VoIP vs. PBX: Strengths And Differences of These Business Communication Tools

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    preferred communication methods. 62% prefer phone calls.

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How many times a day do you use your mobile device, whether for personal or business use? How many calls do you make or how often do you access the internet to check the weather, order food, monitor your social media, or simply play a game? The answer would probably surprise you but with more than six billion smartphone subscriptions globally (and growing), phones are our lifeline to the world.

Phones have changed dramatically since they were invented in 1876. In 1876, the idea of an international phone number would have sounded bizarre. They’ve even changed dramatically in the last 20 to 30 years or so. It’s not just the actual phones that have changed, however, but the way they connect with each other and, more recently, how they connect with the internet.

In particular, businesses have to consider what sort of network is best for their needs. That can come down to costs, connectivity, or other factors. The main two choices for businesses are a PBX (private branch exchange) or a VoIP (voice over internet protocol) system. Just what do these two systems do? What are their strengths and weaknesses and how does a business choose between them?

What are VoIP and PBX?

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Before getting into differences, strengths, or weaknesses, it may be beneficial to have an idea of what each system means and how it works. You would do the same for any system you are considering implementing, from a retail POS system through to inventory control software, so do the same for your phone network.

1. VoIP

VoIP stands for voice over internet protocol which, as the name may suggest, means that you connect calls and other communications using an internet connection. If you are making a voice call, your words are transformed into data packets and transferred to the person receiving the call.

In recent years, the quality of VoIp calls has drastically improved. Of course, the quality of your VoIP system is going to depend on the quality and stability of your internet connection, but a VoIP system now allows for high-quality calls as other services such as video conferencing.

2. PBX

PBX stands for private branch exchange. A PBX is a private phone network used by an organization. It allows for both internal and external communications and offers businesses several features not available on a traditional network such as IVR (interactive voice response) and the ability to easily transfer calls. These features, and others, made PBXs a popular choice with contact centers before VoIP increased in quality.

As VoIP has now ‘caught up’ with PBX networks, both in terms of quality and in features offered, the choice can be more difficult to make today. That choice can very much depend on knowing how one or the other will best meet your business needs. So, what are the strengths and weaknesses of each?


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1. Costs

Costs are going to be important to any business, no matter how large or small it is. Even signing a contract using an online electronic signature software can have a major effect on any organization’s bottom line, especially in the early stages. This can be especially true for startups or businesses operating on a tight budget. Budget can be a major decider in many aspects of a business, including choosing the best blog niches for affiliate marketing.

a. VoIP

Costs are negligible with a VoIP system, at least in the initial stages. As long as your location has a strong and stable internet connection, you are ready to start. Simply choose your service provider, decide on the subscription level you need, and install the proposal building software and other required tools. VoIP allows for a wide range of features and you can now even host a recorded webinar.

As any hardware is owned and hosted by your provider, there is no need for IT staff to install or service the system; all that is done by the provider. Where you will incur costs is in ensuring that you have phones that are compatible with the system, all required software (usually downloaded), and a router that can handle VoIP calls at sufficient quality. You will also have a monthly subscription fee that is usually dependent on the number of users you have.

b. PBX

This is the biggest drawback of choosing PBX. As you are opting for a private network, the setup costs, and ongoing maintenance, can be costly. You need to pay for and install all the required hardware as well as a power supply for your network, routers where needed, and phones and/or headsets that work with the PBX.

A PBX network will also need regular maintenance and updates, which means you will need specialists or dedicated staff in-house, thus adding more overall costs. The prohibitive costs involved in setting up a PBX are why you mainly find it in larger companies or call centers that have not yet made the switch to a virtual system.

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If you are using your phone system to communicate with customers or suppliers, then you expect a certain level of quality. Poor quality calls can mean disgruntled customers and that in turn can lead to them looking elsewhere if they find it hard to communicate with you. Call quality can be a major factor when you ask what is customer experience analytics going to bring to your business.

a. VoIP

As already mentioned, there have been dramatic improvements in the quality of VoIP calls in recent years. However, the quality of your VoIP calls still depends on a number of factors, primarily how good your internet connection is. Other factors that can have a negative effect on call quality include poor hardware such as cheap phones or headsets and inefficient configuration of routers or software. You will often find that the best software has undergone some form of crowd testing.

b. PBX

PBX very much depends on the hardware you have chosen and installed so, as with many things in life, the quality will depend on how good a system you have chosen and if it has been properly installed. As with VoIP, poor-quality peripherals, such as phones or headsets, can also have an adverse effect on the overall quality of your calls.

