If you’re in the market for a VoIP phone service for your business, it’s likely that you’ve come across two choices from some service providers: hosted private branch exchange (PBX) and session initiated protocol (SIP) trunking. They are very similar but have one primary difference that makes them better suited for different uses — a hosted PBX VoIP phone system is hosted at your service provider, but a SIP trunking places the PBX at your business. In this article, we explain both in more detail as well as when to use one over the other.

What is VoIP Telephone Service?

Instead of your local phone company’s copper wires, VoIP phone services use your business’ existing internet connection to convert and transmit voice as data. If you’ve used Skype to make a phone call, then you’ve used VoIP technology before. But while Skype is typically used by individuals, there are other services, like RingCentral, that leverage the same technology on a larger scale for businesses.

VoIP phone service providers generally give your business two options to access their service:

• Your phone service provider owns and manages the equipment necessary for you to access the service in the cloud; or,
• Your business buys your equipment outright and your IT team self-hosts and manages the service.

These two options rely on a hosted PBX or SIP trunking, respectively. Here is how they differ.

Hosted PBX

A hosted PBX VoIP phone system is hosted on your VoIP service provider’s servers at their location. Whenever you make or receive a phone call, that call is first routed through your provider’s servers before it connects to your phones. Hosted PBX systems are cloud-based and do not require you to purchase or install a physical PBX hardware box. Instead, you can manage PBX features like call routing, transfers, auto attendant, and voicemail from your internet browser or smartphone.

The primary advantage of a hosted PBX is that there’s no hardware to purchase or install. Your VoIP phone service provider will provide and maintain all of the equipment needed to connect you, other than your phones themselves, so your initial costs are much lower. Instead, users pay a monthly subscription fee per extension. This makes a hosted PBX an economical option for small businesses. Setup is also very easy — just connect your phones with an ethernet cable and manage your call routing settings online.

RingCentral’s Virtual PBX plans are a good example of a hosted PBX VoIP phone service.

SIP Trunking

SIP trunking is a combination of voice over IP (VoIP) protocol and streaming media services, which are based on the session initiated protocol (SIP). Where VoIP transmits your voice as data over the internet, replacing the need for traditional phone lines, SIP delivers unified communications that combine voice, video, and other streaming services like screen sharing and web conferencing.

SIP trunking is what eliminates the need for a physical connection to your phone company — it’s installed virtually on your business’ internet connection, replacing the need for traditional phone lines. It also allows your business to send and receive calls using the network at your business’ location — whenever your employees make or receive a call, it’s routed through your business’ servers.

Using SIP trunking, VoIP providers connect one or more channels to your business’ PBX hardware. Individual phone numbers are linked to the SIP trunk and in many cases, existing numbers can be ported to it.

The primary benefit of SIP trunking for businesses is that it allows them to keep their existing hardware, thereby maximizing their previous investment and maintaining any existing configuration. Monthly service costs are generally lower as well.

RingCentral also offers SIP trunking in addition to their hosted PBX VoIP phone services.

Hosted PBX or SIP Trunking — Which Do I Need?

Because the two systems have similar features and functions, it can be easy to confuse them. However, the primary difference comes down to who uses them.

Generally speaking, larger businesses have more to gain from using SIP trunking. If they have multiple locations, a large number of employees, or legacy hardware from previous systems then SIP trunking may be the better fit. In these cases, it’s easier to configure, easier to scale, more secure, and more economical. If your business is large enough to benefit from and manage SIP trunking, then it’s unlikely that you’re reading this article — you already know.

On the other hand, smaller businesses will almost always be better off with a hosted PBX solution. They require minimal up-front investment, no additional hardware other than the phones themselves, the service and the equipment are managed by the provider, and their ease of use and affordability make them ideal for small businesses. If in doubt, opt for a hosted PBX VoIP phone service such as those offered by RingCentral. Click the button below for a free trial:

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