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Traditional PBX vs. Hosted PBX: An informative & comparative guide

Traditional PBX Vs Hosted PBX
MyOperator / Blog / Traditional PBX vs. Hosted PBX: An informative & comparative guide

In today’s age, communication is an essential part of the business and with so many communication channels, the telephone is still the most significant than others. Now, for communicating and collaboration between employees, support teams, and customers.  

In this blog we will try to revisit the days of landlines being connected with many hardware copper wires, running throughout the room and having only the ability to connect with the other employees in the office building that is too restricted to a landline, on the other hand, we will also discuss the cloud-hosted. 

Factors on which most of the brainstorming is done, are taken into account such as cost of implementing, control of the system, reliability/uptime of phone lines, scaling up of the deployment, implementation challenges, best practices for choosing the right PBX solution for your business need along with the service provider.       

A PBX (private branch exchange) is based on a private phone network that is settled in a company, working through copper wires. A PBX is a device that connects different extensions within the company but with limitations in the number of lines and number of devices.

What is hosted PBX?

Cloud PBX is a virtual phone system that provides a secure and reliable business phone system through the internet. Hosted PBX has all the hardware at the cloud provider’s end and the only hardware required at the hosted PBX customer is cellphones and signaling devices. 

Traditional PBX or Cloud PBX: Which one is best for your business ?

There are many factors to consider that will help you to determine which phone system will be best for your business. Let’s discuss each of them one by one, at the end we will try to conclude the effectiveness and suitability of the one which suits best to your business 


Cost is the foremost most important factor, which makes or breaks the decision to go for a certain type of setup or not.

Cost is a major factor that plays a significant role in customers’ choice for either the hosted PBX or on-premise PBX. This cost breakdown has been laid out along with the long-term benefits of it and the amount distribution between the on-premise hardware and cloud-hosted hardware.

Lower initial investment: Since the maximum initial investment is required for the expensive hardware (zero CAPEX) . All the hardware requirements without compromising on the quality and network infrastructure are provided by the cloud hosting services. Most of the SLA (service level agreements ) would be mentioned with an up-time of 99.9% & fail-over rate. A huge investment that too in the early stage of businesses that need to focus on the other important aspects of Higher initial cost and set-up cost current and future 

Maintenance & Operational Cost: Unlike the on-premise model (which has total CAPEX), this is completely an OPEX model. This means that the recurring cost is involved only and thus the maintenance cost and the operational charges are bearable and managed by the service provider. The business does not need to worry about fluctuations in the charges, functioning. Thus in maintenance cost ( Hosted PBX < On-premise PBX)

Low monthly service cost: The service cost involved is also quite affordable by the business as compared to the TOC (Total ownership)  model. ( Hosted PBX < On-premise PBX)

Potentially higher maintenance costs: Maintenance and operational cost will be much higher as compared to the cloud-hosted PBX because the various types of lines, servers, etc installed requires sophisticated staff to maintain, arrange  Maintenance cost is the most intensive ongoing task ( Hosted PBX < On-premise PBX)


IT Funds: IT funds are allocated for the various technology-related activities and start-ups or small-medium-sized businesses do not have to further strain it if they opt for a small dividend monthly/yearly based periodical payments. Thus if opting for a cloud PBX were all the responsibility of the IT (adding lines, making customizations) is required, do not break the bank of the businesses.

Business Implementation: Any size business can easily adapt and implement the hosted PBX and doesn’t need to be tech-savvy. Simply open. Enterprises with surplus IT resources (both technical and human ) to have total control of all the aspects of their phone systems 

Major Customisations:  Technical CRM  integrations can be done in a custom manner for custom data fetching and reporting.

Allows for hardware ownership: Complete hardware ownership comes up at a great price, though it provides the pride of owning the system and in-house equipment. But, we have to look both ways if we are trying to build a sustainable business model, weighing the other options. A business model that lacks the ability to scale up without a hitch is any day better until and unless the data is very critical.

Winner: Depends upon the requirements of the business model & data sensitivity. Data storage on the cloud  is also highly secure but due to security protocols if government organizations cannot opt for cloud-hosted PBX they can get their own on-premise PBX (dedicated data centers )

Implementation : 

Setup & implementation of the system: It is done in a plug’n play manner which makes it a reliable service, businesses can have a quick start of the services and pay as they grow. Thus making the setup quick and easier implementation (due to the interface panel & dashboard ) whereas the same cannot be said to be true for on-premise PBX as its setup, implementation is a laborious and resource-intensive task.

