as unprofessional due to a poor experience when talking to you.

For hosted PBX to provide stable, quality sound on your phone calls, you need to know:

  • How many concurrent calls will your business experience at peak days and hours?
  • What codec does your cloud phone service provider use?

As a rule of thumb, you’ll need around 85 to 100 kilobits of data for each concurrent call. If your company expects five concurrent calls at peak hours, high call quality is only possible if your connection with an upload speed of 500 kilobits per second (kbps).

If the number is closer to 30 calls at once, you’ll need an internet connection with an upload speed of at least 3 megabits per second (mbps).

Finally, remember that a wired connectivity will always provide a better internet connection than wireless.

Related: Test your network speed for VoIP

SIP trunking and call quality

With SIP trunking, you’re leveraging your existing IP network to ensure a high call quality.

This is where SIP trunking shines. Does your company have a sizable workforce and experiences a high volume of calls? SIP trunking allows you to use a dedicated line or have a backup connection that you can switch to if necessary.

That’s how SIP trunking can guarantee extraordinary call quality.

The key is to select a SIP trunking provider that uses only Tier-1 carrier networks. This is the only grade of carrier networks that can connect directly to the backbone of the internet. It allows for the highest possible call quality and reliability.

Takeaway:

The focus on call quality directly adds onto the earlier discussed company size, requirements, and potential to expand in the future. Start by analyzing the power of your internet connection and the number of calls that happen at the same time in any given moment.

Analyze these numbers based on the above recommendations to identify the setup you’ll need to maintain the highest quality of calls.

Difference #7: Security

Security is one of the main concerns companies have when it comes to switching to VoIP. Such concerns are common whenever it comes to online data in general.

Here’s how hosted PBX and SIP trunking compare when it comes to keeping your communication systems secure.

Hosted PBX and security

The security of hosted PBX can be compromised as hosted PBX leaves ports open. This defeats the purpose of a firewall and can leave your system open to security issues.

Just like with many other elements of having a provider host and take care of your PBX setup, you rely on their solution when it comes to security, too.

In other words, they are in charge of maintaining a compliant and secure environment. Your hosted PBX system depends on the security standards that they have implemented across the board.

SIP trunking and security

SIP trunking is able to offer superior security as it can run a dedicated connection to you, instead of over the public internet.

This also enables a better connectivity and less bandwidth usage. Hosted PBX can use as much as six to eight times more bandwidth as it’s unable to scale accordingly.

The security of your SIP trunking setup will depend on your own security policy and how well you meet and maintain your security standards.

SIP trunking provides a more secure infrastructure thanks to redundant components and backup systems. Keep in mind your company is the one that has to deal with cybersecurity incidents and ensure compliance.

Takeaway:

Limited staff, budget, and other resources may be the limiting factor around security for your VoIP setup.

When making your decision, talk to your potential providers about their processes. These include ensuring maximum security, such as end-to-end encryption, redundant carriers, and more.

How Do You Know What’s Right for You?

Now that we’ve walked you through all the differences between hosted PBX and SIP trunking, it’s time to make a decision.

Both services come with many features and benefits that often overlap. Both are the foundation of a modern and reliable VoIP network.

Here’s a rundown of key questions to answer so you can find the best option for you:

  • What is the current size of your business and will that change? Do you plan to expand?
  • Do you have PBX equipment in place already?
  • What level of flexibility with your phone system are you looking for?

SIP trunking is the more commonly selected option. It offers increased security, long-term cost efficiency, flexibility, and quality of service. This particularly applies to medium to large enterprises.

Investigate both options — it pays off to take that time. You’ll be sure you’re making well-informed decisions from a technical, financial, and logistics perspective. You should look at cost efficiency on a long-term scale, especially when looking at setup costs.

With our enterprise SIP trunking solution, you can make the most of your existing phones and devices and get crystal audio and video. You’ll also reduce your current bill and stop paying for each minute you call.

All that with no disruption to your service. Imagine an efficient and empowered customer support team on one side and happy customers on the other.

This is exactly what a feature-rich IP-based system will bring you. Sounds like what you’re looking for? Get in touch so that your communications setup can grow with you.

About the author

Yaniv Masjedi serves as Nextiva's CMO. An avid reader and lover of all things marketing, leadership, and personal growth, Yaniv is obsessed with creating strategies that drive awareness, strengthen brands, and create customer-centric culture. To get in touch, follow Yaniv on LinkedIn.
 

Contact an Amazing Service
Sales Expert
(800) 799-0600

See how Nextiva will transform
the way you communicate.


Contact an Amazing Service
Sales Expert
(800) 799-0600

See how Nextiva will transform
the way you communicate.