Traditional Systems vs. Hosted VoIP

Various telephone systems provide levels of control, cost, and flexibility that vary greatly. A list of the most commonplace system types have been provided in the following table:

Table 1. Common System Types



Traditional PBX/Key Systems

A traditional PBX is a telephone system that serves one organization at one location. This type of systems resides on-site and is owned and maintained by the organization. Its users have shared access to the trunk lines, physically connected to the PBX. While they may be feature-rich, a traditional PBX system requires a substantial cash outlay and is cost-prohibitive for most organizations.


Centrex (Central Office Exchange Service) is an enhanced telephone service that is offered by local phone providers. The institutions themselves do not purchase a phone system, and there is no specialized hardware required on-site. Many different institutions are served by the same Centrex equipment. Although it is traditionally less expensive than a Traditional PBX, Centrex does not offer the same level of features.

On-premises IP PBX

An On-premises IP PBX is like a Traditional PBX, but uses IP (Internet Protocol) as the transport mechanism. On-premises IP PBXs can produce significant cost savings because they allow organizations to combine voice and data traffic on a single network. Like Traditional PBX systems, significant upfront cash outlay is commonly required, and organizations themselves are responsible for maintenance.

Hosted VoIP

Hosted Voice Over IP (VoIP) blends the greatest aspects of Centrex and On-premise IP PBX systems. The provider owns and manages all of the required equipment, and the service is delivered via broadband Internet access. Hosted VoIP provides enterprise-grade features to numerous institutions on a scalable hardware infrastructure. Hosted VoIP is a telephony solution that is both feature-rich and cost-effective.

Over the last few years, Analog PBX/Key and Centrex systems have been transformed to utilize Internet Protocol (IP) as opposed to traditional Time Division Multiplexing (TDM). The transformation to IP-based technology has created On-premises IP PBX as well as Hosted VoIP, which are quickly gaining in popularity and market share.

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