Slow, complex, and expensive: The implementation of on-premise is slow & technical implementation of the same is difficult on-premise PBX. For large or even small deployment the setup can be complex to install, maintain or make tweaks. It would require a well-trained technician to make even the small changes in the system of on-premise PBX.

Staff Training: An essential role of using the complete communication setup is bridging the knowledge gap between the installed hardware and the employees who have to use it.

Hosted PBX – Focussed training of the product and solution which is being implemented and laid out in form of a guide for easy access to the database, fetching custom reports, overall control of the implementation, and operational tasks.

On-Premise PBX – Multi-Level Training for the product and its various subparts such as attached hardware and services, servers are required at different levels and one layer training is not sufficient. Layered training even the chipset level knowledge of certain equipment is required for fixing its malfunctions / day-day tasks. 

New Features Installation/Upgrades: Cloud hosting can be more feature-rich as the developers working at the backend of the service provider have broader testing, development thus they can come up with timely market needed features. They have resources which are used to   All the new gestures layout and implementation of the new features is done by the service provider ( including the performance, compatibility, stable / non-stable testing ) Simplicity ( Hosted PBX > On-premise PBX)

Winner Of this round: Cloud Hosted PBX

Control & Customizations

Control Of System: The control of the complete system lies with the business itself opting for on-premise & only certain aspects 

Upgrades are included: Easy firmware and toolset, suite upgrades are included when opted for hosted PBX having the option of OTA (over the air updates ), but in case of on-premise PBX technician is required to update devices which have available update firmware, suitably 

Picking and canceling virtual numbers is easy and fast: Picking up virtual toll free number and deleting them with a swipe of a click from a web browser-based panel provided by the service-providing organization.

Mapping a mobile number behind the virtual numbers is easy: Just picking up the existing mobile numbers or landline PSTN. This provides the pathway for easily adopting the hosted PBX in place of the earlier on-premise PBX subsequently reducing the maintenance & operational costs.

Data Storage & Security: Although in terms of security and reliability today’s ecosystem of cloud storage is a very secure platform but still many businesses /organizations which have sensitive databases and stringent security requirements and protocols to follow opt for private data centers. And the best choice for their need is On-Premise PBX. This way they complete ownership of the data and it is not shared with any third party. Complete software and hardware integration is owned by the company itself. 

Winner Of this round: On-Premise PBX

Flexibility & Remote Working :  

Office shifting: Office shifting can be a huge headache if you have complete hardware and setup in place in your current location which includes (copper wire lines, server racks, signaling devices, etc ).  But with hosted PBX all of it can be done in a click and the calls can be made and received from anywhere on the planet on the go.

Remote working: Remote working is possible and completely similar to all its advantages of office phone lines working. All the comfort of working from a remote location without a hitch in your business is the way it should be so that you can build up a reliable brand image for effective communication and collaboration. As the current situation of COVID-19 many offices have made it mandatory for employees to have access to a WhatsApp API, ensuring seamless communication even when working remotely.

  • Easy to scale for multiple locations & deployments: Scaling up is a good sign of business and should remain to be a positive signal , but it  becomes a bit cumbersome if we have to request additional hardware, integrate with our existing setup Opting for a hosted pbx will make this task as task for simply request the service provider it is done.
  • Easy to add and remove extension lines  : If we need to add any ‘n’ number of lines or remove some of them then it is simply done by raising a set of buttons with the request to the service provider in case of hosted pbx . But in the case of on premise obx , we will need to manually place the copper lines and make the other hardware align with it. The situation becomes worse when we need to upgrade the system for increasing the lines which not only increases the costs but also further maintenance and operational charges of the add on hardware . In terms of simplicity  
  • Responsibility : Complete responsibility of the hardware and software , on premises – you are responsible for the hardware and software
  • Scale of deployment : On hosted – Large scale deployment of several hundred lines (handle traffic volume in peak hours/days ) can be  is easily done successfully without a hitch to overall connectivity , effectiveness of calling ability of the pbx , but in the case of on-premise the same cannot be said to be true . It has limitations in its scalability , additional hardware would need to be purchased and much more for its technical facets of scaling up .

Winner: Hosted PBX 

Future expansion & Scalability

Risk, work & complexity: In on-premise PBX all the risk, work & complexity is absorbed by the user (using the on-premise PBX) and in the case of hosted PBX all the risk, work & complexity is absorbed by the service provider. Risk in terms of any technical malfunction, fixing it and is answerable to the user for the hiccups. Here the technical aspect lies in the hand of experts which may not be the case in on-premise without extra burden on IT funds. 

