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There is no doubt that businesses are looking to reduce communication costs without compromising on phone service features and voice quality. When it comes to implementing Voice over IP (VoIP), two options compete: hosted PBX vs. SIP trunking. Both solutions aim to free businesses from traditional telecom operators and their costly analogue systems. While they’ve got similar functions, they differ in their financial, logistical and technical requirements. So, which one is right for your business?


A Few Definitions


  • PBX is an acronym for Private Branch Exchange. It’s the private telephone switching system that connects external telephone services (PSTN) to user extensions within the organization.
  • SIP (Session Initiation Protocol) is the industry standard application-layer protocol used for peer-to-peer communications and multimedia, including voice, video, email and instant messaging.
  • IP (Internet Protocol) refers to the communications system to route data between computers or network nodes.


What Is a Hosted PBX?

A Hosted PBX eliminates the need to have on-premises PBX equipment. The PBX services are provided by an Internet Telephony Service Provider (ITSP). Only IP connectivity and an Internet connection is needed for the business to start using VoIP communications. Also, users have access to their phone system from any location, provided they have access to the internet.

What Is SIP Trunking?

SIP trunking makes it possible for businesses to continue to use their on-premises hardware PBX and benefit from VoIP services provided by an ITSP. A SIP trunk is a direct virtual connection between the two infrastructures.


Hosted PBX vs. SIP Trunking: Key Differentiators

Capital Expenditures

A hosted PBX solution only requires a router and a business-grade internet connection, plus IP phones. Most businesses already have that, so they can start using the solution right away.

However, should you opt for SIP trunking, it incurs high upfront investments for the installation and/or configuration of your on-premises PBX equipment. Then, you have costs related to the SIP trunking service itself. Because best practices recommend a separate internet connection to achieve optimum performance for your calls, you may need to spend more money just for setting up the service.


Operational Expenditures

Hosted PBX service providers provide flexible packages for clients on the monthly subscription model. You can expect a pretty high return on investment with the right billing options, based on your number of users, selected features and calling plans. For example, Sherweb will give you all available features with unlimited calling minutes and up to 300 simultaneous users. Whether your employees call from an IP phone, the web app or the mobile app, there are no extra costs for all your continental calls. The more features you activate (IVR, Voicemail, Fax to Email, etc.), the higher your ROI and you get a direct positive impact on your productivity.

SIP trunking is different. We already know there are substantial yearly fees for the maintenance and support of your PBX equipment. Next, the SIP trunking is usually provided with a single per-channel pricing scheme. Each channel enables a user to make and receive one call simultaneously. So, if your business requires at least 20 employees to be on the phone at the same time, you will require 20 SIP channels to accommodate all of them. Some service providers offer a flat rate for a SIP channel per month, though a few can provide you with a payment plan for ‘per minute’ charging.



In our hosted PBX vs. SIP trunking comparison, scaling capabilities have an important place.
Hosted PBX service providers offer unlimited space for user additions. They will provide you with a web-based platform accessible through any standard browser. It will allow you to perform routine tasks such as adding a new phone extension in 1-2-3 easy steps.

SIP trunking solutions can scale but in a limited way. The scaling depends on both the local PBX capacity and the ability for the business to purchase more channels to cover all needs.


Geographical Flexibility

A hosted PBX solution will allow employees to access their phone system and features regardless of their location, as long they’ve got access to an internet connection. Phone software such as softphones and mobile apps will let them make and receive calls from anywhere in the world using their smart device or computer.

SIP trunking does not provide this feature in a cost-effective manner. It will require you to pay for third-party tools.


Technical Expertise

Your hosted PBX service provider will handle all the technical challenges and issues that may arise. This obviously translates to huge cost savings, as you don’t have to hire an in-house VoIP technician to troubleshoot your systems. Even better, if you choose your provider carefully, you may never have to deal with technical issues. For example, Sherweb’s hosted PBX has built-in redundancy so it’s guaranteed for 99.999% availability. On your side, all routine activities can be performed through the intuitive web-based admin portal which also allows you to view and export usage reports. There’s no need to have expertise in VoIP for these.

Because your SIP trunking solution involves some locally installed PBX equipment, you need to hire or train an employee to manage the phone system and routers. Technologies evolve constantly, so you may have to repeatedly spend for the person to level up. Or, the manufacturer or seller will stand in for that person, which means you’ll need a maintenance/support contract. On the ITSP’s side, troubleshooting issues means you have access to proper support. Some providers will make you pay per-hour fees for assistance.


Hosted PBX vs. SIP Trunking: Wrapping Up

When you’ve never needed a local PBX and want to benefit from VoIP features and low communications costs, hosted PBX is your best option. A good internet connection is what you need to start using the service right away.

When you already have an on-premises PBX and want advanced VoIP capabilities, you have two options:

  • Either continue using equipment that will always require upgrades or replacement, and add SIP trunking costs on top
  • Or get rid of the local PBX immediately cutting on expenses and start enjoying a flexible hosted PBX subscription

The benefits of cloud-based PBX are:

  • Low to no hardware & servicing costs
  • Outstanding user experience
  • Access to the most recent PBX capabilities
  • Easy integration with third-party tools
  • Unlimited scalability
  • Geographical flexibility

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Written by Jason Nadeau Product Manager – VoIP @ Sherweb

Jason is passionate about Telecom, it’s as much a hobby as it is his career. Certified and trained by top manufacturers of VoIP equipment, he has 20 years of experience in PBX sales, installation and support.