Hosted PBX vs SIP Trunking - What’s the Difference?

Hosted PBX and SIP Trunking are both modern-day digital-equivalent of the outmoded Plain Old Telephone Service (POTS) that delivers VoIP services for business users. Enterprise users are streamlining communications and leveraging significant cost savings and capabilities offered by the internet. Advances in technology and cloud computing make it a natural progression.

Organizations that don’t make the switch to modern communications technology are failing to take advantage of the opportunity to convert what is commonly a cost center into what can become a profit center. The two business telephony options they are very likely to consider are Hosted PBX and SIP Trunking.

How the PBX deployment differs

At the heart of all business telephony systems is the PBX or Private Branch Exchange. A PBX is the switchboard that connects callers to the desired internal extension, and enables the enterprise to stream all external communications (inbound as well as outbound) across the internet.

That includes voice, audio, data, faxes, video and text, and the PBX uses Network Convergence to combine audio, video, and data into a single network. The technology enables users to communicate externally with phones and mobile devices around the world using internet-enabled service.

The difference between Hosted PBX and SIP Trunking is in the deployment of the PBX itself.

SIP Trunking

For SIP Trunking, the PBX equipment is situated on-premise. The organization purchases and maintains the equipment and carries out all configuration, upgrades, security, and general management as an IT function. The PBX establishes a direct internet connection with an Internet Telephony Service Provider (ITSP) and can connect with multiple ITSPs to take advantage of unified communication services.

Hosted PBX

A Hosted PBX will be owned by an ITSP, deployed in the cloud, and provided ‘as a Service’ offering with a range of VoIP functionality. With Telzio, companies pay a subscription depending on the volume of usage they choose, and all functionality and users are included. With other ITSPs, companies pay a subscription depending on the mix of services they choose in addition to a subscription fee per user.

Incoming calls to the cloud PBX are forwarded instantly to your in-house system. Setting up services is fast, does not require IT skills, and has a very low initial cost of ownership. You get an internet gateway to configure all your services and start calling in no time. There are no ongoing maintenance costs for things like system upgrades when it comes to using a hosted PBX service like Telzio.

Which option is best for you?

You need to consider several factors and every enterprise has different priorities and requirements.

Usage Requirements and Cost Optimization

Small and Midsize Business (SMB) organizations that experience consistent and straightforward communication requirements don’t have to invest in expensive PBX systems. The cost of deployment, management, and maintenance of the SIP Trunking service generally outweighs its value propositions for small businesses with limited VoIP requirements and inadequate IT staff on-premise.

Unless your organization is expanding rapidly and falls into the midsize-to-enterprise category, the Hosted PBX model will offer significant financial benefits in terms of cost variability. SMBs can trade high CapEx on SIP trunking equipment with affordable OpEx on a hosted PBX option while leveraging the same high standards of VoIP communication capabilities.

On the other hand, SIP trunking may better suit large-scale enterprises that already own PBX systems and can leverage those previous investments to establish SIP trunking on-site.


SIP Trunking puts the configuration of the PBX under your control to take advantage of whatever advanced features are of benefit to your business. With SIP trunking, you can also choose from multiple ITSPs to benefit from features such as lower call rates for business-hour usage.

ITSPs compete on the range of functionality that they offer. Therefore, the flexibility to change providers can be a significant attraction.

However, failure to research and plan for the best available options may be damaging in the long run if organizations are not able to maximize the value potential of their VoIP investments or add desired functionality as needed.

The hosted PBX deployment offers a viable alternative in this regard. Organizations dissatisfied with existing service and looking to provision resources on the whim are best served with the hosted PBX model. It’s important to make sure with any provider, that the necessary agreements are in place to prevent vendor lock-in.


Control of any on-premise network infrastructure will be subject to your own security policy, ensuring that your defined standards are met and constantly maintained. SIP trunking offers this advantage by default. However, this also means the organization itself is responsible to ensure compliance and end-user security in event of a cybersecurity incident or network downtime.

With the Hosted PBX deployment model, the solution provider is in charge of maintaining a compliant and secure environment of the highest standards. SMBs operating on a limited budget cannot afford to replicate similar high standards of security for self-managed SIP trunking VoIP services.

For an organization to establish similar high levels of availability with SIP trunking, a dedicated infrastructure comprising of several redundant components and backup systems will be required to reduce the costly risks of service downtime.

Long-Term Thinking

It pays to take the time and effort to investigate both options. A long-term cost-benefit analysis is required to ensure well-informed decisions from a technical, financial, and logistics perspective. For organizations already using an in-house PBX, SIP trunking can expand the functionality of their existing system to enable enterprise-wide VoIP functionality. Others can invest in hosted PBX solutions and leverage a high standard of VoIP and unified communication services immediately.

Thomas is part of the marketing team at Telzio and develops thought leadership content in the areas of cloud computing and unified communications. With an education in electrical engineering and background in software development, Thomas has a strong technical understanding pertaining to cloud networking technologies, trends, and practices.