PBX vs. VoIP: What are the Differences?

24% of businesses still use traditional phone services, while 36% of software buyers prefer Voice over Internet Protocol (VoIP) solutions. PBX vs VoIP, therefore, is a vital business communications debate.

Read on to learn all the key details of PBX and VoIP, how the two options compare, and which may prove the best choice for your company.

Key Takeaways

• Private Branch Exchange (PBX) systems are on-premises private telephone networks which allow a business to take, make, and handle phone calls. 
• Voice over Internet Protocol (VoIP) phone systems are software-based solutions which allow businesses to take, make, and handle calls online via the internet. 
• The main differences between VoIP and PBX systems are in the areas of underlying technology, cost, call quality, scalability, flexibility, and security.

What Are PBX and VoIP?

Let’s start by explaining what PBX and VoIP actually are. Many people get confused and some even use the terms interchangeably. However, they are distinct and varied systems.

PBX (Private Branch Exchange)

• Type of private telephone network for company use
• Traditional PBXs are on-premises solutions that rely on hardware and landlines at your business premises.
• This type of network allows company employees to communicate both internally (with other employees) and externally
• Besides allowing users to make and receive calls, a PBX network also has a couple of useful features that are not available on traditional phones, such as call transfers or an IVR menu
• By using a PBX, a company can have many phones installed that are all connected to one network

VoIP (Voice over Internet Protocol)

• Works on a completely different principle, which is that calls are forwarded using the internet
• Whenever you make a call, your voice is transformed and compressed into data and then sent to the target phone
• Some years ago, the quality of VoIP calls was pretty low, so companies picked PBX as a more reliable option
• Nowadays, the quality of voice calls isn’t any different from a regular PBX call

But while both the speed and quality of both networks might now be similar, there are still plenty of differences between them. Below we highlight the most important differences when it comes to PBX vs. VoIP so that you can choose the best option for your business needs.

What Is the Difference Between VoIP and PBX: A Snapshot

Before you start considering whether to choose PBX or VoIP, it’s vital to understand the two options and how they differ. 

The key differences between VoIP and PBX are:

PBX vs. VoIP: Main Differences in Detail

Understanding the differences in the technology that underpins PBX and VoIP is important. What you’re likely more interested in, though, are the tangible differences between choosing VoIP or PBX for your business: 

#1 Initial Setup Costs

The biggest difference between PBX and VoIP when it comes to installation and set up is the cost. 

Setting up a PBX phone system for your company is pretty complicated and expensive, because:

• You need to pay upfront for a system power supply, routers, compatible phone sets, headsets, and other hardware
• The costs of installing and setting up the whole infrastructure (getting physical landlines installed, for instance) are also high.

Adding it all up, the overall cost can quickly get into thousands of dollars, so only bigger companies with many employees can afford PBX networks.

Adopting and implementing a VoIP solution, meanwhile, is much cheaper. If you already have an existing internet connection, there’s no need to set up an entirely new system. You only need to invest in:

• A router that can handle high-quality VoIP calls
• Phones that are compatible with IP technology (although, mobile phones, laptops or PCs, and tablets can work just as well)
• Software

There’s no need to hire a technician to install a VoIP system, either. In many cases, it’s as simple as downloading software and apps onto your chosen devices. 

#2 Monthly Costs

Another aspect that you need to bear in mind when picking between PBX and VoIP is the monthly costs of running and maintaining each system. 

With PBX, this is dependent on your setup. Generally, you need to add together the phone bills, system maintenance, and any further costs generated by maintenance issues (such as the need to replace or upgrade equipment). You’ll also need to pay for software and phone licenses.

VoIP, meanwhile, is typically a subscription service. Your monthly cost will depend on which calling tool and plan you use. VoIP business phone system costs tend to come in at between $25 and $180 per user, per month, with providers often offering tiered packages. For example, at CloudTalk, we have four pricing models, from a starter plan that costs as little as $25 per user, per month to a tailor-made plan for enterprises.

#3 Call Quality

With PBX, the call quality depends mainly on the hardware, which includes the routers and phone models. If the system is appropriately set up and the phone models are high-quality, then the calls will be too.

With VoIP, the situation is a bit more complicated, as there can be several causes of low sound quality. One of the most common reasons is a slow or unstable internet connection. If the router isn’t configured correctly, this might also cause call delays and hiccups to the point of VoIP being unusable. The headset of your employees or the calling software might also impact the quality of calls. 
However, with the right infrastructure and the correct VoIP provider, call quality can be as good as or better than traditional PBX systems. CloudTalk, for example, ensures high call quality via a globally distributed server infrastructure. That means average jitter of only 17.8 milliseconds and average latency of only 23ms.

#4 Scalability and Ease of Upgrading

Upgrading or scaling a VoIP system isn’t the slightest problem. If you need to, you can easily switch to a higher-value VoIP plan, order more phones, or add new users. 

If you need another phone number (even an international one) in your company, you can add one in just a few minutes and use it straight away. 

