Hosted PBX vs. SIP Trunking: What's Best for Your Business?

Kent Yunk

March 26, 2019

When you decide to employ a virtual communication system for your business, there are several considerations to make. First, you need to find a provider that offers the right VoIP (voice over internet protocol) services. Then, you'll need to sort through the available types of business phone systems. Since most of them are described using acronyms, it’s difficult to determine what you're actually reading about.

Two common business phone systems are SIP (session initiation protocol) trunking and hosted PBX (private branch exchange). Both systems accomplish the same goal but use different approaches.

What Is Hosted PBX?

Hosted private branch exchange, also called virtual PBX, is a type of internet telephone service that allows enterprise users to share one network of multiple telephone lines. It is a branch exchange hosted in the cloud.

Hosted PBX service providers have their own PBX network you can utilize. They’re equipped with all the features you expect like simultaneous calling, video conferencing, voicemail, call transferring, auto-attendant features and more. Essentially, with hosted PBX, you outsource the technical infrastructure and maintenance of the system to a third-party provider.

The use of a comparable traditional system requires the use of clumsy PBX equipment to connect to a phone line. However, modern virtual systems leverage more convenient call center accessories.

Advantages of Hosted PBX

A hosted PBX system can be compared to website hosting. For example, most companies pay a third-party hosting provider to host all their website files instead of running a server at their physical location. With hosted PBX, you’re doing much of the same thing with your voice and unified communications.

Case in point: With hosted PBX, you leverage the benefits of a SIP business phone system. Yet, a third party configures and maintains the technology. It can be an ideal solution for many companies.

Here are some of the benefits of hosted PBX:

● Decreased setup costs: Compared to traditional phone service providers, you can expect to pay less for initial installation and setup

● Minimal hardware requirements: Bypass the need for excessive equipment and accessories. Reduce your hardware costs and free up space in your call centers

● Massive business savings: Long-term communication costs will decrease tremendously when you employ hosted PBX

● Scalable capabilities: Depending on your choice of vendor, you may be able to scale your phone system as your needs grow

● Convenience: The comfort of allowing someone else to maintain technical systems is a major selling point for many enterprise companies and most small businesses

● Variety of features: You can leverage the ability to add various communication features, depending on what your provider offers.

The right cloud PBX framework will provide everything above and more. This explains hosted PBX’s projected growth over the next few years: a compound annual rate of 14.9%, which, in dollar terms, translates to US$ 4.73 billion in 2018 to US$ 9.5 billion by 2023.

Disadvantages of Hosted PBX

As with all communication systems, PBX has its share of imperfections. Here are some of the possible disadvantages of hosted PBX:

● Lack of control: An apparent potential disadvantage is the loss of control over system technology. For some, the convenience of hosted PBX outweighs this and is not perceived as a con

● Low-quality connection potential: With the lack of control comes the possibility of a low-quality connection. While you are not monitoring the system yourself, you may have to depend on your provider

● Feature limitations: If you do not host your own communication system, you may not be in control of the features you can leverage. Negate this problem by selecting a provider that offers everything you want and need

Remember that your risk for problems is minimized with a high-quality business phone system provider.

What Is SIP Trunking?

SIP trunking refers to a system used to establish, transfer and translate data over an internet connection. It is often combined with VoIP to create a connection that can be used for voice calls.

For instance, you can add additional channels or lines so your business can make multiple calls or video chats at one time. “Trunking” refers to the ability of the network to handle simultaneous calls. In essence, SIP trunking allows you to set up real-time audio or video sessions between two parties.

The system works in a similar way as a traditional phone call. But SIP trunking takes this process a step further. It enables multiple communication channels simultaneously. Most hosted SIP service providers charge based upon the number of SIP trunks your business uses.

Advantages of SIP Trunking

With SIP trunking, your support staff, sales reps and customers enjoy an enhanced communication experience. You oil the machine and connect to a shared network of lines to handle your calls.