Work in terms of installing the hardware in place and its day-to-day operations of the PBX, smooth functioning of its services in terms of interface, features of the product.

Growth & reduction: You plan and execute with your own resources in case of on-premises PBX. But in the case of hosted PBX, you can scale up or scale down as per your requirement without any sort of commitment in terms of minimum or maximum phone lines. 

Winner: Hosted PBX

Productivity/Downtime of Business 

Productivity: Overall productivity increases as the existing  numbers can be mapped behind the 

Auto-attendant IVR system – used to automatically route calls to specific extensions

Powerful call management solutions, help in determining how calls are handled based on time of day, day of the month, holiday, or even incoming number rules.

Mobile Forwarding & Parallel Calling: The mobile forwarding feature gives the flexibility to pick up the call if the agent or employee is unable to take up the call with real-time diverting of call and 

Voicemail – (Single & Multi-level IVR), and more – The facility of voicemail 

All of the basics are included, such as call hold, transfer to voicemail, extension dialing, etc., but advanced communication tools may not be available as part of traditional PBX

In terms of simplicity  ( Hosted PBX > On-premise PBX)

Frequently asked questions on Traditional PBX versus Cloud PBX

Ques: “Will my employees need new phone extensions if I switch to Hosted PBX?”

Ans: No, it can be easily mapped behind the new virtual phone number of cloud-hosted PBX

With hosted PBX, changes are handled quickly and efficiently through web portals.  These interfaces enable adds/deletes/moves for easy maintenance and optimization tweaks, as needed by the organization.  However, many on-premise phone systems require an on-site visit from a technician familiar with the exact system interface, even for simple modifications to the configuration.

Furthermore, hosted PBX system updates are taken care of at the PBX provider’s location so there is no concern about adding hardware, patching equipment, or upgrading systems.  In contrast, with on-premises PBXs, technically apt staff members need to have on-hand experience ready to continuously monitor and update systems as firmware updates and patches are released – an additional and ongoing support expense.

Complete & customized reporting for inbound and outbound call traffic can be fetched from the call management suite of the hosted PBX easily which data can be used to improve the customer experience. The resulting data can then be used to improve customer service for call centers, as well as to increase operational efficiencies. On the flip side, on-premises PBXs have a limited number of reporting capabilities available to management, with a smaller number of changes and possible customizations.

Loss of Internet:  Loss of internet connectivity or catastrophic events has no effect on operations because calls can be sent to voicemail or a mobile phone. This is because of redundancy within an off-site facility that has safeguards including backup power sources. In terms of simplicity hosted PBX also 

Final decision on the choice between Traditional PBX & Cloud PBX

Every business is different and so are their needs. However, in the modern age where people are shifting to remote working, where businesses have more flexibility and grounds for expansion, and where startups are not able to afford giant budgets, cloud telephony makes an ideal choice for most businesses. 

Still, businesses like to opt for on-premise PBX instead of hosted PBX Reply on traditional systems due to their various specific needs such as sensitive databases which cannot be shared with any sort of service provider 

At MyOperator, we offer cloud PBX solutions for your startup, medium, or enterprise businesses. Being a leader in cloud telephony and among the first ones to offer this technology along with call center software in India we have had the fortune to serve over 6000+ businesses in the last 6 years. Hope to redo  the exponential growth for other businesses also 

The facility and ease of doing adoption of hosted PBX  from legacy landlines to cloud phone systems within minutes provide us the ability to businesses quick and simple migration without losing any businesses. 

As per the features required by today’s businesses most of the business needs are fulfilled by hosted PBX as it offers most of the features and complete suite solution of business communication needs.

We at MyOperator provide complete cloud call center solutions, a suite of features that makes the communication between the employees and customers seamless, easy to monitor thus maximizing the communication effectiveness in both ROI & satisfaction.

The number of enterprises switching from conventional PBX to hosted PBX has been increasing consistently. A market research study conducted by Markets and Markets suggests that the global hosted PBX market size is expected to grow from USD 4.73 billion in 2018 to USD 9.50 billion by 2023, at a Compound Annual Growth Rate (CAGR) of 14.9% during the forecast period. The enterprises will keep switching to hosted PBX solutions to leverage benefits in terms of cost, performance, flexibility, scalability, and security.

88% of customers prefer good customer service over innovation (source)

Hope it helps in making the right decision.

demo of call management system
About The Author
Srishti Panwar
Srishti is a Growth Marketer. She loves reading and writing. If she is not with the books, she is probably out playing badminton. She is a fitness enthusiast and likes to indulge in creative chores.

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