Subscribe to the Nextiva blog newsletter for the latest content on Customer Service, Productivity, Marketing and VoIP.

PBX vs VoIP: 26 Top Differences to Know Before You Buy

Between PBX vs VoIP for an office phone system, what would you choose?

In general, both solutions offer all the features you need from a business phone solution. But there are huge differences in upfront costs, maintenance requirements, and required technical expertise.

In this post, we’ll give you a complete breakdown of PBX vs. VoIP, including costs, maintenance, benefit analysis and more, as well as make recommendations for different business types

We’ll start with the basics of VoIP and PBX, but you can also skip straight to the differences.

What is the difference between PBX and VoIP?

What Is PBX?

A PBX, or private branch exchange, is a type of business phone system. It connects all office desk phones on the same network. It enables your business to make internal calls for free as well as transfer calls freely.

With PBX, a company can have more phones than phone lines. Instead of actual lines, it uses extensions to redirect calls to the business number.

A hosted PBX solution is a cloud-based alternative offered by many VoIP providers. It has many of the same features, without the need for complicated on-site installation.

What Is the Difference Between IP PBX and VoIP?

Legacy PBX systems used analog switchboards like the public switched telephone network (PSTN). Today, most PBX systems use digital networking protocols (IP) for internal calls. These newer systems are also called IP PBX.

Some IP PBX installations convert the digital signals on-site and use phone lines connected directly to the PSTN.

VoIP is an approach to transfer calls over the internet. With VoIP, the phone sends digital call data to the VoIP provider. Then, data centers translate the signals to analog and send them to the PSTN.

With VoIP, in most cases, your service provider maintains the hardware. An IP PBX must be serviced on-site by IT teams.

What Is VoIP?

VoIP, or voice over internet protocol, is a technology for transmitting voice data over the internet.

VoIP phones record your voice and transform it into data. They compress these files in real-time and turn them into data packets. These packets then travel to your VoIP provider, where they’re converted and connected to the target phone.

It might sound like a long and slow process, but the data travels at the speed of light. There is no speed difference between analog calls and VoIP calls.

While the first VoIP company struggled to provide even low-quality calls, today, VoIP providers support HD voice calling and offer many advanced business phone features.

It also offers many unique advantages for businesses of all sizes, which we will cover in more detail below.

Do You Need a PBX for VoIP?

Your business does not need a PBX system in place to use VoIP effectively. The only requirements for VoIP is an internet connection and a VoIP phone. Your VoIP provider can also give you most PBX features without on-site PBX hardware.

If you already have a PBX in your office, you can implement SIP trunking to use VoIP to handle your calls.

PBX vs VoIP: 27 Top Differences

There are advantages and disadvantages to both PBX and VoIP. Below, we highlight 27 vital differences to help you choose the right system for your voice communication.

1) Upfront Investment

Installing on-site PBX is a big project and requires a large upfront investment. Uninterruptible power supply, expensive routers, VoIP gateways, software, and other hardware are required. It typically costs thousands of dollars.

That’s before factoring in the cost of actual phones or headsets.

With VoIP, the main piece of hardware you need to invest in is IP phones. You can even use USB headsets with computers to cut upfront costs further.

Read more: How to Install VoIP Phones in Your Office (+ Examples)

2) Running Costs

VoIP providers typically follow a subscription model. With Nextiva, you can pay as little as $20/month per user. Even our more basic plans provide PBX features like call routing and forwarding.

The running costs of on-site PBX depend on your set up. They could include software licenses, maintenance and service fees, update fees, and your phone bill. Business landline costs alone can be up to 60% more expensive than VoIP.

3) Call Quality

Things have changed since the first VoIP company struggled to make IP phones a reality in 1995. VoIP now typically uses the same audio codec as PSTN to deliver HD voice calls. That said, insufficient bandwidth or network configuration errors can impact VoIP call quality.

The voice quality of PBX systems can be equally high. In fact, most modern PBX systems use VoIP technology.

Ultimately, the quality of your hardware (things like routers, switches, and your VoIP gateway) determines the quality of your calls.

4) Scalability

A call center’s technology can be scaled rapidly with VoIP. Order more VoIP phones, add users to your plan, and that’s it. You may have to upgrade your broadband internet plan or add a network switch.

And multiple branches or offices can use the same VoIP plan.

With PBX, it’s not as simple. You have to add extra phone lines and install new hardware. For new offices, you need to install a completely new PBX system.

5) Reliability

The reliability of VoIP comes down to your VoIP provider. Nextiva has a 5/5 rated network with 99.999% uptime. We’ve also got thousands of positive reviews across multiple industry websites.

A proper PBX installation is typically very reliable. The only X factor is whether your IT team has the required expertise. If not, troubleshooting and fixing issues can result in costly downtime.

6) Team Mobility

With VoIP, it’s possible to handle calls from your computer or mobile phone. Nextiva offers native apps for iPhone, Android, and desktops. Customer service and sales reps can handle calls out of the office. They can work from home when ill, and take emergency calls on the road.