The benefits are somewhat quantifiable, especially when it comes to cost savings and ROI. Still, many of the perks stem from the pleasant experience they provide. When it comes to business, the experience is everything.

Recognize that with SIP you’re not just making phone calls anymore. Instead, you’re adding a layer of enhancements to your VoIP calling service. Video, email and more will now be accessible from your unified communications system. You can even share business documents within your team and externally with customers.

Here are some of the pros of SIP trunking:

● Instant ROI: Once your system is in place, you will see immediate savings on calls compared to traditional phone services

● Scalable capabilities: Scale your call network up or down, depending on calling requirements, at the will of your provider

● Enhanced functionality: Leverage your existing network for added functionality. You almost always diversify your communication with SIP trunking

● Unify communication channels: Maintain complete control over your communication channels with unified phone, fax and written messages

● Cost savings on hardware: As with hosted PBX, the hardware required for SIP trunking is notably less expensive than with older systems

● Increased mobility: Access your communications anytime from anywhere. Use desk phones, PCs and mobile devices to access the same dashboard

Disadvantages of SIP Trunking

SIP trunking comes with a certain level of control that is required by come companies. With that comes a couple of potential downfalls:

● Interface congestion potential: All VoIP systems run the risk of dropped calls due to congestion, which can happen because of a lack of monitoring. It can also take place with a lack of ample bandwidth

● Lack of information security: When proper security measures are not in place, your data can be at risk. This is another reason why companies must choose trusted hosting and phone system providers

Make sure you monitor systems to ensure that the interface congestion is minimized. Ask your hosting system representative what security measures are in place to protect your data. If you want more security and, at the same time, freedom to manage your servers, you can use Windows VPS hosting and benefit from Windows OS and interface, as it's super user-friendly. The vast majority of personal computers run on Windows, which is a Microsoft product and brings additional authority and security. As long as your provider is up-to-speed on best practices, you should be fine.

Differences Between Hosted PBX and SIP Trunking

SIP trunking caters primarily to businesses that already have their own IP PBX system. Your hosted PBX takes this a step further by allowing any kind of business to utilize the power of SIP over VoIP. All you need is compatible equipment.

Still, whether your business will benefit from hosted PBX or SIP trunking depends on how your current infrastructure and network are set up. If you're looking to minimize setup costs and any technical involvement, then hosted PBX is a great choice.

Furthermore, most small businesses don’t have the metaphorical bandwidth to host communication systems on their own servers. Typically, hosted PBX is more of an enterprise solution. Keep in mind that this isn’t necessarily true, especially for some smaller tech or security companies. Protection of client information can be another factor in the need to host your own system.

If you want more control over your network—and have the infrastructure to support it—hosting your own SIP trunking solution could be the preferred approach. But in the case that it’s better for someone else to handle the tech for you, look into hosted PBX.

	Hosted PBX	SIP Trunking
Setup Costs	Low cost with no existing PBX equipment on-site	Low with existing PBX equipment on-site
Monthly Costs	$15-50 per phone line	$20-50 per user
Maintenance and IT Support	Handled by your hosted PBX system provider	Handled by internal IT staff
Scalability	Low -- Recommended for less than 20 employees	High -- Recommended for more than 20 employees


Geographic Freedom	High -- Self-reliant	Variable -- Dependent on PBX platform functionality
Voice Quality	High with a small number of simultaneous calls	High with a variable number of simultaneous calls
Security	Variable -- Dependent on the hosted PBX system provider	High -- Self-reliant

Choose the Right Communication Solution

Hosted PBX and SIP trunking are VoIP benefits you can leverage to turn your communication platform into a competitive advantage. 8x8 can help you choose the right features for your current needs. Then, you can scale as you grow. Work with a team that understands your VoIP needs and provides your company with a reliable connection.

Choosing the right technology is crucial to a growing business. Take the uncertainty out of the equation by choosing a SIP technology provider that can scale to meet your business' needs, whatever they may be at any given time. Call 1-866-879-8647 or fill out our online form to request a no-obligation quote from an 8x8 product specialist.