VoIP vs PBX: A Complete Comparison

So it’s finally time to find a phone solution for your growing business. Or maybe you’re not entirely happy with your current solution and are ready to switch. You’ve been Googling different options for days now, and you’ve narrowed it down to two: VoIP vs PBX. But what’s the difference? And how do you know which one’s right for you?

This guide breaks down the seven key differences between the two and helps you weigh the pros and cons so you can pick the setup that actually works for your business.

What is PBX?

PBX (Private Branch Exchange), also known as a PABX, is a traditional phone system that typically uses physical phone lines and on-site equipment to manage calls. It connects to the public switched telephone network (PSTN), allowing your business to make and receive calls over landlines instead of the internet.

PBX phone systems also link your team’s phones together so employees can call each other for free using short numbers (extensions) while routing incoming calls between each other.

Traditional PBX systems usually require bulky hardware that’s installed somewhere on-site, like in a dedicated equipment closet. You’ll also need wired desk phones and often a technician to set them all up. If you go with analog PBX (also called landlines), your building will need special wiring, too — which definitely isn’t a DIY project.

That said, PBX has evolved. Some modern systems, called IP PBX, use internet protocol for internal call routing while still staying on-premises. These connect through Ethernet instead of phone lines, making installation a bit easier — but they still rely on physical equipment you have to manage and maintain.

What is VoIP?

Voice over Internet Protocol (VoIP) is the technology that allows you to make and receive calls and messages through an internet connection. Every time you FaceTime your mom or jump on a Zoom call, you’re using VoIP technology.

Also known as virtual PBX, cloud PBX, or hosted PBX, VoIP phone systems eliminate the need for on-site storage. To make and receive calls, you simply open the web or mobile app on a smartphone, tablet, or computer.

Cloud-based VoIP lets your entire team use the same phone system, no matter where they’re working — in the office, remote, or on the go. Everyone stays connected through one shared platform, with access to the same features and call tools.

You also have access to more functionalities than what traditional PBX services have to offer. For example, OpenPhone offers text messaging (SMS and MMS), call routing and IVR, our AI agent Sona, call summaries and transcriptions, and integrations with tools like Slack, Zapier, email, and HubSpot CRM.

🔍 Go deeper: How does VoIP work & how can it impact your business?

Why many businesses choose VoIP vs PBX: 7 key differences

VoIP business phone solutions and PBX may both handle calls, but they work differently.

VoIP is the technology that lets you make calls over the internet using an app and your mobile device, computer, or tablet. PBX is a traditional phone system that uses landlines and on-site equipment to route calls.

VoIP is easier to set up, more flexible, and includes features like texting, call analytics, and automation. PBX can still make sense for businesses with existing PBX infrastructure or those based in areas with poor internet connectivity.

Here’s a closer look at how they compare:

VoIP vs PBX differences: Visual breakdown

Here’s a quick visual breakdown of the differences between VoIP and PBX across seven categories:

Feature	VoIP	PB (traditional)
Mobility	Works anywhere with internet	Tied to a physical location
Cost	Predictable, monthly subscription-based pricing	High setup and maintenance costs
Scalability	Add new users, numbers, and features in minutes	Requires buying extra hardware and hiring expert support
Text messaging	Supports SMS and MMS, plus texting automations	No texting support, only voice calls
Security	Built-in encryption and controls from trusted providers	Secure if properly maintained — but all on you
Call quality	Clear with a strong internet connection	Clear with good wiring, but weather/wiring can affect quality
Team productivity	Built for collaboration	Internal calls and call routing only

1. Mobility

VoIP works anywhere there’s an internet connection, giving small business teams the flexibility to stay available whether they’re working from home, switching between job sites and the office, or simply on the move. It helps ensure that everyone stays connected without being tied to a desk.

On-premises PBX systems are tied to a specific location. This makes them a better fit for businesses that operate primarily from one site or need a secure, fixed communication setup.

2. Cost

VoIP costs are typically much lower than PBX. Most VoIP service providers charge a flat monthly fee (often between $15-$40 per user) with no need for special hardware unless you want it. You can get started with just your existing device, a softphone (phone software), and an internet connection. Plus, your hosted PBX provider usually takes care of maintenance and customer support — no IT team required.

International calling and texting are also much more affordable. Many VoIP providers charge just a few cents per minute, and with OpenPhone, calls to the US and Canada are free.

PBX system costs can start at around $2,605 for a five-person team. The cost of phones, wiring, installation, and hardware quickly add up. You’ll also need to budget for ongoing maintenance, repairs, and possibly IT support to keep everything running.
Calling internationally can get expensive fast, too. For example, with AT&T’s basic rates, US customers can expect to pay $1.55 per minute just to call Canada and $3.50 per minute to call the United Kingdom.

3. Scalability

VoIP systems scale easily because they don’t rely on hardware — everything runs through the cloud. You can add users, phone numbers, and features in minutes without needing to install anything or rewire your setup.

