The terms hosted and managed PBX are easy to get confused, and it’s not surprising that most people improperly use them interchangeably. This article will discuss the difference between the two.

Before we begin, we need to be clear on a few definitions.

  • An IP-PBX can refer to the hardware or software that performs the functions that were once done by Private Branch Exchanges.
  • A Virtual PBX and a Hosted PBX mean the same thing
  • VoIP is short for Voice over Internet Protocol, but at, we refer to VoIP as representing the entire range of services that are available with VoIP, from the telephony service itself to the many different facets of VoIP, such as telepresence, managed and hosted PBX, hybrid PBX systems, and so on. At, VoIP refers to the transmission of any packet-switched data, such as voice, video, telephony data (e.g. caller ID) and computer data that is sent over the internet and/or the PSTN

A PBX, in modern business, is a physical thing that you can see. Traditional PBXs had closets full of hardware. An on-premise IP PBX is a server, usually Asterisk-based, with Ethernet ports, that replaces a traditional PBX. They are about the size of a desktop computer or a rack mount, and can be connected to other IP PBX servers with a USB cable. The PBX is programmed over the web by an IT specialist. The equipment is owned and maintained by the company. A Hybrid PBX system is made to integrate older technology such as ISDN and telephone jacks, but an IP PBX is not necessarily backwards-compatible.

Hosted PBX companies handle all the call routing and switching at their own location and are responsible for managing all the PBX equipment. They provide the service of hosting that equipment, which they own. It would be like going to a restaurant-The restaurant owns the kitchen (the PBX), supplies the food (provides minutes), cooks the food (and SIP trunking), gives you the food (sells or leases you an IP phone), and cleans the dishes afterward. You pay for the finished product. Most of the VoIP companies we review, including Nextiva, onSIP, RingCentral, and 8×8, specialize in hosted PBX.

Continuing with our restaurant analogy, it is easy to pull up another chair and add another diner, because everything is set, no matter how many people eat there. In fact, it is much easier to serve one table of eight rather eight tables of one. VoIP is the same way, which is why it is very easy to add or move a user. Similarly, the more users you have with a hosted VoIP service, the less it will cost you per user. Some business VoIP providers provide unlimited minutes, and others meter their minutes for as low as, well, free, but because the service is hosted, the virtual PBX service performs in the same way, regardless of how many minutes you use.

Managed PBX, or Managed VoIP equipment and software are part of the package, but the equipment is maintained at the provider’s site or the customer’s site. There are ongoing costs associated with managing the hardware and keeping the software and the users updated. A good hosted PBX solution offers a guarantee, called a Service Level Agreement, that the network will be available and operational for a certain percentage of the time. As part of that SLA, the managed VoIP solution will include remote monitoring and reporting information about the network, especially any degradation. In contrast, a hosted VoIP solution has no duty to share information about specific parts of their network working, failing, or being updated, except in the most general sense to show that the network is operational.

One advantage of Managed PBX is the speed of the development cycle. Managed PBX vendors are quick to deploy the latest technology, and are often testing out their own technology as soon as they create it. Another advantage is reliability. Unlike a hosted solution, being held to a Service Level Agreement ensures that the vendor will be quick to respond to security threats and natural disasters. Managed VoIP providers have support staff on call at all times. Yet another advantage is the long-term cost, which can be lower than hosted VoIP.

Again, going back to our restaurant analogy: In managed VoIP, the subscriber would own the kitchen, and the VoIP manager would be responsible for running the kitchen, including making reports to the owner of the kitchen; in hosted VoIP, the customer would come in, eat, and leave. Each system has its own advantages and disadvantages, but the market is leaning more toward hosted VoIP.manage

Additional Reading

The 8 Most Popular Business Phone Plans with Unlimited Calling, Text and Fax
Business VoIP vs Traditional PBX Systems: Everything You Need to Know
RingCentral vs 8×8: Hosted PBX Wars