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VoIP vs PBX: How to choose which business phone system is right for you

VoIP vs PBX
(Image credit: Pexels)

If you’re thinking about replacing or upgrading your business phone system, you have an important choice to make. Do you want to use a Voice over IP (VoIP) or a Private Branch Exchange (PBX) service?

The choice between the best VoIP services or a PBX phone system can make a significant difference in the quality of your phone calls, the cost of your phone service, and your business’s ability to scale in the future. In this guide, we’ll explain the pros and cons of both VoIP vs PBX to help you decide which system is best for your business.

Features

PBX is a traditional analog phone system that connects your business with a vendor or client over a physical phone line. VoIP, on the other hand, is a digital phone system that turns your call audio into packets of bytes and sends them to the caller on the other end of the line over the Internet.

There are stark differences between PBX and VoIP phone systems. To start, the devices that you can use each phone service with are often different. PBX phone systems require analog-compatible phones. In some cases, your phone provider may sell specific hardware that is required to use their service.

Since VoIP systems are digital, on the other hand, this type of phone service can be used with almost any digital device. You can purchase digital handsets for the office, or simply use your business’s computers and tablets as phones.

Another important difference is that VoIP systems can interface with a wide variety of digital software platforms, while PBX systems cannot. With VoIP, it is straightforward to record calls automatically using software on your computer or to set up auto-transcription for calls and voicemails. VoIP systems can also interface with automation workflow software that enables you, for example, to route calls from inside your organization to one voicemail account and calls from outside your organization to another.

With a PBX phone system, your options for call routing, recording, and voicemail are limited to the features built into your handset.

Larger businesses may also appreciate that VoIP phone systems can be hosted internally. This is not the route that most organizations want to take, since self-hosting a phone system entails higher setup costs and ongoing maintenance. However, a self-hosted VoIP system can be fully customized to fit your business’s needs and allows you to ditch third-party providers. With PBX, there’s no way to self-host your business phone system.

Performance

The primary advantage that PBX phone systems have over VoIP systems is that they are more reliable. PBX phone systems are carried over dedicated phone lines that are used by few, if any, other devices in your organization.

In fact, many PBX systems will even work in the midst of a power outage (although your phone handset may require an external power source to function). That’s a big deal if your business needs to be able to operate during a major storm or another event that knocks out power to your area.

VoIP systems, on the other hand, rely on your Internet connection. If the power goes down or your business experiences a network outage—either because of an internal problem or because of issues at your Internet Service Provider’s data center—then your phone service won’t work. VoIP calls can also suffer from poor sound quality or spotty connections if your business is using all of its available network bandwidth.

The bottom line is that if reliability is a key concern for your business, PBX has a major advantage over VoIP.

Another thing to consider when choosing a phone system is where your business will be several years from now. Unfortunately, PBX phone systems can be difficult to scale as your business grows. Each phone line requires an additional physical cable running into your building. Once you run out of available lines, you might need to pay for expensive electrical work to bring in more.

With VoIP systems, to scale up, simply contact your service provider to license another line. You might need to increase your network bandwidth to handle the additional demand on your company’s Internet connection. However, that’s relatively easy to do by contacting your Internet Service Provider or purchasing additional network hardware.

Support

The level of support you receive for your phone system will depend on your provider. Some PBX and VoIP services offer 24/7 support to make sure your business’s phone lines are always up and running. Others have more limited support hours, which may enable them to charge less for their service.

One thing to keep in mind about getting technical help with a VoIP system is that many aspects of your phone system are outside the hands of your VoIP provider. If a problem with call quality is caused by Internet connectivity problems, for instance, you’ll probably need to turn to your Internet Service Provider for help rather than your phone provider.

It’s also worth considering that a VoIP system will become part of your business’s IT infrastructure. If you have an internal IT department or work with a third-party IT service, you will want to make sure that the technicians are able to integrate and service a VoIP system.

Pricing and plans

Ultimately, the choice between VoIP vs PBX phone systems comes down to price for many businesses.

Since VoIP systems operate digitally, they are almost universally cheaper than PBX systems. Most businesses can set up a new VoIP phone system for between $25 and $40 per employee per month, depending on how many users you have, what kind of handsets you purchase, and whether you need to upgrade your network bandwidth.

PBX systems can cost more than 10 times as much. For a business with around 30 users, expect to pay between $700 and $1,000 per user for setting up a new system. Much of this cost comes from paying for PBX-ready handsets and wiring. Once your system is up and running, a PBX system typically costs around $50 per line per month.

Verdict

For the vast majority of businesses, a VoIP phone system offers a better value than a PBX phone system. It’s significantly cheaper to install and works with a wider variety of devices, including your business’s existing computers and tablets. VoIP is also more flexible, enabling you to add and remove users on an as-needed basis as your business grows.

PBX phone systems, by contrast, are extremely expensive to set up. They are also relatively inflexible if you need more lines than your wiring allows.

The other major benefit to VoIP is that it integrates with other business software platforms to improve productivity. You can digitally route calls, automatically record and transcribe conversations, and more. With a PBX phone system, none of these software integrations are possible.

The only major advantage PBX has over VoIP is reliability. If you run a business that absolutely must have phone service during a power or Internet outage—such as a medical facility or emergency response company—then having a PBX phone system with analog infrastructure may be important.

Michael Graw is a freelance journalist and photographer based in Bellingham, Washington. His interests span a wide range from business technology to finance to creative media, with a focus on new technology and emerging trends. Michael's work has been published in TechRadar, Tom's Guide, Business Insider, Fast Company, Salon, and Harvard Business Review.