Hosted PBX vs SIP Trunking: Which Is Better for Small Business?

A hosted private branch exchange (PBX) and session initiation protocol (SIP) trunking are two underlying technologies that make voice-over-internet-protocol (VoIP) communication possible. A hosted PBX is a top-to-bottom phone service that is handled in the cloud by a third party. SIP trunking, on the other hand, requires you to host and maintain equipment in your office. Hosted PBX requires less work for small business users, while SIP trunking offers more control.

• Hosted PBX: Best for most small businesses that don’t want to worry about installation and maintenance of expensive PBX equipment.
• SIP trunking: Best for tech-savvy businesses that want full control over their telephony hardware, including improved cost efficiency for larger organizations.

Hosted PBX vs SIP Trunking at a Glance

Takeaway: An SIP trunk solution offers customers more control and privacy over their system. It is up to them to determine how much or how little functionality their service has, which can be an asset to some teams, like telemarketing, healthcare, or IT support groups, whose livelihood depends on the security and reliability of their call center phone system. However, setup and maintenance require much more work and technical expertise than a hosted PBX.

A hosted PBX, on the other hand, offers less customization, as all PBX functionality is hosted in the cloud by your service provider. While this may seem like a negative, it doesn’t have to be. This is because all you have to worry about is logging in to your account and using your features. For this reason, it’s likely the best choice for small businesses with limited resources.

When to Use Hosted PBX

Most small businesses will want to consider a hosted PBX over SIP trunking when it comes to their business phone system. Hosted PBX systems, like the one offered by RingCentral, require almost no work on the part of the customer; you can go from setting up your account to making calls on your computer or mobile device within minutes. It also negates the need to purchase or set up any hardware like what’s required with a SIP trunk. You can learn more about RingCentral’s hosted PBX service by visiting their website.

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Hosted PBX Pros & Cons

Hosted PBX Pricing

Hosted PBX pricing will depend entirely on what service you go with. This can range from 8×8’s entry-level package, which starts at $12 per user, per month for minimal features. On the other end of the spectrum, RingCentral’s Ultimate package starts at $49.99 per user, per month for two to 20 users on an annual basis for real-time analytics, developer options, and hot desking.

Why Hosted PBX Is the Better Choice for Most Small Businesses

A hosted PBX is likely the best choice for most small businesses because it requires so little of them in terms of cost and effort. Once you sign up with a service provider, you can start making calls on a computer, mobile device, or VoIP desk phone while your provider handles all of the technology on their end. For small businesses that lack the spare time to maintain a PBX box, hosted is the way to go.

Hosted PBX Providers

There are several highly capable providers for hosted PBX service in the market today. Many of these services also offer tiered pricing plans, which allow you to scale up or down in users and features depending on the needs of your business. You can find a list of our top choices in our article on the best hosted PBX providers.

When to Use SIP Trunking

SIP trunking has the same end result as a hosted PBX, and you are still using a combination of hardware and software to transmit calls as data over the internet. The key difference is that you, as the customer, must set up and maintain the PBX hardware box in your office. A SIP trunking solution, like what is provided by Twilio, is ideal for tech-savvy teams that want full control over the system’s security and features. If your company is very large, it could also make more financial sense to host the system yourself.

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SIP Trunking Pros & Cons

SIP Trunking Pricing

Pricing for SIP trunking can vary greatly. A PBX box can easily cost upwards of $1,000. On top of that, you will need software such as Twilio, which is used to build a phone system to your exact specifications. That service is priced on a per-minute basis starting at $0.0045 per minute. However, unless you are a capable developer, you will also need to hire someone to build out this system.

Why SIP Trunking Is the Better Choice for Larger Teams

If you have a larger company, you likely have at least one full-time IT person who is capable of PBX installation and maintenance. If so, taking the initial hit on investing in an SIP trunking setup might make the most long-term financial sense for your company. The customization features will also help you get exactly what you need out of your phone service.

SIP Trunking Providers

In addition to offering tiered feature plans, a number of the best VoIP phone service providers for small business also offer SIP trunking plans for those who would prefer more control over their phone system. Many of these services also offer the use of mobile apps that can extend the functionality of the office’s business phone system to remote workers.

Hosted PBX vs SIP Trunking: Which Is Better for Small Businesses?

Assessing your company’s size, budget, and preferences will overall determine if hosted PBX or SIP trunking is better for you. While SIP trunking has its place among larger companies and those with specialized needs, we do urge most small businesses to at least consider hosted PBX, as the savings and ease of use are going to serve most organizations much better.

Ultimately, the choice between hosted PBX or SIP trunking will boil down to the following factors:

• Cost: A hosted PBX is a lower initial investment and costs less money every month for smaller teams. However, larger organizations with the right infrastructure might find SIP trunking to be a better long-term investment, especially if they already have full-time IT staff.
• Control: When the PBX is hosted on a provider’s hardware, you only have so much control over what features you use and what security options you have. While the vast majority of providers offer a wealth of features and top-level security, some niche businesses might want full control over their phone network and would therefore benefit from SIP trunking.
• Tech knowledge: If you go with SIP trunking, you will need to know how to properly set up and maintain your PBX box. You will also have to figure out how to set up lines for each of your employees. With a hosted PBX, you can start making calls and using features like video conferencing within minutes of setting up your account.

Ultimately, we find that a hosted PBX is the best choice for most small business users, just because it’s so easy to use and carries a low monthly cost with no need for extra hardware. Most small businesses lack the budget to properly host a PBX box in the first place, so we suggest trying a service in which the provider does all the heavy technological lifting.

Frequently Asked Questions (FAQs)

What happens if my hosted PBX service goes down?

In most cases, you can reach out to customer service to check in on the issue and perhaps receive a credit for your lost time. Many providers have a service level agreement (SLA) that their service will be up a minimum of 99% of the time you are subscribed. If they breach that agreement, they are obligated to give you at least partial compensation for your missed time.

Where do I buy PBX hardware?

In most cases, you will have to buy a PBX box from a third-party equipment supplier. Depending on where you live, you might also have local contractors that can handle supplying the box and installing it. You can also buy them online from retailers such as Telco Depot.

What kind of internet connection do I need for an internet-based phone system?

Regardless of what option you choose, you will need a fast, stable internet connection. In order to make sure your network can handle a phone service, we recommend checking out our internet speed test guide.

Bottom Line

SIP trunking and hosted PBX are two popular methods for businesses to make calls over the internet. However, they are very distinct technologies with their own advantages and disadvantages. While SIP trunking is a good choice for larger teams that can support it, most smaller outfits will want to look at a hosted PBX for its cost savings and usability.