Hosted VoIP compared to traditional PBX

A PBX or Private business exchange system consists of direct line-to-line connections made by an exchange and connected to the public telephone network. VoIP systems on the other hand use the Internet to package voice signals into data packets that are transferred over the Internet to a provider who manages connectivity to the public network.


Traditional PBX

Companies use a private branch exchange to connect their internal phones to their external lines to carry out functions such as call forwarding and call hold. That means you have a capital expenditure for phones and then a monthly service cost for dial tone (phone lines). Business voice over Internet protocol, or VoIP, systems can carry out many of the same functions at a lower cost. You have to evaluate the advantages and disadvantages of PBX versus VoIP to find out which is the best fit for your business. VoIP allows you to get new equipment often at zero extra cost and you rent the phones as part of the service. The cost of dial tone goes away and you now have calls coming on over your Internet which you are already paying for to support your computers. The monthly cost of VoIP is a wash with the cost of dial tone with the added benefit of new equipment and feature functionality.

Its not unheard of for an enterprise size customer (100 phones or more) to spend $50-100,000 on a PBX. The idea being that they'll keep it for 10-15 years and amortize it. The problem is that doesn't take into account yearly maintenance, software updates which happen quarterly and other hidden costs. I wont go into a full TCO total of cost of ownership diatribe but there is more too it than just buying a system and paying for dial tone. Most of the time because of the hidden ongoing costs, businesses don't keep their system up to date and are not able to take advantage of the system improvements. It usually reaches a point where the system becomes of end of life and requires a complete forklift upgrade to get up to date. Business owners resort to buying old parts of ebay to keep things a float and the traditional PBX becomes a hassle.

Hosted VoIP

Contrast a PBX with a Hosted VoIP solution. Hosted VoIP often includes free phones, all software updates are included and performed by professionals regularly at no added cost. Support is 24/7 365 and there is no technician fees. Most of the time there is no equipment onsite other than your data network and the handsets that are on the desk. The phones plug into the data network just like a computer and if a phone goes bad for any reason the vendor just ships out a pre-configured replacement basically for the cost of shipping. Hosted is really the best of all worlds because you get the latest equipment and software with ongoing support. There is no capital expenditure and the monthly recurring cost can be written off. The only potential snag is usually related to your own data network. If you network is not solid or you are trying to get by on some super cheap broadband circuit you might have issues....not with the phone system but with your connectivity. Make the investment and get quality Internet and solid firewall/router and you'll do just fine.

To learn more about hosted VoIP and check out our vendor reviews click below: VoIP Phone provider reviews

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