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Difference Between Traditional PBX vs VOIP vs IP PBX

Simplify your phone communication with a cost-effective, secure and reliable virtual phone solution

CallHippo Blog image
Hiba Ali

Senior Writer:

green tickDate: April 6, 2023

Are you looking for a reliable business phone system for your business?

With the advancement of technology, we are left with far too many options. As a result, businesses often struggle to choose between these three— traditional PBX, IP PBX, and PBX in VoIP phone systems.

Can a traditional phone system help you run your business? Or a PBX VoIP phone system would be the best option? Generally, both business phone solutions offer all the features you need. However, they differ dramatically in terms of upfront expenses, maintenance necessities, and required technical expertise.

This article will highlight the key difference between traditional PBX vs. hosted PBX vs. PBX for VoIP to help you choose the right one for your business. Let’s get started!

What Is PBX?

A PBX, or private branch exchange, is a telephone system that is used to connect various office desk phones to a shared network. 

In other words, it enables calls to be routed to several handsets without each extension requiring its landline from the telephone provider. Hence, an organization using PBX can make all internal calls free and transfer calls without hassle.

Besides, it enables an organization to have more physical phones than phone sets.

Types of PBX Phone Systems

A virtual PBX system might be analog, digital, or cloud-hosted.

Traditional or Analog PBX Phone Systems

 Type of PBX Phone Systems


The analog PBX or landline system, which is increasingly rare, uses the public switched telephone network (PSTN). It connects inbound and outgoing calls over traditional copper telephone landlines.


1. Internal Communication

With a PBX system, the call would be routed within, bypassing the building entirely. Add a few more phones, and the complexity of different phone lines quickly becomes unmanageable — and costly — with a standard direct line setup. 

It’s critical to remember that, while you may be concerned about the expense of a private telephone exchange, there are PBX phone systems available for small enterprises. These benefits are available without investing in a high-end, extensive company phone system.

2. Centralized Control

A PBX phone system might have a help desk feature that enables all calls received by your business’s multiple phones to be accessed by a single number. That is, rather than listing a lengthy list of unique phone numbers in directories or adverts, you may list one.

3. Automation

One of the benefits of a PBX phone system is eliminating the need for a receptionist. Typically, PBX auto attendants allow callers to enter an extension number to bypass what would otherwise be a protracted menu process.

4. Flexible Call Routing

Because calls can be forwarded, you can build up a series of backup routings if a critical employee, such as a sales manager, leaves their desk. For example, the call will be transferred to another sale reap. These choices enable you to ensure that critical customer calls do not go to voicemail or go unanswered.


Businesses are increasingly moving away from premise-based PBXs, and there are several reasons why not upgrading and implementing Hosted PBX can hinder your business’s performance:

1. Poor Customer Service

Several industry experts claim that customer service is more important than the product. You may not know the answers to customer questions if you have a premise-based PBX.

The customer-service enriching features that Hosted PBX providers are simply not available on premise-based PBXs. Features such as call queue analytics, call recording, etc., will greatly improve your company’s customer service, resulting in happier, more satisfied customers.

2. More Downtime

“Single Points of Failure” refer to premise-based PBX systems. A single point of failure is an element of a phone system that, if it fails, will stop the entire system. This isn’t a good thing. The worst part is that when it fails, you must wait for your vendor to drive over with a spare, which takes days.

3. Inflexible

As another limitation of the traditional PBX phone system, your phone can only make and receive calls where it is physically installed. For example, when moving into a new building, you must reinstall your entire phone system at a new location.

Likewise, you will not be able to make or receive calls if you leave for a business trip or work from home. All companies require mobility and flexibility, which the traditional PBX cannot provide.

IP-PBX Phone Systems (Hosted PBX)

IP-PBX Phone Systems


A hosted PBX, or VoIP PBX, provider transfers your calls to a reliable VoIP system. The VoIP desk phone replaces your company’s regular landlines and utilizes a digital networking protocol commonly known as IP (Internet protocol) for internal calls. Hence, they are called IP PBX solutions. 

They convert the digital signals directly, and callers use phone lines securely connected to the public switched telephone network (PSTN).


