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What are VoIP PBX systems? Comparing hosted PBX vs. on-premises PBX

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Ongoing online meeting made possible by VoIP PBX systems

In today’s digitally connected world, legacy phone systems no longer provide the advantages they once did. Traditional PBX systems don’t offer the flexibility and cost-efficiency that modern businesses need.  

VoIP technology has transformed the world of business communications by allowing users to make and receive calls over the internet. Businesses the world over have made the switch to IP PBX, and you should too.  

When choosing whether to implement an on-premises PBX or one that’s hosted in the cloud, there are some fundamental differences you should know to ensure you’re providing the best communications infrastructure for your employees and customers.

Here, we’ll compare on-premises PBXs and hosted IP PBXs to help you decide which is the best solution for your business.

What is a VoIP PBX system?

PBX is an acronym for Private Branch Exchange. A PBX system is a private telephone network that a company or organization uses to communicate internally and externally through Voice over Internet Protocol (VoIP), ISDN, or analog phones. 

Both on-premises and hosted PBX systems allow businesses to use more phones and telephone numbers than traditional phone lines that operate using a Public Switched Telephone Network (PSTN, for short). PSTN network uses switchboard technology which requires you to install landlines and is primarily used to facilitate residential telephony.

VoIP PBX systems offer advanced features, such as:

  • Voicemail
  • Call forwarding
  • Interactive voice response (IVR)
  • Call recording
  • Call queues 
  • Online faxing

To use VoIP PBX, you need a reliable broadband internet connection. What’s more, VoIP technology supports numerous kinds of IP phones, including desk phones, softphones, and conference phones, as well as mobile devices.

When choosing a VoIP PBX, you’ll need to pick between on-site or hosted PBX.

What is hosted PBX?

Cloud-hosted PBX or simply, hosted PBX (also known as virtual PBX or cloud PBX), is one where the service provider hosts, manages, and maintains the servers and technology required for the phone system to function. 

A virtual PBX provides all the benefits and features of a regular PBX while being rooted in cloud technology. Cloud PBX solutions are hosted in remote data centers, and their services are delivered through internet connectivity.  

In addition to offering all the call management and routing features of legacy PBX systems, they also provide businesses with numerous benefits such as flexibility, mobility, and lower overall costs.

Virtual PBX systems have evolved to provide end-users with a range of advanced features that simplify business communications and collaboration. Moreover, IP PBX solutions are offered as a service with flexible pricing and payment plans, making them a great option for small businesses.

What is on-premises PBX?

On-premises PBX systems reside on-site at your premises. Your company or organization is responsible for hosting and maintaining the PBX system, which increases the overall costs. 

With on-premises PBX systems, phone calls can be made either through a traditional phone company or VoIP with SIP trunking through an internet phone service provider. The PBX system requires the business to have the appropriate infrastructure, including servers, hardware, and data network security. 

On-premises PBX systems are more suitable for large enterprises with the budget, infrastructure, and resources to deploy and manage them. For instance, you need a dedicated IT team to ensure the security and maintenance of the system. 

On-premises PBXs give end-users more control over the system and their data but come with a lot of additional costs. Virtual PBX service providers like RingCentral have evolved to offer end-users more flexibility and customization of their IP PBX without those costs. That makes RingCentral the provider of choice for many large companies.

Choosing between hosted PBX and on-premises PBX

Choosing between on-premises phone systems and hosted PBXs depends on your business needs and available infrastructure. 

On-premises solutions can work just fine if you have sufficient business infrastructure in place to manage them. However, it’s important to consider the added costs that come with managing and maintaining the network, on-site servers, security, and hardware.

Alternatively, there’s a huge range of hosted PBX and unified communications solutions on the market that offer numerous benefits and advanced features that can improve business communications and even make residential VoIP a possibility. 

A business phone system like RingCentral MVP (formerly RingCentral Office) allows you to completely outsource hardware and infrastructure requirements while giving you complete control over your data, settings, and a wide array of advanced features.

On-premises PBX

  • High initial expenses for hardware and installation
  • High maintenance costs at the expense of the business
  • High expansion costs
  • The company is responsible for software updates
  • Telephone lines required for each handset
  • In-house IT department required to ensure system functionality

Hosted PBX

  • Little on-site hardware or installation costs
  • Few maintenance costs; servers and hardware are the service provider's responsibility
  • Easy to expand or reduce the system as required at little to no cost
  • Automatic and non-intrusive software updates
  • New users and numbers can easily be added
  • Reduced dependency on in-house IT teams; everything is taken care of by the service provider

Benefits of a cloud business phone system

Opting for a hosted IP PBX system yields countless benefits when compared to on-premises PBXs.

1. Improved data security and maximum uptime

On-premise PBX systems rely on a specialized in-house IT team or third-party service vendors to handle security, data breaches, and access control. However, your data isn’t all you have to worry about. You’ll also need to ensure your physical premises are protected with video surveillance systems and other types of security systems. 

Compared to those hosted on-premises, top-level cloud PBX and VoIP phone systems eliminate many threats that legacy systems are more susceptible to, like security breaches, power outages, and even natural disasters. A major benefit of cloud PBXs (when compared to on-premises) is that you don’t have to worry about how secure your data is anymore—it’s all taken care of. 

Solutions like RingCentral house your cloud PBX in secure, Tier 1 data centers protected by enterprise-grade security. This means you can rest assured that your data is secured and ensure business continuity in case of emergencies or disruptions. 