On-premise PBX systems rely on an internal data network to connect their phones. You can’t use any phone or device outside the office. So VoIP is also a hiring asset, as 92% of millennials prioritize flexibility when job hunting.

7) Standards-Compliant Technology

A custom-developed PBX dashboard is often created with no consideration for standards. It might only work properly with a limited selection of network hardware and phones.

With a modern hosted solution like Nextiva, it’s a different story. We follow current VoIP standards and codecs, allowing you to use cutting-edge routers, phones, headphones, and other hardware.

Our web app dashboard meets all web and security standards. We also offer HIPAA-compliant communication and have tailor-made plans for companies in regulated industries.

8) Emergency Calling

Both VoIP and PBX numbers are different from regular phone numbers. They don’t have a clear, connected location.

Nextiva solves this issue with E911 information, where you register the address of each number. 911 calls are free with all VoIP plans but still require an internet connection.

PBXs are internal calling networks; users might not know they need to reach an outside line to dial 911. It’s also possible for users to accidentally dial 911 when trying to reach an international call.

While neither option is perfect for emergency calls, the prevalence of mobile phones makes this a non-issue.

9) Security

VoIP security varies from one service provider to the next. Nextiva has a multi-million dollar security budget. Engineers monitor our networks 24/7, and we arrange regular penetration tests.

On-site PBX routes external calls directly to the PSTN. Since the system is not connected to the internet, there is no risk of hacking.

Read more: Avoid These 13 Common Phone Scams (+How to Fight Back)

10) Domestic Calls

VoIP providers generally treat all local calls the same. They don’t differentiate between local and long-distance calls. Nextiva offers unlimited calls in the US, Canada, and Puerto Rico starting at $20/month.

Companies with landline PBX may pay long-distance or minute charges depending on their plan. Switching from landline to VoIP can make domestic calling a lot cheaper.

11) International Calls

Phone companies charge ridiculous minute rates for international calls. If your PBX uses landlines, you have to pay regular phone company rates.

But with VoIP, international calling rates tend to be much lower. Nextiva’s rates start as low as $0.01 per minute. You can also call other VoIP phones on the same plan for free — anywhere in the world.

12) Outages

Analog telephone lines are independent of the power grid. But PBX installations, with internal servers and gateways, are reliant on electricity.

VoIP, similarly, connects with the PSTN through the internet, and modems need power to function. So PBX and VoIP tie here, as both will go offline with an outage.

However, with Nextiva, agents can still handle calls during local outages by using our smartphone app.

13) Advanced Voicemail Features

Nobody wants to call a voicemail number and slowly listen through each message. Both PBX and VoIP offer advanced features like voicemail to text and voicemail to email.

With PBX, you may have to invest in additional hardware for either feature. Nextiva’s enterprise plans include voicemail to text and voicemail to email.

14) Service Provider Options

With the rise of VoIP and hosted PBX, there are a lot fewer companies offering on-premise PBX systems.

With no local PBX provider, you have to rely on unproven contractors or your team for the installation.

There are a lot more options when it comes to VoIP. Most phone companies and mobile service providers have also branched out into VoIP.

Nextiva, for instance, has powered business communication for decades.

15) Multimedia Communications

An analog PBX installation can, by definition, only handle voice calls.

With both IP PBX and VoIP, you can use instant messages and conference calls. The difference is that with VoIP, you can do so across offices and state lines.

With our pro and enterprise plans, unlimited VoIP video, voice, and conference calls are included in your monthly fee.

16) Contracts & Terms

On-site PBX installations typically involve long term service contracts. You also purchase PBX software licenses on a multi-year basis.

With Nextiva, you can commit long term with a contract or go month-to-month with no hidden terms or fees. Read more about Nextiva costs here.

So VoIP solutions are safer to try out in the short term.

17) Internet Usage

Traditional trunking for a PBX uses PRI, which is a much older technology. It is usually on a separate network from your LAN and can be time-consuming and expensive to maintain.

VoIP, on the other hand, can use your existing network infrastructure (Ethernet) for connectivity.

VoIP calls only need about 100 kbps of bandwidth per line. You can take our VoIP speed test to test if your network meets the requirements.

18) Phone Options

A traditional PBX can only work with phones that can work as proprietary telephones. Because other solutions have become more popular, there are often compatibility issues.

With VoIP systems, you have a lot more options. You can use IP phones or regular desk phones with an adapter. Agents can even use their own mobile devices or a softphone application on their computer.

Read more: What is a Softphone? Definition, Benefits & Comparisons

19) Customization Options

IP PBX installations can be customized, but it’s a complex process that tends to require new hardware and technical assistance.

With VoIP, you can often customize your plan to get the functionality you need without making any hardware changes. Nextiva customers can easily manage everything through the online dashboard. From editing routing policies to managing call queues and entire call centers, it’s all there.

