Last Updated: March 10, 2023

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Phone System FAQs

What’s the Difference Between Hosted PBX and a VoIP Phone System?

In short, not much. Hosted PBX is a type of Voice over Internet Protocol (VoIP) designed for business use. Hosted PBX systems rely on VoIP technology, but they have all the features and capabilities associated with traditional on-site PBX systems.

Looked at another way, all hosted PBX systems are VoIP phone systems, but not all VoIP phone systems are hosted PBX. Other types of VoIP are designed for consumer use.

The more important distinction is: How do hosted PBX systems differ from on-site PBX systems? All VoIP systems, including hosted PBX, route calls through the Internet. A third-party provider hosts the system on its servers and handles maintenance. Traditional PBX systems rely on telephone hardware and switches that must be stored and maintained on site.

Hosted PBX costs much less than the on-site variety to install and maintain. There’s less equipment to buy, and the provider handles all maintenance. Your monthly payment will go to the provider, not the local phone company, which tends to cost less.

Like traditional PBX systems, hosted PBX systems have advanced features such as auto attendant, call forwarding, custom greetings and automated directories. But the features tend to be easier to set up and use, requiring little IT support. Hosted VoIP also connects employees across multiple locations, routing calls to home offices and cell phones - a feature that traditional PBX systems lack.

What’s the Difference Between Hosted PBX and a Regular Business Phone System?

Until recently, almost every business used traditional Private Branch Exchange (PBX) phone systems. PBX systems rely on telephone hardware and switches to route calls. That hardware must be stored on site, and it requires ongoing maintenance.

The trend these days is toward hosted PBX, also known as business VoIP or cloud-based telephony. With these systems, calls are made through the Internet via an offsite data center. A third-party VoIP provider handles all of the maintenance and support.

  • Cost - Hosted PBX is less expensive to install and maintain. The system might cost anywhere from $3,000 to 15,000 to install in an office of 20 to 30, while traditional PBX could run $500 to $2,000 per user. Maintenance is the responsibility of the provider, not your in-house IT staff.
  • Installation - Hosted PBX systems are installed much faster and easier. In some cases, the systems are “plug and play,” meaning you can set them up yourself.
  • Ease of use - You get all of the same features and capabilities with hosted PBX, but the phone systems are more user-friendly and intuitive. Often, you can add users or enable a certain feature without IT support. Hosted PBX systems can also connect users across multiple locations as if they were in the same building. For example, calls can be routed or transferred to cell phones or home offices.

How Difficult Is It to Install a Hosted PBX System?

Some hosted PBX systems are self installed; others are handled by a professional. The method of installation depends on the company you choose and the system’s complexity.

Professional installation is most common, and it’s a fairly painless process. In most cases, the installation can be completed in one day per site. However, that doesn’t mean you can call on a Monday and have the system installed on Tuesday. There’s a consultation period where the provider assesses your needs, and then the provider needs to order the equipment. The complete process from consultation to final training can take one to six weeks.

The installation process, in most cases, is not very disruptive. Your phone system should never be down completely. The system is built, programmed and tested in advance, leaving little to do on-site. Once the equipment is installed, the provider will walk employees through the features. Most providers will ask that a member of your IT staff be on-site during installation.

Keep in mind that there are certain situations that can delay the process. If you’re moving phone numbers over from another provider, for example, budget an extra week or two.

If your needs are very basic, a “plug and play” system that you can self-install might work. However, you need to make sure the proper router and cables are in place to support the system. And if you have trouble, there will be no one on-site to help.

Can I Save Money with a Hosted PBX Phone System?

Hosted PBX is usually far less expensive than traditional on-site PBX, so it’s a good option for companies looking to tighten the purse strings. You’ll get the same features and functionality but pay 40 to 80 percent less in most cases.

  • Fewer upfront expenses - With hosted PBX, there’s less expensive hardware to buy because calls are routed through an off-site data center. Don’t be fooled - you’ll still need some equipment, including handsets ($50 to $750, depending on features), additional power supplies ($10 to $20 per phone) and potentially a new router. But upfront expenses will be much less than traditional PBX. You might spend $3,000 to $15,000 to have hosted PBX installed for an office of 20 to 30 people, while traditional PBX might cost $500 to $2,000 per employee.
  • Lower maintenance costs - With hosted PBX, also called business VoIP or cloud-based telephony, you’re no longer paying a monthly fee to the local telephone company. You will pay a monthly fee to the hosted PBX provider, but the cost is usually less. And when something goes wrong with the phone system, it’s not your responsibility to fix it. The provider picks up the tab.
  • Little training or support - Hosted PBX systems are easy to use, so they require very little training and support. Chances are, you’ll be able to add users and enable additional features without the help of customer service or in-house IT staff.


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