Hosted PBX and SIP trunking for an on-premise PBX are services that a business might consider to implement a phone system. They are both VoIP solutions with similar functions, but they differ in key logistical, technical, and financial respects.
SIP Trunking and Hosted PBX Explained
A business phone system is often referred to as a PBX, which stands for Private Branch Exchange. A PBX is responsible for connecting phones and voice applications such as an auto attendant, voicemail box, etc. Today, a PBX is telephony software that runs on a server in your office or is hosted by a third party. Most IP PBXs and the phones that work with them use the SIP protocol, a communications protocol for signaling and controlling multimedia communication sessions.
Whether or not an IP PBX is hosted or in your office, it will need to be connected to the Public Switched Telephone Network (PSTN) for outbound dialing. The PSTN is not all VoIP-based (or SIP-based), so one must use a SIP trunking service to connect the PBX to the PSTN. With hosted PBX service, the PBX and SIP trunking service are kept offsite and maintained by the provider. With SIP trunking, the PBX is installed and managed on-site by your own IT staff, and you are also responsible for purchasing and maintaining a SIP trunking service.
So in short: a hosted PBX service is a complete phone system solution that connects to the PSTN and is maintained by a third party. SIP trunking is a gateway for your on-premise PBX to an Internet Telephony Service Provider (ITSP).
Here are 8 key differentiators between hosted PBX and on-premise services.
1. Hardware Costs
To set up a hosted PBX, your office will need IP phones, routers, and business-grade broadband service. The provider "hosts" the actual PBX servers and maintains them, so you do not need any additional hardware. From this standpoint, hosted service saves you money on initial startup costs.
An on premise PBX and SIP trunking, on the other hand, require significant upfront capital expenditure. IT staff must install on-site IP PBX servers and connect a SIP trunking service. In addition, it is often recommended that a business install separate Internet connectivity for the SIP trunking service.
2. Ongoing Costs
Once you set up your hosted phone system, you will pay a monthly subscription fee to use the VoIP service. Providers typically offer several packages and bill by the user, feature, and/or calling minute. Depending on the needs of your team, you could pay anywhere from $10/month per user to $50/month per user.
One pricing scheme that SIP trunking services use is per channel. Each channel allows you to make one phone call simultaneously. If you need to have ten employees on the phone at the same time, you might need 10 SIP channels to accommodate them. Charging by the channel is typically a flat rate per month plan.
Alternately, SIP trunking services can charge per minute. For example, one of Digium's packages charges a flat fee of $.015 per minute with no setup fees. Twilio is even more cost effective, with outbound calls costing just $0.007 per minute, and inbound calls costing $0.0045 per minute.
SIP trunking phone systems can scale out, to an extent, but they require you to purchase more on-premise servers when you expand significantly (and configure dial plans accordingly). One PBX can typically handle up to a couple hundred phones.
Reputable hosted VoIP services, on the other hand, have virtually unlimited space for your users. Hosted VoIP phone systems allow you to add new phones and users to your phone system in a few simple steps. It's typically so easy that a non-IT professional can handle it. With IP phone booting, the entire process for adding a phone to your network can be done inside your web browser.
4. Geographical Flexibility
One of the main advantages of a hosted PBX is geographical flexilibity. This lets your employees access the phone system even when they're outside the office - traveling, working from home, etc. Features such as webphones and mobile apps enable users to access the office phone system from their various devices.
5. Software Interface
Maintaining an on-premise PBX requires networking and software management expertise to operate. Having an IT staff member on hand is critical to maintaining your on-premise PBX and SIP trunking service.
Common PBX software includes: Asterisk, Switchvox, and Trixbox. Without a mastery of one of these platforms, your business runs the risk of losing phone service entirely during an outage. If you can't afford to hire a full-time staff member, there are freelance IT personnel who work with small businesses.
Hosted PBX users don't have to worry about these issues. The phone system is controlled from the online Admin Portal, designed for easy use, and overall system maintenance is controlled by the VoIP provider.
6. Calling Features
Hosted PBX companies compete against each other to develop leading business calling features. Competition drives these VoIP providers to release new third party integrations, real-time communications add-ons, custom call center reporting, instant video conferencing, and more.
On-premise PBXes tend to miss out on these new features, unless you have a dedicated software engineer who can build and maintain custom telephony applications.
7. Call Quality and Security
Oftentimes with SIP trunking and Hosted PBX, the most important variable in your call quality is your Internet connectivity. If your Internet connectivity is suffering from jitter, delay, packet loss, or insufficient bandwidth, this will degrade your phone calls. You can test your network quality with a VoIP network test. Similarly, if your network is not secure, you are exposing your phone system to potential security breaches.
If the SIP trunking service you select runs a dedicated connection to you (not over the public internet), this lends to better connectivity and security. Nowadays, though, most SIP trunking and hosted PBX services send packets over the public Internet. You can check with the provider on how they ensure call quality and security (e.g. geographic platform distribution, utilizing redundant carriers, employing shortest path call routing, end-to-end encryption).
The only kind of maintenance you'll be responsible for with a hosted PBX is adding users, changing features, and other internal housekeeping. Your service provider will take care of server and software maintenance. They have a dedicated IT staff that manages outages, disruptions, and system-wide upgrades.
Conversely, these issues must be handled by your own IT staff if you're using an on-premise SIP trunking service. The servers are stored on your property, and their upkeep will be left to you. If your PBX software provider releases a new update, your network administrator must reinstall the software and reconfigure your servers for the changes to take effect. This can mean scheduled downtime for your phone system.
Hosted vs. Trunking: The Final Verdict
There are many factors to consider when selecting a business phone system for your organization. Security, flexibility, scalability, and ongoing costs and maintenance are some of the key differences between choosing a hosted VoIP solution and a SIP trunking service. Ultimately, you should consult with your network administrator or IT staff to discuss the best option for you. (But if you don't have those resources, we definitely suggest hosted!)