1. Mobile Devices Integration

Using IP-PBX, you can make and receive calls on your cell phone with the same phone number as your desk phone. This is accomplished by installing a mobile application that is fully integrated with your company’s IP-PBX system.

2. Scalability

Online management and the removal of user license costs ensure your business’s scalability. In addition, as your user base and feature requirements develop, there is no additional expense associated with adding lines or features from a contractual, management, or cost perspective.

3. Hot Desking

Hot desking is the capability for multiple users to share a single workstation. Although the desk phone is fixed to a hot desk, users can log in and utilize its extension. This is easily accomplished with IP-PBX systems. Additionally, a user can unplug their desk phone, physically relocate it, plug it in, and continue to use it usually.

4. Easy Setup

IT administrators are particularly pleased with the ease with which IP-PBX systems may be configured. Even non-technical workers, such as office managers or administrative assistants, can establish an IP-PBX. Due to the IP-PBX’s internet-based nature, the setup process is likewise conducted via the internet. The web interface allows for creating hunt groups, extensions, and the recording of intuitive menu welcomes.


1. It requires a high-speed internet connection

You get better sound quality for every call using a cloud PBX phone system. To accomplish this, you need data from your existing internet connection. The bandwidth of your phone system is determined by the VoIP codec and how many calls you make. We recommend planning for 100 Kbps upload and download speeds per line.

2. You might have to adjust network settings

IT staff may need to optimize network routers for cloud telephony, which involves trial and error and can be unexpected in some VoIP deployments. Here are some technical requirements: Don’t run two routers in succession, Prioritize voice traffic over VoIP QoS, etc.

3. Users may require more guidance

When you switch from an on-premise PBX to a cloud-based PBX, the biggest change may be the new world of advanced calling features. Unfortunately, deploying a new phone system affects established habits and workflows, and changing those is hard. There’s no way you can walk every employee through everything, but you don’t want to leave them hanging, either.

What Is VoIP?

A revolutionary technology, VoIP transfers voice data over the Internet at the speed of light. VoIP phones are used to record voice, and these data packets are compressed and sent to the VoIP gateway or a VoIP service provider. They are converted into analog signals to provide cost-effective and apex-quality business communication.

Organizations across the globe are leveraging the power of VoIP technology. The global VoIP services market is expected to reach $194.5 billion by 2024 – a clear indicator of its growing popularity!

What advantage does VoIP offer over PBXs

1. Low Cost

VoIP is a cost-effective substitute to traditional telephone service. VoIP, as the name implies, makes and receives telephone calls through your internet/broadband connection. This can significantly lower your business’s operating costs by obviating the necessity for numerous separate telephone lines.

2. Higher Call Quality

Since VoIP PBX utilizes your internet connection, it provides superior call quality when compared to other options. In addition, a VoIP telephone system offers customers a high-definition voice via the internet, remarkable clarity, and clear audio – particularly with our new Mitel VoIP Telephone Systems.

3. Flexibility

VoIP can be customized to your business’s specific requirements. Due to this versatility, it’s simple to configure a VoIP PBX system to fit your business’s telephony requirements. The only constraint is bandwidth, which potentially allows for the addition of thousands of people.

4. Reliable

VoIP has evolved through the years, with programs like Skype and FaceTime at the forefront of innovation. As a result, numerous organizations have used VoIPs globally, and the technology is constantly changing, making it one of the most reliable telephone solutions available.


1. Internet connection must be reliable

As a start, the quality of your VoIP service depends on the quality of your Internet connection. This is because VoIP does not consume as much bandwidth as you think, and the devices on your network must have low latency.

2. Jitter & Latency

Internet-based technologies often encounter other connection issues like latency and jitter. For example, delays in transmission or improper re-assembling of data packets cause latency and jitter. 

These issues might not even be with your network; major internet backbones change data routes automatically to ensure traffic is delivered reliably on the quickest path to a destination.

Difference Between Traditional PBX vs VOIP vs IP PBX

Choosing the right platform is crucial – it will streamline business communication processes and catapult bottom-line results. Here are some significant differences between traditional PBX vs cloud PBX vs VoIP that can help you make the right decision.