For example, here are some ways OpenPhone makes it easy to scale and customize your phone system: 

• Instant phone numbers: Every user gets a free US or Canadian local or toll-free number. Need more? Add extra VoIP numbers for just $5 each per month.
• Shared numbers: Let multiple teammates handle the same line, respond to customers faster, and view full conversation history.
• Smart call routing: Use features like custom ring groups (available on OpenPhone’s Business plan) to prioritize who receives incoming calls first on your team as you grow.
• Custom settings for each number: Set business hours, voicemail greetings, call recording, international calling, and permissions per number or user right from your settings. No outside intervention needed.

You can shape your VoIP system to fit your business based on your team size, industry, or how your roles are divided. That kind of flexibility makes it much easier to adapt as you grow.

PBX systems scale more slowly and often require more hands-on work. To grow, you’ll need to buy additional desk phones and possibly expand hardware — especially if opening new locations. Some systems also need IT support to install or configure changes. While it’s possible to scale a PBX setup, it’s far less flexible and can get expensive quickly.

4. Text messaging

VoIP systems often support both SMS and MMS, so you can send texts, images, videos, and GIFs — all from your business number. VoIP texting makes it easier to confirm appointments, follow up on leads, or answer quick questions without playing phone tag.

Many platforms, including OpenPhone, also include tools that help you stay on top of messages:

• Auto-replies: Acknowledge customers and let them know their next steps, even when you’re not available to respond right away. Send instant responses when you miss a call, receive a voicemail, or when you’re unavailable or outside business hours.
• Scheduled messages: Write and queue up texts in advance — perfect for promos, appointment reminders, or end-of-day outreach.
• Snippets: Save time with reusable templates for common messages like confirmations, reminders, and follow-ups.

PBX systems on the other hand, don’t support texting, which limits how customers can reach you. And with 80% of people checking texts within five minutes, not offering a messaging option means you could be missing the fastest, most effective way to connect — and even lose potential customers.

5. Security

Since VoIP services rely on the internet, they require smart security practices to limit the risk of internet-based attacks, like hacking, phishing, or eavesdropping. That said, reputable providers include built-in safeguards like:

• Call encryption
  
• Permission controls and user roles
  
• Firewalls and spam blocking
  
• Real-time network monitoring

As long as you stick with a trusted VoIP provider and take simple precautions (like setting strong passwords and avoiding public or unsecure WiFi), you can keep things safe without needing to manage everything yourself.

PBX systems avoid online threats — but put security entirely on your plate. For example, you’re usually responsible for setting up physical security, managing firewalls, performing manual updates, and limiting access.

That works fine if you’ve got in-house IT. But for most growing businesses, it can be hard to consistently maintain strong security without extra support.

6. Call quality

As long as you have a good internet connection and sufficient bandwidth, your VoIP call quality can be crystal clear. High-speed internet usually does the trick, and a cellular data connection can keep you running if you run into a power outage. 

If you’re still experiencing problems, you can usually troubleshoot call dropping issues quickly and on your own, or reach out to your provider for help.

PBX call quality is usually just as high as long as you’re using high-quality hardware. But if your PBX system uses landlines, your phone call quality can be affected by weather and bad wiring (which is sometimes expensive and time-consuming to fix). And remember that IT support we mentioned? You’ll need it if you run into issues.

7. Team productivity tools

VoIP and PBX both allow you to work with your team — but at very different levels.

VoIP systems help your team work more efficiently by giving everyone access to automations and advanced communication tools. 

For example, here’s how OpenPhone boosts team productivity:

• Internal threads: Loop in team members on customer conversations to delegate tasks, ask questions, or add context. Your customers will be none the wiser. They’ll just see great service.
  
• Auto-attendants (IVR): Let callers choose who they want to speak with using a keypad menu (e.g., “Press 1 for sales, press 2 for support”) so they reach the right person faster. IVR also helps block out robocalls.
  
• Automated texts: Use integrations like Zapier or Make to send automatic follow-ups after bookings or missed calls.
  
• Contact notes and custom properties: Leave notes and add properties on a contact that others can see. For example, you can record customer preferences, lead status, or the date of their next appointment. That way, anyone picking up the thread has the full context to keep things moving smoothly.
  
• Call analytics: See when you get the most calls, how many are missed, and overall call and message volume so you can spot bottlenecks, adjust staffing, and improve response times.

PBX systems support basic collaboration, too — like the ability to transfer calls between extensions and make internal calls for free. Some also offer auto-attendants (which can save businesses the cost of virtual receptionists) that let callers route themselves to the right extension.

That said, PBX features are mostly limited to voice communication and can’t match the flexibility or automation VoIP brings to the table.

Choosing between PBX and VoIP phone systems for your growing business

The right phone system depends on how your team works and what kind of setup you already have.

If your business is in a fixed location where solid internet services aren’t available and you already have the phone hardware installed, a PBX solution can still be a decent option. 

But VoIP solutions are the better fit if any of the following rings true:

• Your business is growing
• Your team works remotely or is often on the go 
• You want the flexibility to handle calls from anywhere without relying on old-school equipment

Here’s a simple table to help you assess which business phone system is best for you:

Get more from your business phone system with OpenPhone

We’re obviously a little biased — OpenPhone is a VoIP provider, after all. But if you look at what growing businesses need today — flexibility, affordability, and tools that help your team work smarter — VoIP far surpasses PBX. And with a lot less friction.

But you don’t need to take our word for it. Start a free trial of OpenPhone for seven days and see how it fits into your day-to-day.

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