Comparisons10 min read

What Are the Differences Between PBX and VoIP?

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After the introduction of the PBX system in the early 1960s, it set the standard in business communication as a reliable phone system with high audio quality. With time, VoIP emerged as a modern phone system leveraging the internet, breaking the standard set by traditional on-premise PBX.


Traditionally, businesses used PBX phone systems as there were no better alternatives. However, nowadays, VoIP phone systems have become popular among businesses due to their flexibility and modern communication solutions, which do not require on-premise hardware. Its marketing value significantly increased after the COVID-19 pandemic as it allowed businesses to maintain operational continuity despite the challenges of lockdown.


By the end of 2033, the market value of VoIP is estimated to reach $472,260 million at a CAGR (Compound Annual Growth Rate) of 13.8%, dominating the market value of the PBX. The value of PBX is projected to reach $104,627 million at 11.3% CAGR by 2023.

What is PBX?

PBX (Private Branch Exchange) refers to private telephony networks that allow you to make/receive calls within a company or organization over PSTN (Public Switched Telephone Network).


PBX was created to simplify business communication. Before, businesses needed separate Centrex lines for each employee to make a call, which a local phone company billed. All the calls had to go through the public telephone network. PBX allowed internal communication between co-workers without using the public network, making communication cost-effective.

Components of PBX

Traditional PBX consists of three parts: The PBX Cabinet, The Automatic Call Distributor (ACD), and The PBX Call Lines.


  1. The PBX Cabinet is a switchboard acting as a central hub that handles the system. It contains necessary electronics and hardware, including processors and switches, for managing call routing, call queueing, voicemails, call conferencing, and auto attendant functions.


  2. The Automatic Call Distributor (ACD) is a telephony device that automatically assigns incoming calls by pre-set distribution rules. It distributes calls to designated departments, agents, or an IVR-based menu, efficiently reducing the manual workload.


  3. The PBX Call Lines is a network framework that allows internal communication and external connectivity by sending signals between phones.

What is VoIP?

VoIP (Voice over Internet Protocol) is a technology that converts voice call signals into digital data packets and transmits them via the Internet instead of a regular landline. It is also known as IP (Internet Protocol) telephony.


With its advanced features, VoIP offers modern, inexpensive communication solutions for businesses. Businesses leverage functionality like automated attendants, IVR and tools integration, and analytics to streamline communication. It makes VoIP technology more feature-rich and low-cost than landline services.


As long as businesses have internet connectivity, VoIP technology allows them to reach their employees (on-premise or remote) using their corporate telephone network without being bound by physical boundaries.

Components of VoIP

The VoIP network consists of three main components: User Agent (UA), Gateways, and Proxy Server.


  1. User Agent (UA) refers to devices that send/receive calls in a system. UA consists of two components: I. User Agent Client (UAC) - Sends requests to other endpoints. II. User Agent Server (UAS) - Responds to requests from another endpoint.


  2. Gateways are network nodes that connect two networks: VoIP and PSTN. The gateways convert voice signals from PSTN into a digital data packet using a codec to transmit it over the existing IP network. Again, to transmit it over PSTN, it converts data packets back to analog voice signals after receiving them from the IP network.


  3. Proxy Server is the intermediary program that routes all communication packets, like incoming calls, within a VoIP network. It offers services, including call routing, access to the network, and registration. It is used with a location server or registrar.

Comparison: PBX vs VoIP

The key difference between standard PBX and VoIP phone systems is their operation infrastructure. PBX uses telephone landlines to transmit voice data packets over PSTN (Public Switched Telephone Network), while VoIP uses the internet to transmit it.





Hardware Installation and Setup

Complex setup process with more hardware equipment requiring a professional IT team.

Easy setup with less hardware equipment.


Reliable and high audio quality.

Good call quality.


System installation and maintenance costs can cost above $7000.

Cost varies with providers and the plan you purchase. The starting price of a basic VoIP plan starts at $12 per user.


Basic features, including call routing, faxing, voicemail, and caller ID.