Difference Between PBX and IP PBX

1. Cost

Traditional PBX systems require a large upfront investment, around a few thousand dollars. Here’s a breakdown of where you will need to invest:

  • Analog phones
  • On-premise PBX hardware
  • Installation by an experienced team
  • Regular maintenance

On the other hand, IP-PBX systems use VoIP to connect phone calls, so it doesn’t require exclusive hardware. Besides, you no longer have to worry about paying for installation or maintenance that requires onsite engineers.

2. Relocation

If you plan to relocate your office premises, you will have to carry the PBX boxes to the new office and reinstall it there. This means “downtime” for your business, and your services will be affected during these procedures. 

In IP-PBX systems, all you need to do is carry the handsets and gateway to your new office premises, plug them, and they are up and running within seconds. No engineers and no boxes to be fixed on the walls, thereby minimizing downtime.

3. Expanding Your Business

As your business grows, you will likely expand to new locations and add more staff. However, it is worth mentioning that the traditional PBX system will require you to buy new equipment and install them, again costing you thousands of dollars. 

In the case of IP-PBX systems, all you need to do is decide the number of lines you want, get pre-configured handsets, and connect them to your system. They will be a part of your existing communication system under the same plan and features.

4. Remote Work

As more and more companies hire remote workers, choosing a system that supports work from home is crucial. However, most of the traditional phone solutions have failed to make remote work seamless. And the PBX phone system is no different. You cannot just spend hundreds of dollars setting up a phone system in each employee’s home.

Remote business phone tools

( Source: aircall )

However, with the IP-PBX system, just give them a handset and ensure they have a high-speed internet connection. They can even connect with their colleagues to discuss work-related stuff. Besides, customers won’t be able to distinguish whether your agents are based in the home or office.

5. Features and Functionalities

Since traditional PBX systems are installed on your premise, adding new functionalities can be a pain. Phone solution providers don’t add new features often, and when they do, installing them would mean downtime for your services. 

On the other hand, IP-PBX is already equipped with advanced features like auto-attendant, voicemails, call distribution, etc. And since it runs on the internet, it is easy to launch and install new functionalities. Moreover, the update happens mostly during off-hours, so it doesn’t affect your services.

6. Reliability

Traditional PBX systems are prone to disruption. For example, power outages, natural disasters, and other problems can affect your services now and then. 

However, when you have an IP-PBX phone system, you can stay connected with your customers as long as you have an internet connection. 

As a precaution, some companies keep at least one traditional PBX phone to keep their business running even when there is no internet connection available.

PBX vs VoIP System

PBX vs. VoIP System

1. Initial Investment

Money matters! The upfront cost of your business communication platform can dent a big hole in your pockets. With a PBX system, you will need to make a large initial investment – it requires expensive hardware, routers, software, and a long-term power supply. You also need to consider the money spent on phones and headsets as the PBX system cost.

VoIP business phone systems do not require a heavy upfront investment – all you need to get is the IP phones. VoIP is a more cost-effective technology than PBX as the service provider handles all the major equipment.

2. Operating Expenses

After the initial investment, it is the running cost of your business phone platform that can drive efficiency and add value! 

VoIP phone systems do not have a high operating cost – users have to choose a suitable subscription plan to avail of all services and features. Most VoIP gateways or VoIP service providers offer customizable pricing plans to suit any kind of organization’s budget.

Organizations that use PBX technology may have higher operating costs that include on-site maintenance, software upgrades, licenses, and phone bills. The business landline costs alone can be 60% higher than VoIP systems.

3. Call Quality

It is imperative to choose a business phone solution that delivers the best call quality! The call quality of VoIP phone systems has improved tremendously since the first IP phones came into existence in 1995. Now, users can enjoy an excellent experience without any interruptions or dropped calls.

The voice quality of PBX is as good as virtual phone systems; however, it ultimately depends on the quality of the hardware equipment. With the right software and phone equipment, PBX technology is not behind VoIP in terms of call quality.