And if you need any help, our Amazing Service team is just a phone call away.

20) Upgrades

Just like with scaling and customization, upgrading a PBX system can be a challenge. At the very least, you need new hardware and a technician with PBX experience. You might even need a team of developers, depending on your goal.

If you upgrade from a PBX to VoIP, you can use server rooms and closets for other projects, and your IT staff can focus on more productive areas of the business.

21) Cell Phone Compatibility

You cannot use a smartphone with a traditional PBX. With IP PBX, there are very few compatible apps, and many solutions explicitly exclude mobile phones.

With VoIP, the smartphone is just another option for your agents. Our business phone service app is available for both iPhone and Android phones. This allows your staff to make and answer calls from the road using their business number.

The customer won’t even know that they are out of the office.

22) Other Accessories

IP telephony makes it easy to add additional tools and accessories to your system. Through open standards and common interfaces like USB and BlueTooth, it’s easy to extend your phone with a headset.

For active sales and support agents that rely on CRM data, cutting-edge VoIP headsets can be a huge asset.

You can also use Nextiva VoIP with third-party business tools like a CRM, and much more.

23) Size of Business/Team

Traditional PBX solutions suited large office buildings with hundreds of employees.

IP PBX installations are suitable for medium-sized businesses and enterprises. One caveat is that they need sufficient IT-staff and a reasonable technology budget to deploy and maintain a PBX system.

A VoIP solution is different. A hosted PBX service is suitable for businesses and teams of all sizes, from solopreneurs, SMBs, and early-stage startups, to large companies with remote employees, multiple offices, and thousands of lines.

With Nextiva, you can create a custom plan that serves the needs of your business.

24) Use Cases (When to Use PBX vs VoIP)

Companies that have no plans for future expansion, and a limited technology budget, might be better off sticking with their original PBX.

Distributed companies and enterprises will reap a lot of benefits from VoIP. Using the same plan for all offices will lower costs, and improve company-wide communication. It will also centralize their data, giving managers and analysts a better real-time overview of performance.

25) IT Team Involvement

With a PBX installation, your IT team will be busy, no matter if it’s IP or traditional. Since you own and manage the system, updating and monitoring it is your responsibility. If any features stop working, your staff needs to troubleshoot and fix the issues.

If your company doesn’t have a single IT manager, on-premise PBX isn’t for you.

With VoIP, the provider handles all the sophisticated hardware and software. With or without a tech team, Nextiva is a great choice.

26) Other Advanced Features

Times have changed, and VoIP providers now offer all the standard PBX features. From ring groups, call queues, call forwarding and conference calls, to call analytics and reporting.

These are standard features with all Nextiva’s plans.

Some advanced features unique to VoIP:

  • Find Me, Follow Me (Answer calls from any phone or device with just one phone number.)
  • Remote Call Recording (Instantly record calls in HD, regardless of the location of the phone or agent.)
  • Team Chat (Collaborate privately with other team members in real-time.)

And that’s only a small selection of Nextiva’s VoIP features.

PBX vs VoIP: Best Choice for SMBs 

The average IT manager’s salary is over $107,000 per year. That’s a lot more than the marketing budget of most small businesses.

For that reason alone, on-premise PBX systems are off the table for SMBs.

Nextiva offers a basic and easy-to-use plan for SMBs that starts at $20/user per month. With fewer advanced features, it’s easy to get your new phone system up and running.

We provision all phones before we send them, so all you have to do is plug them in and turn them on. You don’t need an experienced IT team, or a large technology budget to get started.

PBX vs VoIP: Best Choice for Enterprises

So if VoIP is the best choice for SMBs, does that mean that PBX is the best choice for enterprises?

Not so fast. Sure, enterprises do have the budget and infrastructure to install and manage on-premise PBX systems for all their offices.

But that doesn’t change the fact that each office’s intranet installation is an island. There can be a clear disconnect between offices throughout the country.

But you don’t have to switch completely to fix this issue. An IP PBX connected with VoIP through SIP trunking is an excellent option for enterprises with existing PBX systems. It allows you to pool your

Nextiva’s enterprise cloud PBX solution can help connect different office systems. It will centralize voice data, and bring transparent reports to your managers. With cross-office data in one place, your C-suite gets a better view of business performance.

Ready to Take Your Business Communications into The 21st Century?

PBX and VoIP have a lot of the same features and benefits. The real difference lies in the scalability, costs, maintenance, cross-office collaboration, and centralized data.

That’s where VoIP and hosted PBX solutions really shine. If you want all the standard PBX features (with some unique to VoIP) at a lower cost, check out Nextiva’s hosted PBX solutions.

For companies that already have a PBX in place, you don’t have to settle for one or the other. With SIP trunking, you can get all the benefits of VoIP without having to install a new system from scratch. Reap the benefits of both and gain a reliable new partner in communications.

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.