When your business experiences downtime, it comes at huge costs to your business. It can reduce your customers’ trust in you and set you behind on projects. Hosted PBX providers guarantee maximum uptime, most of them (like RingCentral) adhering to the enterprise gold standard of 99.999%.

2. Lower costs

One of the most obvious benefits of implementing an IP PBX phone system is the cost savings for businesses. By eliminating on-site PBX appliances, businesses can reduce initial costs as well as the long-term costs of managing and maintaining an on-premises PBX system. 

IP PBX systems function using cloud technology, which means there are little to no costs associated with hardware, management, and IT support. 

With a cloud-hosted VoIP solution like RingCentral MVP (Office), you can manage your entire system online. If you want to add new extensions, modify features, or contact IT support—you can do it all from the simple RingCentral MVP interface. 

With RingCentral MVP, you’ll pay a single monthly cost that covers unlimited voice calls, video meetings, instant messaging, and a host of call management and collaboration features to streamline your business communications and enhance productivity.

3. Increased mobility

In today’s digitally connected world, remote work has taken center stage. 

An IP PBX allows team members to sign in from any internet-connected device, whether that’s a cell phone, tablet, or desktop. With the mobile app from RingCentral, users can access all the functionality of a business phone system from their mobile device. 

Users can make calls, join video conferences, send text messages, send and store files, and much more with RingCentral for mobile. 

Hosted PBX empowers employees with the freedom and flexibility to effectively work remotely. Not only does this increase their productivity, but it also improves your company’s bottom line.

Manager dialing a team member’s number from his mobile phone

4. Scalability

Hosted VoIP PBX phone systems offer more scalability for small businesses as users can easily add new phone lines, phone numbers, locations, and extensions in no time at all. This makes it extremely easy and quick to scale your business phone system as your business grows—so you can get down to business immediately! 

Say you’re experiencing a period of rapid growth or need to scale your call center software to accommodate more phone lines during a hectic period. You can do so without incurring huge costs or investing in equipment that’ll go unused for most of the year. 

Moreover, hosted VoIP PBX systems can accommodate remote sales staff and business teams by allowing them to sign in to their business phone system from anywhere in the world. This opens up the hiring pool for businesses to work with remote talent.

5. Easier to install new features

Business phone systems give users access to a range of advanced features like:

  • Auto-attendants
  • Call reporting and analytics
  • Cloud storage
  • HD video conferencing 
  • Intelligent call routing for fielding incoming calls
  • Mobile apps
  • Voicemail-to-email transcription
  • Business app integrations (CRM, project management tool, etc.)

These advanced features enable businesses to maximize productivity and enhance communications internally (among teams) and externally (with customers and clients). 

On-premises PBXs rely on in-house IT teams to handle new feature installations. This can be a slow and complicated process and means you’ll spend more time waiting for those features to get up and running. With IP PBXs, installing new features is handled by the service provider, saving you time, money, and confusion. 

What’s more, cloud PBX providers have access to a wider pool of resources. This makes it simple for users to customize their business phone system with the latest feature sets.

RingCentral MVP: A VoIP phone system for your business

RingCentral MVP is a virtual PBX solution that offers all the advantages of traditional PBX (extensions, paging systems, voicemail, etc.) without the limitations and expenses related to hardware, management, and maintenance. 

RingCentral MVP provides businesses with an integrated platform for voice, video, and message, as well as a range of advanced features to improve communications. Key features of RingCentral MVP include:

  • Complete mobile integration
  • Business SMS
  • HD voice and video with screen sharing
  • 99.999% uptime and enterprise-grade security
  • Advanced call management features (intelligent routing, automatic voicemail transcription, custom greetings, etc.)
  • Real-time data insights
  • Business app integrations and open APIs
Video: A modern business phone system

Make the switch to a cloud PBX today

If you’re weighing up the pros and cons of implementing a cloud PBX business phone system, it’s important to consider your business needs. Choose a solution that provides the flexibility and scalability you need to grow your business communications simply and affordably.

By placing your trust in a cloud PBX provider like RingCentral, you can focus on serving your customers, connecting your team, and achieving your business goals. Learn more about our solution by viewing our demo.
Important details and disclaimers
Get Connected Promotion:
20% Office + Phone Rental discount for SMB’s
*Void where prohibited. The Offer is valid between March 1, 2021 and August 31, 2021. To qualify for SMB Get Connected promotional offer (“Offer”) you must: purchase a two-year RingCentral MVP plan of any tier; (2) between two and three hundred ninety-nine digital lines; (3) be located in the US and Canada only ; and (4) be 18 years of age or older; when purchasing the RingCentral MVP plan (the “Qualifying Conditions”). The Offer includes: (1) a 20% discount off the standard list price of qualifying any RingCentral MVP plans for remainder of two-year plan; and (2) the option of phone rentals “Qualifying Phone Models” (defined below) for a 40% off the standard list prices offered by RingCentral. Qualifying Phone Models are limited to the following: Poly 150 or 250 or Yealink T42S orT48S, subject to availability and RingCentral’s sole discretion. Promotional price discount applies to base monthly rate only and excludes fees, taxes, additional or premium services and other charges. These terms are subject to change at any time without prior notice. You agree that the final discount Offer price is determined by RingCentral’s sole discretion, in compliance with these terms and any applicable laws. RingCentral reserves right to terminate this offer at any time. RingCentral Terms of Service apply. Early termination or other changes to the customer’s RingCentral MVP plan, may be subject to additional fees, subject to the Qualifying Conditions.
RingCentral Office is now RingCentral MVP. All references to "RingCentral Office," whether in the Agreement or its attachments, Order Forms, marketing or descriptions, mean "RingCentral MVP"