To set up a business phone system, you need to decide which fits your needs better: a hosted PBX or SIP trunking. Both connect to the public switched telephone network (PTSN), provide reliable phone service, and offer features, such as voicemail and an auto-attendant. However, cloud-based hosted PBX systems require fewer upfront costs and long-term resources, while SIP trunking is more resource-intensive.
The better option for a business will then depend on use case, but in general is as follows:
- Hosted PBX: Better for small businesses wanting a phone system with voice, video, and text capabilities without the added hassle of maintaining on-premise servers. You can learn more about the best options in our guide on the best hosted PBX providers.
- SIP trunking: Better for larger companies with information technology (IT) teams to maintain on-site equipment.
Did you know? Both technologies require some setup and may offer more features than you need, especially if your small team is mostly remote or if you only need to support one or two users. In this case, another option to consider is using a virtual phone number instead. You can learn more about this option in our guide on voice-over-internet-protocol (VoIP) versus virtual phone systems.
Hosted PBX vs SIP Trunking at a Glance
Variable, based on on-site functionality
Limited to choice of VoIP plans
Total control over features and data
Ease of Installation and Use
Easy after initial installation
Maintenance and IT Support
Handled by a third-party provider
Handled by on-site staff
Monthly service cost and optional expenses for phones or other equipment
Monthly service cost, infrastructure installation and upgrades, and phones or other equipment
Read on to learn more about how the different technologies compare:
Best for Scalability: Hosted PBX
Add or remove users and lines via an administrative portal.
Based on hardware capabilities, scaling up may require new servers or equipment.
As a small business grows from a handful of employees to 20 or more, owners add lines and users through a web-based administrator portal. Hosted PBX is ideal for companies hiring seasonal staff and is a must-have for fully remote organizations. Moreover, adding, removing, or configuring features doesn’t require technical experience.
In contrast, scaling on-premise PBX and SIP trunking services may require additional infrastructure and IT staff resources. In addition, business owners are limited to the existing capabilities of their on-site servers, meaning if you plan to expand, you must invest in larger systems from the get-go. Typically, large enterprises find SIP trunking scalable because they have existing equipment and IT teams, and expansion may therefore cost less.
Winner: Hosted PBX is more scalable for small- to mid-sized businesses because it doesn’t require on-site equipment or IT staff. However, both systems support call center phone systems.
Best Price: Hosted PBX
A monthly service cost and optional equipment expenses.
A monthly service cost or per-minute fees, on-site PBX installation, ongoing maintenance expenses.
While monthly service costs for hosted PBX and SIP trunking are similar, cloud-based PBX systems don’t require any special equipment or installation fees. Many voice-over-internet-protocol (VoIP) services, such as RingCentral and 8×8, charge a per-user fee, ranging from $12 to $59.99 per month.
Small business owners simply pick a plan, choose or port a phone number, and start using their new business phone system. Internet protocol (IP) phones or softphones connect desktop users to the phone system, but employees may use any internet-connected device.
By comparison, SIP trunking requires a significant upfront investment for on-premise PBX installation, and one PBX box can cost more than $1,000. From there, you’ll need to sign up with an SIP trunking provider, such as Twilio, that provides the software for your phone services.
While Twilio charges per-minute fees, other providers may require a monthly subscription. Additionally, you may need extra electrical or internet cables and IT support to build out your phone system.
In some cases, large organizations realize cost savings by using a limited number of lines for hundreds of employees versus paying a per-user charge with hosted PBX services. However, it’s important to factor in the cost of maintenance, upgrades, and repairs. Without an on-site IT team, companies may need third-party technical support to update hardware, troubleshoot an outage, and perform maintenance tasks.
Winner: Unless you already have an existing PBX system, the installation for SIP trunking can be prohibitive. For most small businesses, hosted PBX is cheaper to install, costs nothing to maintain, and offers reasonable per-user rates.
Best for Mobility: Hosted PBX
Cloud-based phone systems work from anywhere with an internet connection. Mobile apps keep teams connected.
Switching business locations means moving and reinstalling PBX and SIP trunking equipment. Mobile apps support on and off-site teams.
Both hosted PBX and SIP trunking offer user-friendly mobile apps that work across many devices, such as Android or iOS devices, desktops, and laptops. In addition, web-based management portals allow hosted PBX and SIP trunking users to access or configure features remotely.
However, if you move to a new office location, cloud-based services follow you without disruption. Simply use or install the VoIP application on work or personal devices to answer calls from any office with an internet connection.
Since SIP trunking requires on-premise equipment, switching locations requires moving equipment and associated components to the new office. Doing so may result in a temporary disruption of service until you’ve installed and configured the servers at the new site.
Winner: It’s easier to move to a new office building or eliminate a physical office when using hosted PBX because it doesn’t require on-site equipment.
Best for Ease of Installation & Use: Hosted PBX
The admin portal and mobile apps are user-friendly. No on-site hardware installation is required, except for configuring desk phones, if needed.
Mobile apps and the admin portal are easy to use. On-site installation requires IT knowledge and may need electrical wiring.