If you are thinking about switching your current router or phone to newer models, that’s not a problem either. You can even use the same VoIP plan in different offices! Also, you can just as easily remove phone numbers or move to a lower plan. 

VoIP also comes with several features that are either not available for PBX phones or are very expensive to add. You can even ask your VoIP provider to add custom features that are needed by your company.

Meanwhile, scaling a PBX system can be troublesome, not to mention costly. If you are moving to a new office, you have to build the PBX infrastructure there from scratch. Even doing something as seemingly simple as adding more users to PBX is a challenge. It might turn out that you will first need new lines that require a different module, and said module requires far more capacity. 

For all of those things, you’ll need an experienced technician. And once you’ve already paid for new hardware or signed a long-term licensing contract, returning to previous settings is pretty much impossible. It’s the same with adding new features. This might be costly and difficult to do, as you will need a knowledgeable IT technician.

#5 Flexibility

The lack of flexibility of PBX phones is another thing that can cause issues. 

PBX phones are usually proprietary, which means they are either bound to a given system or vendor. Want to switch to a different phone model or vendor? It may happen that you will have to replace your entire set of equipment, as your current models won’t be compatible.

Here comes another noticeable problem, especially now that remote and hybrid working is ever more popular. PBX phones can only be used inside your office and only with compatible phone models. That means remote calling is out of the question. 

When it comes to VoIP systems, you have a lot more options:

• You can use any phone as long as your provider offers a mobile app
• You can also use them wherever there is a stable internet connection
• It’s possible for your agents to handle calls straight from a computer app

So, no matter if they are stuck in a traffic jam or working in home-office mode, agents can answer calls in the same way as if they were in the office.

#6 Reliability and Security

If properly installed and maintained, a PBX system is reliable and secure. As they rely on a traditional PSTN (Public Switched Telephone Network) rather than an internet connection, there’s no risk of hackers attacking. 

PSTN networks, however, can suffer outages due to extreme weather or other events that may damage the wider network. For instance, if a vehicle crashes into a telephone pole and causes it to fall, your business may lose your telephone line until it’s fixed. 

VoIP-based systems, meanwhile, are reliant on the internet. That means if your business does entirely lose its internet connection it may also lose the ability to make and take calls.

However, software-based calling solutions work across a range of devices. So, even in that worst-case scenario, your staff could still access the system on their mobile phones or from a different premises.

With the right provider, VoIP solutions are also impressively secure. CloudTalk, for instance, implements strict security standards in order to provide end-to-end protection of your—and your customer’s—data.

Choosing Between PBX and VoIP: The Pros and Cons

Ready to choose your business communications system? If you need a bit more help, here’s a summary of the pros and cons of PBX and VoIP:

Traditional PBX Pros and Cons

Pros:

• If your business already has a traditional PBX system, keeping it means you don’t waste what you’ve invested in the hardware and infrastructure.
• You can sometimes have greater control over customizing or adapting the system, as it is entirely yours. However, it takes significant time and resources to do so.
• Using familiar hardware, such as landline phones, can be more comfortable for some workers.

Cons:

• Traditional PBX relies on the PSTN and in many countries the PSTN is getting phased out. That means your phone system won’t be future-proof.
• Costs are typically much higher. You have to pay more for installation, and are then liable for ongoing maintenance costs, too.
• Features are typically far more limited. It’s also much more difficult—if not impossible—to integrate a traditional PBX system with CRMs and other software-based business tools.

VoIP Pros and Cons

Pros:

• VoIP-based solutions are typically quick and easy to install and set up. Once your teams have downloaded the software, they can often get started in a matter of minutes.
• Solutions are charged on a monthly subscription basis. That means what you pay is consistent, predictable, and often less than you would with a landline-based alternative.
• The range of features available is much wider, with advanced AI-powered functions offered by the best providers. It’s also often straightforward to integrate your phone system with your CRMs and other tools.

Cons:

• If you have a weak or unreliable internet connection, jitter and latency can impact calls made via VoIP.
• Some VoIP providers include hidden fees within their pricing or make useful features a part of only their more expensive plans. Choose the right provider, however, and you can avoid this.
• As an internet-based solution, VoIP can be vulnerable to cyberattacks. However, the best solutions are protected by stringent security measures.

PBX vs VoIP: Understand Both & Choose the Best One For You

Both PBX and VoIP have their advantages and disadvantages. 

PBX is familiar, secure, and can offer high call quality. However, both the initial setup and ongoing maintenance of the system is costly. What’s more, the network on which traditional PBX systems are based—the PSTN—is increasingly getting phased out worldwide. 

VoIP solutions, meanwhile, are very flexible and scalable, and the cost of installing and running them is much lower than with traditional lines. VoIP performance does depend a lot on internet connection capabilities, however most modern businesses do have a strong connection.

Already have a traditional PBX in place? Cloudtalk can help you move from the outdated PBX setup to VoIP, and provide you with all the benefits.

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