Advanced features, including screen sharing, unified callbox, and social media integration.

Accessibility and mobility

PBX physical wires limit the accessibility of users within the organization's boundaries.

Accessible from anywhere with an internet connection.


Less reliable during power outages.

It can be reliable due to its mobility.


Requires new lines and additional hardware to scale.

Easily scalable by purchasing a new subscription plan.

Security and Encryption

Secured from cyber threats.

Possibility of cyber threats that can be mitigated with proper encryption.

Maintenance and Upgrades 

Requires a professional IT team to maintain and upgrade the system.

The service provider handles all maintenance and upgrades.

1. Hardware Installation and Setup

The VoIP setup and installation process is shorter, simpler, and requires less equipment than PBX. However, unlike PBX, VoIP involves training employees to use new features and setting up call routing strategies and IVR call flow paths.


Hardware requirements for PBX installation

  • On-site PBX server
  • Telephones
  • Modems
  • PBX cards
  • Cabling
  • Network infrastructure, including switches, routers, wall jacks, and firewalls.


Hardware requirements for VoIP installation

  • Router, ethernet cord, internet
  • PoE adapter
  • Internet-enabled device
  • Analog telephone adapter (ATA) or VoIP gateway.
  • Desk IP phones, speaker systems, and headsets (optional).

2. Connection

Regarding connection, PBX is widely known for its reliability and high call quality. It runs in a separate network using PRI (Primary Rate Interface) or traditional phone lines to handle calls. However, with reliable internet speed, VoIP can also offer good call quality in addition to its flexibility and accessibility.

3. Cost Analysis

PBX usually needs a high initial investment of $7000 or above in terms of installation and hardware costs. It also has higher operating and maintenance costs. VoIP is generally more cost-effective than PBX, which has a low upfront cost. However, VoIP costs can add up quickly depending upon the service provider, plans, additional features, and volume of the users.


PBX Cost Analysis





Equipment and new hardware

$5000 to $9000+ (one time for 15 to 20 users)

$0 (only if using existing devices)

Software licensing

$3000 - $4000 (one-time or recurring)

$20 - $50+ (monthly per user)

Setup and installation

$1000 - $1500 (one-time)

$35 - $50


$3000 - $4000 annually

You only have to maintain your devices, such as IP phones

In-house IT team

$50000+ per employee per year


Internet connection


$35 - $70

4. Features

On-premise PBX offers basic features that are accessible only on the desk phone, including call routing and voicemail.


However, VoIP provides more advanced features in addition to basic features, including IVR and CRM integration.


PBX Features

  • Caller ID
  • Voicemail
  • Voice calling
  • Faxing
  • Call transfer
  • Hold calls
  • Audio conferencing
  • Call Blocking


VoIP Features

  • Callbox notes
  • IVR
  • Voicemail transcription
  • Video-calling with screen-sharing
  • Call whispering, Call monitoring
  • Business SMS texting
  • Social media integration
  • Advanced call management
  • Unified callbox

5. Accessibility and Mobility

VoIP leverages the internet to ensure accessibility by effortlessly synchronizing multiple devices to streamline communication. This enables users to work from anywhere as long as they have internet access. On the other hand, PBX offers limited accessibility as they are tied to physical hardware and wires. This makes PBX less flexible.

6. Reliability

Both PBX and VoIP are affected by hardware issues and power outages. However, VoIP offers mobility, which enables users to communicate from any other location as long as they have access to the internet and power. This allows VoIP users to minimize downtime during an outage.

7. Scalability

With VoIP, scalability is easier than ever. It simply requires you to purchase more IP phones to add users to your subscription plan. In contrast, PBX requires you to buy hardware components, including wires and phones, and hire technicians to manually add new lines to upgrade.

8. Security and Encryption

Both PBX and VoIP are not immune to security breaches. PBX, not being connected to the internet, is immune to cyber security threats but vulnerable to toll fraud and physical intrusion. In comparison, VoIP is at risk of internet-based threats and hackers. However, security measures, including third-party security (GDPR, HIPAA, etc.), end-to-end encryption, and network monitoring, can mitigate risks.

