Hosted PBX vs SIP Trunking

Which one is the most suitable for your business?

There is no doubt that many businesses are looking for solutions with the ability to drastically reduce communication costs without comprising on voice quality and service delivery.

Enter VoIP (Voice over Internet Protocol), the new buzzword that seems to disrupt the communication industry by forcing established businesses to rethink their communication models.

With huge cost savings, ability to scale at a moment’s notice and with a host of advanced calling features, the traditional phone systems are no match for this new kid on the block.

There are many ways ‘VoIP’ can be implemented and the current standoff is between hosted PBX and SIP Trunking/On-premises PBX.

Both solutions operate on a VoIP platform, got similar functions but differ in their financial, logistical and technical requirements.

So, which one is the right one for me?

I can see that you are struggling with that decision. Don’t worry, I got you covered.

I put together this blog post in an attempt to demystify and settle VoIP industry most passionate standoff between Hosted PBX and SIP Trunking/On-premises PBX.

Hosted PBX and SIP Trunking/On-premises PBX

What is Hosted PBX?
PBX is an acronym for ‘Private Branch Exchange’, which is a telephone system within an organization whose purpose is to switch calls between an organization’s users using local lines while enabling those users to access external phone lines.

Hosting basically refers to the ‘storing or management’ of information or services, thus a hosted PBX is a telephone exchange system that is stored or managed by a third party service provider.

Both the Hosted PBX and SIP Trunking solutions provide VoIP solutions as standard services, i.e. managing incoming calls, voicemail, automated greetings/message and call records among others.

The hosted PBX solution sets itself apart by having a cost-effective plan. It eliminates any setup fees for purchasing hardware equipment or upgrade costs, making it a smart choice for business start-ups with budgetary constraints.

SIP an acronym of Session Initiation Protocol, is a method that businesses use to access phone services over an Internet connection as opposed to a traditional phone line.

SIP Trunking is also a VoIP solution. It uses VoIP (Voice over Internet Protocol) or Internet connection to connect a PBX to the Public Switched Telephone Network (PSTN), effectively replacing the traditional ‘phone trunk’ i.e. Primary Rate Interface (PRI) or Analogue line.

What are the requirements for SIP Trunking?
The user must have a PBX capable of connecting to all internal end users, an Internet Telephony Service Provider (ITSP) and a gateway which acts as an interface between the PBX and ITSP.

Both hosted PBX and SIP Trunking/On-premises PBX are VoIP solutions with similar functionalities, though a number of key differentiators that set them apart, such as;

Startup costs
Hosted PBX solutions only require the business to purchase IP phones, routers and to install a business grade internet connection.

However, should you decide to deploy a SIP Trunking/On-premise PBX solution, you will have to incur startup costs from the installation of your own PBX equipment and SIP Trunking.

It is highly recommended that you connect a separate internet connection for the SIP Trunking/On-premise PBX solution for your business to achieve optimum performance.

Ongoing costs
Hosted PBX service providers provide several, flexible packages for clients on a monthly subscription model. Their billing options are dependent on various factors such as; the number of users, features you require and per minute calling plans.

In contrast, SIP Trunking and On-premises PBX usually use the one pricing scheme per channel.

Each channel enables a user to make and receive one call simultaneously.

So, if your business requires at least 20 employees to be on the phone at the same time, you will require 20 SIP channels to accommodate all of them.

I have noticed that most service providers provide a flat rate for a SIP channel per month, though a few can provide you with a payment plan for ‘per minute’ charging.


Both Hosted PBX and SIP Trunking/On-premises PBX have got different scaling capabilities.

Hosted PBX service providers offer unlimited space for user additions to your PBX system. They will provide you with a web-based platform which is accessible through any standard browser, which will allow you to perform routine tasks such as; adding a phone to the network through a series of 1–2–3 easy steps.

SIP Trunking/On-premises PBX have the ability to scale but in a limited way. The scaling is dependent on the business ability to purchase more On-premise PBX servers and perform configurations on the ‘dial’ plans.

Well, you guessed it right. The process is just too expensive and cumbersome for most businesses.

Geographical Flexibility

A Hosted PBX solution will allow your business employees access their phone system and features, regardless of where they are, as long they got access to an internet connection.

Phone software such as softphones and mobile apps available on Google App stores provide users with the ability to access their phone system and features on multiple internet compatible devices.

SIP Trunking and On-premises PBX solutions are not able to provide this feature in a cost-effective manner.

Technical expertise
Your Hosted PBX service provider will handle all the technical challenges and issues that may arise from your business phone system.

This obviously translates to huge cost savings, as you don’t have to hire an in-house VoIP technician to troubleshoot your systems.

The routine administration is done through an easy to use web-based Admin portal and the overall system administration and maintenance is done by the service provider.

SIP Trunking/On-premises PBX solutions require businesses to hire a person with networking and software management skills to manage their systems.

The person must be knowledgeable in industry standard PBX software platforms such as; Asterisk, Tribox and Switchvox.

Calling features
The VoIP industry is a competitive industry and each VoIP service provider strives to have the latest and most advanced VoIP software available. Thus, your hosted PBX service provider will definitely be in possession of the best and technologically advanced VoIP software available In the market.

Due to the high prices of this VoIP software, businesses with SIP Trunking and On-premises PBX solutions are unable to access this software.


Hosted PBX solution service providers assign dedicated personnel to handle all PBX server, software maintenance and upgrades.

You will only be responsible for routine, internal housekeeping of your database such as; modifying calling user rights and adding phone numbers to the system through the use of an easy web-based online Admin portal.

Businesses with SIP Trunking and On-premises PBX solutions make their own arrangements concerning the maintenance of their on-premises PBX equipment and software upgrades.

These tasks require skilled personnel, which contribute to additional expenses for the business. During software upgrades, downtimes are expected and this further contributes to revenue losses for the businesses.

What makes Hosted PBX solutions the better options? A recap
· Lower Hardware & Servicing Costs
· Superb customer Experience
· Third-party software and mobile apps Integration
· Call Logging and advanced features
· Access to the latest and most advanced PBX software on the market
· Unlimited Scalability in adding new phone lines and users
· Geographical flexibility
· Number Retention even when employees leave the organization

Hosted PBX vs SIP Trunking/On-premises PBX: The verdict is out
As you have seen, there are several factors a business must consider when choosing the most appropriate VoIP solution for their business phone system.

The ease of setup and huge cost savings definitely puts the hosted PBX solution ahead of its competitor and I highly recommend it to any business looking for a cost-effective VoIP solution for their business phone system.



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