In getting your new small business phone system up and running, hosted PBX phone systems win hands-down. You can sign up, set up, and start using your phone services within minutes. Plus, web-based admin panels allow supervisors to configure access permissions or features, whereas mobile apps support employees using any internet-connected device.
However, mobile app functionality and ease of use differs by the VoIP or virtual phone number provider. For example, Grasshopper is well-known for supplying ultra-simple mobile apps, perfect for less tech-savvy users, whereas RingCentral’s advanced configurations may take more time to set up. Plus, businesses wanting to use existing landline desk phones may need to install analog telephone adapters (ATAs).
Similar to hosted PBX, on-site SIP trunking services provide user-friendly admin portals and mobile apps. It’s easy to configure user permissions or call management features in the office or remotely. The mobile apps give users access to all features and support calling from any internet-connected device. However, SIP trunking differs because initial installation is resource-intensive unless you currently have on-site PBX infrastructure.
Winner: Hosted PBX edges out SIP trunking because a new service can be up and running in minutes versus the hours or days it takes to install a new on-premise PBX system with SIP trunking.
Best for Maintenance & IT Support: Hosted PBX
The third-party VoIP provider handles all maintenance, upgrades, and repairs. Most software updates occur automatically.
An IT person handles all repairs, updates, and maintenance, including firmware patching. A third-party provider may send automatic software updates.
Many small businesses choose hosted PBX over SIP trunking because there isn’t any ongoing maintenance required. Instead, your VoIP provider maintains the servers, which includes patching. If you need help, simply call your provider’s customer service number or submit a trouble ticket.
Moreover, the provider handles any service problems or outages. In most cases, software updates happen automatically, and whenever you open your softphone app, you’re using the latest version.
In contrast, SIP trunking maintenance and support are handled by your company. If your employees’ phones don’t work, they call your IT department. Your in-house team is also responsible for firmware patching. However, third-party software may be automatically updated.
Winner: Hosted PBX comes with almost zero maintenance responsibilities, and your provider delivers customer support, making it an excellent choice for small business owners.
Best for Customization: SIP Trunking
Customization is limited to configurations based on your VoIP plan.
An on-site PBX and SIP trunking system are completely customizable.
A top reason companies choose SIP trunking is to have complete control over their servers, data, and phone features. Instead of paying a VoIP provider for unused features, your IT team customizes your system to your exact specifications.
With SIP trunking, your data stays in-house, on servers you own, whereas with a hosted PBX system, all information flows to external servers and data centers. For companies wanting total control over their security and the ability to tailor a custom system, SIP trunking is the best option.
The best hosted PBX providers offer a range of plans, and some also provide add-on features or a la carte options. So, if you want call recording, then you’ll need to choose a plan that offers this feature, even though it may also include many other advanced, yet unnecessary features. Additionally, many VoIP providers are HIPAA-compliant, but your data still goes to a remote server instead of remaining on-site.
Winner: SIP trunking allows business owners to fully customize their phone system, from features to security levels—making it the clear winner.
Best Hosted PBX & SIP Trunking Alternatives
Although most small businesses benefit from a hosted PBX system and larger enterprises find SIP trunking has the advantage, there are other times you may prefer an alternative. Solopreneurs, fully remote teams, or rural businesses without high-speed internet may consider the following options:
- Business landline: If you work in a remote area with a spotty or slow internet connection, conventional phone service may be more reliable than hosted PBX or SIP trunking.
- Virtual phone number: Solopreneurs or small teams may prefer a service that directs calls through their existing cell phone, eliminating the need for a full-service VoIP system. Find out the best virtual phone number providers based on pricing, features, and usability.
- Business cell phones: If you don’t need a new service for your office, business cell phones can keep teams connected.
Frequently Asked Questions (FAQs)
What is the difference between hosted PBX & SIP trunking?
The main difference between hosted PBX and SIP trunking is that a third-party provider maintains the servers for your hosted PBX phone system, whereas SIP trunking requires on-premise hardware, including a PBX box.
Do you need a PBX for SIP?
Yes, cloud-hosted or on-premise PBX systems are required for SIP. This is because VoIP services package the PBX and SIP trunking components into one service, while an on-site PBX box requires a SIP trunk to connect phones to the VoIP service.
What hardware do I need for a PBX system?
A cloud-hosted PBX system doesn’t require any special hardware, but you can purchase optional IP phones through your VoIP provider or authorized resellers. An on-site PBX system needs a PBX box, desk phones, and assorted hardware and cables. Local contractors, third-party equipment suppliers, or retailers like Telco Depot offer various PBX equipment.
Hosted PBX and SIP trunking are popular, reliable technologies that give companies access to advanced features, such as virtual receptionists and automatic call distribution. However, for small businesses without existing PBX infrastructure, cloud-hosted PBX services are cheaper and easier to install and maintain.
If you are searching for an easy-to-use and scalable VoIP platform, check out RingCentral. It offers advanced call management tools, including interactive voice response (IVR) and multilevel attendants.