Scalability and upgrades

Nearly every business hope to grow and expand at some point and, with rapidly evolving tech, your system may need to be upgraded on a regular basis. How do VoIP and PBX face these challenges?

a. VoIP

One of the beauties of a VoIP network is scalability. Nearly all providers make it easy for you to upgrade your plan as they recognize you want the potential for growth. If you do scale upwards (you can scale downwards if necessary), then you may need to look at whether your current internet plan is sufficient to cope with added users, but this is again a simple process. Of course, you may also need to buy extra phones.

Upgrades are also simple with a VoIP system. Not only are they simple, but they are also hassle-free too as any changes to the system are usually carried out by the provider free of charge. Where you may incur costs is when you consider upgrading routers or phones/headsets if there are better and more efficient options available.

b. PBX

Sadly, PBX is a different kettle of fish in this regard. If you need to scale beyond the capacity of your current system, then you are facing a process that can be both costly and complex. And unlike VoIP, if you change location, then you need to start from square one when it comes to building your PBX infrastructure.

These difficulties also apply if you are looking to upgrade your system. Replacing outdated or inefficient hardware can cost a lot of money as well as needing specialist IT staff to replace the old equipment. If you are merely adding new features to the system, those same hurdles remain high cost and the need for experts to install or add to the current system.

Security and reliability

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Of course, any business wants to be sure that their systems and data are secure, but this can be especially true for call centers that handle sensitive information such as healthcare data. That means you want a system that offers both security and reliability.

a. VoIP

As far as security is concerned, a VoIP system depends on the quality of the provider as well as how you have configured the system. Most providers will offer a high level of security, but you as an organization shoulder much of the responsibility in ensuring you are safe from external attacks, that you use call encryption where needed, that a good firewall is installed, and that you train your staff in security tactics such as strong password use.

The major issue facing your VoIP system is that it is dependent on a power source (unless you have independent power or a backup) so if there is an outage, your connection is gone. The secondary issue is that your system depends on a stable internet connection so if your ISP encounters problems, you will too. Knowing the common VoIP issues you may face can help inform any decision.

b. PBX

Your PB system is not connected to the internet so your information is secure and not open to attacks from external threats. Of course, if you integrate other solutions with your PBX, then you need to ensure those solutions have sufficient protection but hackers cannot gain access to data via your PBX alone as it connects to the outside world via PSTN (public switched telephone network).

PBX is not vulnerable to power outages and it will keep working even during a major power cut. If your technicians have properly installed or maintained your PBX system, then it should be reliable. The only issue you may face is if any of the hardware fails or breaks down. If a major component goes down, then you may face lengthy downtime till any problems are rectified by IT staff or an external specialist.

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Flexibility can be another major factor when it comes to considering which phone system to opt for. You want to ensure a high level of flexibility in the workplace and that can often start with how you communicate.

a. VoIP

Flexibility and mobility are two of the major features a VoIP system brings to your business. You can choose to use any phone as long as it offers VoIP calling and is compatible with your system. VoIP is also extremely mobile and, as long as your staff has access to a good internet connection, they can use it anywhere and from their own phones or via a mobile app. This means you can easily adapt to any remote working model.

b. PBX

Whereas flexibility and mobility are offered in droves by a VoIP system, the opposite is true with a PBX. In most cases, PBX phones will be proprietary and tied to the make of the system you chose. And, because PBX is a hardware-based internal system, it offers no mobility whatsoever, meaning that if some of your employees move to remote or hybrid working, you need to look for other communications solutions.

The takeaway

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It could be argued that VoIP has now superseded PBX systems, with the multitude of features on offer, such as team chat for online collaboration regardless of location, VoIP adapts to any new innovations that are developed.

Of course, choosing a system is going to depend on factors such as business needs, budgets, etc. Will your choice of phone network be a factor in increasing customer retention? Or will it help to ensure your customer acquisition using a field service quoting software?

Modern businesses need to have multiple tactics and strategies to compete in today’s marketplace. From efficient SEO video marketing to omnichannel communications, the right, or wrong, decision can have a substantial effect on results. The phone system you choose is a major decision, you should weigh the pros and cons and review the terms carefully using a software contract.

Severine Hierso - EMEA Senior Product Marketing Manager, RingCentral Office

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Severine Hierso is EMEA Senior Product Marketing Manager for RingCentral Office, the leader in cloud voip business, and is passionate about creating value, differentiation and messaging, ensuring a better experience for customers and partners.

She has gained extensive international Product Marketing, Market Research, Sales Enablement and Business development experience across SaaS, Telecommunications, Video Conferencing and Technology sectors within companies such as Sony, Cisco, Cogeco Peer 1 and Dimension Data/NTT.

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