Hosted PBX vs. On-Premise PBX: What’s the Difference?

Physical PBX or Hosted PBX?When looking at office and business communications systems, we often encounter the term “PBX.” It’s usually an afterthought for many, but there are subtle differences in the type of PBX systems offered among VoIP hosting companies and plans.

While there are similarities with both systems, the features and advantages offered by one or another are distinct. These distinct features could very well influence your decision making process when selecting a service and plan, since it may alter what does and does not best fit your business needs.

With that in mind, let’s review the two kinds of PBX systems.

Hosted PBX

Hosted PBX or virtual PBX is also known as a hosted VoIP phone system. With hosted PBX, most of the equipment is owned, maintained, and stored at an offsite facility operated—most often—by the service provider. This type of PBX system includes plans labeled as “cloud-based” PBX.

All calls are filtered through an IP-PBX server (hosted by the service provider) through a router hooked up to your desk phone. Typically, users are charged monthly fees based upon usage and features, or a combination of both.

On-Premise PBX

This type of PBX phone system, or IP-PBX (Internet Protocol Private Branch eXchange) phone is service in which calling equipment is hosted at your business, as opposed to an offsite location. You would own the equipment, purchased from a provider, and would maintain the equipment yourself. This equipment will take up physical space and is more resource intensive than hosted PBX systems, as it requires both space and maintenance overhead.

On-premise PBX is typically done using an IP phone using a Local Area Network (LAN). Calls may then be filtered using a traditional telecommunications company in conjunction with VoIP via SIP trunking, using Gateway cards in order to connect. Alternatively, on-premise PBX can connect via an Internet service telephone provider (ISTP).

What The Differences Mean

For most small to medium businesses, as well as individuals and entrepreneurs, a hosted PBX phone system is the ideal choice. While some may require the purchase of provider specific phones, there is less overhead and maintenance. The lack of up-front costs and investment creates greater flexibility that allows you to grow or downgrade your services as needed to fit your business needs.

On-premise PBX systems are still useful, but are best suited for large businesses with resources and physical space on-hand. It is appealing because it is a viewed as a long-term investment, making it cheaper in the long run. There is also much more control given to the user, which is appealing to some.

While the differences between hosted PBX and on-site PBX systems seem obvious, the distinction is clear. Knowing which one is needed should serve as a starting point when reviewing and determining which service provider and features best fit your needs.

Julia Richardson is a senior editor/researcher at Revuezzle. As a mom of 3 with a degree in Marketing, Julia loves to combine her passions- writing, researching, and people. In pursuit of these passions, she’s done a little bit of everything— From B2B sales, advertising copy, to writing, research, and the occasional celebrity interview. Her writings have been featured in multiple blogs and online publications, and she’s designed and implemented marketing plans for several Fortune 500 companies. Julia lives in Richmond, VA with her husband, kids, and her dog Phoebe.

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