9. Maintenance and Upgrades

As service providers manage VoIP systems, most of the maintenance is done by providers. Upgrades are also done within a few clicks. With PBX, maintenance and upgrades are costly. It requires you to hire a professional IT team for maintenance, buy additional hardware, and source parts to upgrade.

Pros and Cons of PBX

The on-premise PBX is more suited for larger businesses with the resources to manage and operate the phone system, including professional IT teams, infrastructure, and servers. Small and growing businesses may find it difficult to afford an in-house IT team and initial setup costs. However, on-premise PBX facilitates businesses in remote areas with no internet access. 



  • PBX providers handle all the installation, training, and network quality.
  • Greater control over the system as the system data server is installed in your office.
  • No additional training is needed due to its user-friendly and familiar interface.
  • Copper wires in the system allow high and reliable call quality as audio is not affected by internet bandwidth fluctuation.
  • Customers get to customize their data and settings.
  • Any issues, including data recovery and disaster backups, can be handled on-site with professionals.
  • Enhanced security encryption as the physical connection of phone lines resides within your office’s location.
  • Higher initial investment.
  • Requires a professional IT team to manage the system.
  • The customer is responsible for network security and maintenance costs. 
  • Limited flexibility and mobility due to its on-site physical hardware connection.
  • Power outages can result in downtime if there is no backup power. 
  • Limited features and functionality compared to other phone systems. 
  • Expected to be outdated within a few years due to the popularity of VoIP and other cloud phone systems.

Pros and Cons of VoIP

VoIP relies on an Internet connection, which can be both a pro and a con, depending on your bandwidth. With high internet speed, the call quality and overall service are top-notch, but an internet outage can halt the entire system's operation. However, as VoIP runs on the Internet, businesses can leverage it to improve their productivity, allowing users to connect with clients and remote workers anywhere in the world.




  • Significant cost savings due to lower installation and operating costs
  • The service provider handles the entire operation and maintenance
  • A comprehensive pack of advanced features, including automated IVR, call routing, transcripts, and call management strategies
  • Supports the connection of multiple communication channels
  • Scalability is easy
  • VoIP offers portability, as users can access the system as long as they have an internet connection.
  • With high internet speed, VoIP’s digital transmission provides high audio quality.
  • Requires power and a reliable internet connection.
  • Vulnerable to hackers and cybersecurity attacks.
  • Lower internet bandwidth can cause potential jitter and latency, resulting in dropped phone calls
  • Some service providers may charge a hidden fee

PBX vs VoIP - Which Business Phone System Should You Choose?

The choice between PBX and VoIP depends on your business size, communication needs, and requirements.


PBX is a reliable and secure choice for businesses that require exceptional call quality and familiar infrastructure. However, it is costly and has high upfront and maintenance fees. In comparison, VoIP provides a modern and cost-effective solution for every business - small, medium, or large scale - with its flexibility and robust features.


Upgrade your communication infrastructure with Calilio. Our VoIP-powered business VoIP phone services offer uninterrupted connectivity and advanced security compliance with robust communication features at a low cost. Our VoIP plan starts from $12 per month.

Frequently Asked Questions

Which is better, PBX or VoIP?

VoIP offers a cost-effective solution than PBX with flexibility, mobility, scalability, robust security standards, and a feature-rich system. This makes VoIP a better choice than PBX.

Is VoIP cheaper than PBX?

VoIP is significantly cheaper than PBX due to its low installation, maintenance, and running operational costs.


IP PBX is a type of VoIP. IP PBX transmits audio signals from voice calls through IP (Internet Protocol) networks instead of a physical copper wire.

What is the difference between VoIP and cloud-based PBX?

VoIP is a technology that leverages the internet to transmit voice calls. However, cloud-based PBX is a particular application of VoIP. It is managed and operated on a cloud infrastructure by a third-party provider.

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