4. Scalability

One of the best parts about VoIP phone systems is that they are highly scalable; hence they can expand according to the growing size of your business. Multiple office branches at different geographical locations can benefit from one VoIP plan, and most service providers can add on extra modules and phone lines at a minimal cost.

On the other hand, PBX technology is not scalable. Users need to add more phone lines and build on to the existing hardware capability which may take time and add to expenses.

5. Mobility

Mobility is the number one advantage of modern-day VoIP solutions! It enables your team members to take calls from anywhere in the world – all they need is a working Internet connection to log in from a mobile phone, laptop, smartphone, or personal computer.

With on-premise PBX solutions, organizations function through an internal network that can connect to their phones. Hence, phones cannot be used outside the physical office site. This restricts mobility as team members cannot make or receive calls when they are not present in the office location.

6. Customization

PBX phone systems can be customized; however, it is a time-consuming process that involves organizations purchasing specific hardware and utilizing technical assistance. On the other hand, VoIP phone systems are highly customizable – your service provider can easily give you the features you need without any complex hardware changes!

7. Upgrades

Upgrading a PBX system can be quite challenging as you will need to invest in new hardware and have technicians conduct the upgrade process. However, with a VoIP platform, organizations do not need to worry about system upgrades as the service provider handles them. Hence, it is much easier to maintain VoIP business phones in comparison to PBX systems.

8. Security

Undoubtedly, security is a prime concern for organizations while implementing a phone system. VoIP systems are generally highly secure as the VoIP service provider handles the security protocols. While choosing a VoIP vendor, make sure to discuss their security policies and whether they have data encryption to safeguard sensitive organizational information.

With PBX systems, your external calls are directly routed to the PSTN. The phone system is internally connected and has exposure to the Internet; hence there is minimal risk of hacking or malpractice.

9. IT Infrastructure

Organizations opting for PBX technology need to maintain a huge IT infrastructure to deal with upgrades and maintenance issues. With VoIP, companies do not need any IT staff as the service provider handles all the software and hardware requirements. This makes VoIP phone solutions a better choice for smaller organizations without an IT department.

10. Reliability

In terms of reliability, both PBX and VoIP phone systems are highly reliable and deliver apex voice quality. However, an on-premise PBX phone system may require companies to maintain qualified IT staff on the premises to troubleshoot or resolve any technical issues.

11. Outages

In PBX phone systems, the internal servers and gateways are dependent on electricity; hence a power cut can be a problem and lead to outages. VoIP phone systems connect the PSTN through an Internet connection through a modem; hence need electricity. Hence, both PBX and PBX VoIP technology need electricity to function and will go offline with an outage.



Final Words

Finding the right phone system is one of your business’s most critical tasks. In a period of increasing digitization, failing to adopt cutting-edge communications technology might jeopardize operations and put your company behind in the highly competitive business environment.

PBX VoIP – the cloud-based alternative to premise-based PBXs – have exploded in popularity, as have SIP Trunking systems, which connect existing premise-based phones to the cloud, giving teams VoIP services.

Still, there are many reasons why VoIP is the better overall choice when comparing VoIP with PBX, including its significant cost savings over premise-based PBX, high mobility and scalability, and strong security standards.

It is widely believed that analog phone systems are on their way out – so investing in a premise-based PBX in VoIP is only prudent for enterprises and businesses with high-security concerns.

Get the best business PBX in VoIP for less and gain a reliable new communication partner.

FAQ – 

What is PBX Used For? 

The private branch exchange allows users within a company to share external phone lines while switching calls between local lines.

Do I need a PBX for VoIP? 

You do not require a PBX for VoIP to work effectively, All you need is an internet connection and a VoIP phone, and your VoIP provider can provide most PBX features without an onsite PBX system.

How much does a PBX cost? 

The cost of an on-site PBX system typically ranges from $500 to $1000 per user.

Which is better: PBX or VoIP? 

There are both advantages and disadvantages to PBXs and VoIP, PBXs are reliable, secure, and offer high call quality, but they require costly setups and maintenance. In contrast, PBX with VoIP is more flexible and scalable, costing much less to maintain than traditional lines.



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