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What Is the Difference Between VoIP and Hosted PBX?

This article was updated on November 6, 2023

With all the acronyms and tech jargon out there, learning about the nuances of virtual phone systems can feel a lot like decoding a cypher — and who has time for that? In this blog, Vonage will simplify one of the most commonly asked virtual communication questions — what exactly is the difference between hosted PBX and VoIP?

Illustration of several office buildings. Above them are several employees using laptops floating on clouds.

Let’s Clear Up Some of the Confusion

Considering the scope and complexity of telecommunications, it’s easy to get lost in the lingo and draw the wrong conclusions. When researching different types of phone systems for a business, many assume that hosted private branch exchanges (PBX) and voice over internet protocol (VoIP) are the same thing. Although hosted PBX and VoIP systems do work together, they are not interchangeable. Since this is such a common misconception, Vonage decided to clear things up. 

This blog will explain everything you need to know about hosted PBX and VoIP, including:

  • The differences between hosted PBX and VoIP

  • How hosted PBX and VoIP work as small business phone system solutions

  • The advantages VoIP offers small businesses

What Is a Hosted PBX System?

Different from a traditional PBX system — which is an on-premises solution — a hosted PBX system uses the internet to function. So, instead of using wires and landlines, a hosted PBX stores all data and software on the cloud and runs using your broadband connection.

Additionally, your hosted PBX provider is in charge of all the technical aspects of setting up, managing, and maintaining your service. This offers you greater flexibility and also cuts down on IT and other costs, making hosted PBX an excellent communications solution for small to mid-sized businesses.

Is Hosted PBX the Same as Cloud PBX?

Yes, hosted PBX and cloud PBX are the same thing, and the terms can be used interchangeably. As long as your business is partnered with a PBX service provider and has a stable internet connection, a hosted/cloud PBX system can be accessed from anywhere at any time. This is especially helpful as more and more businesses adopt hybrid and remote working models.

What is VoIP?

In basic terms, VoIP is a method for making calls using the internet. VoIP technology takes a conversation and transforms it into a compressed signal, which is then transmitted through your broadband network. In essence, VoIP goes hand-in-hand with hosted PBX systems. While VoIP technology is used to make the calls, a hosted PBX server connects those calls to other telephone networks.

Hosted PBX vs VoIP

VoIP and hosted PBX work together. but each technology has separate functionalities. Here are some of the key VoIP and hosted-PBX capabilities.


Hosted PBX

VoIP is a method for making calls. 

Hosted PBX is a cloud-based system that enables businesses to use VoIP technology.

VoIP uses IP telephony technology to transmit calls, instead of traditional copper wires.

Hosted PBX uses a VoIP connection to handle all calls instead of physical, on-premise hardware.

Is PBX a VoIP Gateway?

No, hosted-PBX systems are different from VoIP gateways. A VoIP gateway enables the transportation of call data from VoIP networks to communication solutions that are not based in the cloud. This includes telecom providers and landlines. VoIP gateways are most often used when a business has a combination of traditional telephony components and internet-based communications solutions. These gateways function as a connector for legacy communications technology and modern IP-based/cloud communications infrastructure.

Is It Worth Switching to VoIP?

For most small businesses, making the switch from traditional analog telecommunications solutions to VoIP is a no-brainer. Due to the many advantages of VoIP technology, the VoIP services market has experienced immense growth as a whole, with the global market surpassing 40 billion USD in 2022. Put simply, people continue to invest in VoIP because it works.

Here are a few top benefits of VoIP for your business:

  • VoIP Is Affordable

Because VoIP technology relies on the internet, it doesn’t need additional hardware or service connections. This means VoIP solutions require less maintenance, minimal staff support, and have lower setup costs. All of these advantages work to provide small businesses with a robust communications infrastructure that doesn’t break the bank.

  • VoIP Helps Remote Workers Stay Connected

As more and more companies offer remote work opportunities, people look to technology to keep things business as usual. When it comes to virtual communication, VoIP is one of the most used and critical technologies. Using VoIP technology, remote workers can seamlessly connect with their coworkers and clients using voice calls, chats, video conferencing, and many more features.

  • VoIP Goes Beyond Voice-Only Calls

VoIP’s capabilities are enhanced when combined with a cloud-based unified communications as a service (UCaaS) platform. UCaaS enables VoIP technology to reach its full potential and allows businesses to improve the efficiency of all forms of digital communication. Some communication solutions, like Vonage, provide features that give small businesses a competitive advantage without the enterprise price tag. Here are just a few samples of what we have to offer:

And there you have it! That’s the story on hosted PBX and VoIP technology. If you’re on the hunt for a better communications solution, check out our plans and see what Vonage can do for you!


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