VoIP vs. PBX: Which Phone System Is Right for Your Business?

Select the right type of phone system for your business. VoIP and PBX are two common business phone systems and we're comparing them.
by
Daniel Weiss

Making business calls is likely so entrenched in your daily routine that you don’t even have to think about it. But there’s a huge amount of technology operating behind the scenes to connect the caller to the call recipient. 

That technology comes in two distinct, competing flavors: VoIP (voice over internet protocol) and PBX (private branch exchange).

Every business has to make the decision between VoIP vs. PBX phone systems. We’ll break down the history and technology behind each to give you the information you need to make the best choice for your business.

A History of PBX Systems

If you’ve ever called a business and pressed a number for your desired menu option or dialed a specific office extension for the person you’re trying to reach, you have used a PBX phone system.

In the early years of telephone lines, calls traveled through public switchboards, where operators manually directed them to the correct recipient. Early PBX systems enabled businesses to use a large number of phones for less cost by hiring their own operators and purchasing or renting telephone lines and switchboards. 

Fortunately, by the 1970s, superconductors solved the problem of automated switchboards, which were previously very unreliable. Without the need for a human operator, PBX systems became even more affordable and popular, especially considering features like extension dialing, hunt groups, and call forwarding.

As computer technology developed, PBX systems that operated like desktop computers came onto the market and allowed companies to add hold music and additional phone lines. Unfortunately, this new phone system could be a costly investment. Plus, the switchboards were only available in 16-line units, which forced companies to buy more lines than they needed.

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Then came the internet, which changed phone systems just like it changed everything else.

The result was IP PBX, a more modern, automated version of PBX that had internet connectivity. Since it was much less costly than a PBX system, an option only affordable to large corporations, any company could use it. The phone system wasn’t cheap, but it saved on overhead costs and provided features that made it a valuable investment for companies of all sizes.

The Evolution of VoIP Technology

In the 1990s, developers created the ability to channel calls through the internet’s data network, which would soon prove a viable competitor to PBX—VoIP. 

VoIP works in the following sequence:

  1. 1. It converts analog phone calls to digital signals.
  2. 2. It translates the digital signals into Internet Protocol (IP) packets.
  3. 3. It converts the IP packets back into phone signals, and a telephone on the other end receives them.

VoIP makes voice and data networks converge: Users have access to the internet, analog phone calls, and VoIP phone calls all through the same line.

As the internet continued to develop, new possibilities arose. Instead of restricting calls to IP PBX equipment, VoIP systems allowed communication between computers, phones, and IP phones. This new system was cloud-based and hosted by an outside provider. It functioned as an application, offering multiple channels of communication. Users could video chat, share data, instant message, and more. They could do so from anywhere, as long as they used a device connected to the internet.

The VoIP system also allowed companies to integrate their communication with other applications. Salespeople could now track calls within CRM systems, use notes from previous conversations, analyze sales calls for effectiveness, and even transcribe conversations. Communication became connected and the possibilities endless.

Pros and Cons of PBX vs. VoIP Technology

In today’s digital world, you might expect VoIP systems to be more popular than PBX systems, but that isn’t always the case. Each of these phone systems has its advantages and disadvantages. This table will help you understand which system would be best for your company: VoIP vs. PBX.

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FeatureVoIPPBX
ReliabilityOutgoing calls on VoIP systems won’t go through in an internet outage, but the system can still operate during an emergency and calls received will go to voicemail.PBX systems operate partially through phone lines, which can protect your communications from power outages and internet failures. Some phone lines still operate during outages, but if your PBX system is internet-enabled (IP PBX), it’s only as reliable as the connection it uses.
CostVoIP’s lack of required equipment and maintenance reduces costs. Calls (even long-distance and international) don’t incur additional charges. Fixed monthly subscription fees allow companies to budget appropriately.Expensive PBX system cabinets are necessary for traditional PBX systems. In addition to paying for equipment, companies also have to pay IT team salaries and other monthly maintenance charges. IP PBX systems can lower monthly operating costs—even for a high number of users.
Size LimitationsWith VoIP, only bandwidth limits the maximum amount of numbers and users. You can add and remove users with ease, and the amount you’re billed will adjust accordingly. Companies can also use multiple local and international numbers on the same system.Traditional PBX systems limit the number of phone numbers and lines, and adding additional lines requires more server space and hardware that can be costly. Calls can only go through specific devices within the system, instead of allowing for flexible call options.
Sound QualityThough sound quality with a VoIP system relies on a strong internet connection, fiber optic cables generally eliminate any quality issues.With a traditional PBX system, calls travel through landlines, which can make for the best sound quality. With an IP PBX system, low internet signal and broadband strength can cause calls to lose quality.
FlexibilityWith a VoIP system, companies can receive calls from any location on any device. As a result, team members can connect via cell phone, computer, or other internet-connected device from anywhere in the world, which makes communication effortless.Since traditional PBX systems are hosted onsite, companies are limited by what they can afford and can only make calls from office phones. (IP PBX systems are simpler, but they still require specialized phones that anchor team members to their desks.)
FeaturesVoIP system features include conference calling, call waiting, voicemail options, call queues, call transfer, and interactive voice response. There are also dozens of external integrations you can use to customize your VoIP system.PBX systems are generally limited to basic phone calls.
AvailabilityVoIP systems are available to any business with a strong internet connection and can be set up in minutes.Digital technology has almost completely replaced the analog technology of PBX systems. Unless a company already has a PBX system in place, it isn’t really a viable option.

Other Factors to Keep in Mind When Choosing Between VoIP vs. PBX 

To get an idea of which phone system is best for your company and make a final decision between VoIP vs. PBX, use the tips below to evaluate your options.

What Is Your Current Setup?

If you are already using a PBX or IP PBX system, and it’s affordable and working well for your company, you may want to stick with it. You’ve likely already sunk a significant amount of money into your system, so you may want to continue using it rather than investing in something new. 

If you don’t already have a phone system in place, a VoIP system is likely your best option. VoIP is generally more affordable, more flexible, is rich in features, and requires no hardware.  

Setting up a VoIP system is also incredibly simple and fast—the administrator simply has to invite the relevant team members and they’ll soon be up and running. VoIP also empowers employees to set their own preferences and settings for calling, which can make the entire team more efficient.

Do You Have Reliable Internet Access?

Both IP PBX and VoIP phone systems rely heavily on your internet access. Before integrating either system, make sure you have enough bandwidth and a strong enough signal to handle all your business’ calls.

If you don’t have reliable internet access, an IP PBX system is your best option. You’ll be able to use your system through gateways to your phone line, though a strong internet connection would still probably be an asset.

Does Your Team Often Work Remotely? 

If your company has a distributed team, where many team members often work from home, cafes, coworking spaces, or from the road, VoIP may be the right phone system for you.

A VoIP system allows you to make and receive calls on laptops and cell phones instead of office extensions on hardwired desk phones. No matter where you are, your customers will be able to reach you when they need you.

Hopefully this post helps you settle the matter of VoIP vs. PBX and empowers you to choose the phone system that’s best for you.


Different phone systems each have their pros and cons, but if you’re looking for flexibility, affordability, reliability, cutting-edge features, and a phone system that can evolve as your business does, VoIP may be the right choice for you.

Aircall is a smart, secure, cloud-based VoIP solution trusted by professionals and their teams around the world. Try it for free here.

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