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Virtual PBX vs. Hosted PBX

Many people think that the term “Virtual PBX” is synonymous with “Hosted PBX” or “Cloud-based PBX”. Although both provide a lower total cost of ownership (TCO) than a premise-based phone system, they are not identical. There are actually significant differences between the two – namely in regards to functionality. The major difference being that one, the Virtual PBX, is just an automated answering service and call director and the other, a Hosted PBX, is a complete, professional phone system.


A Virtual PBX is not a complete system on its own, but is just one part of a Hosted PBX system, best described as an automated answering service that provides routing options to handle and transmit inbound calls. This type of system does not have call control features or outbound calling, but instead reroutes incoming calls to cell phones, landlines or VoIP extensions via an auto attendant or interactive voice response (IVR).

These systems are cheaper than Cloud-based PBX solutions, but lack significant business communication features. They are best suited for very small offices / home offices that need to keep costs extremely low. Like with a Hosted PBX solutions, there is no need to purchase any new hardware – users can get a toll free number and point it to employee’s landlines, cell phones or even free soft phones. It can also handle a few advanced call forwarding features like find me/follow me.

It’s important to note that this system does not replace your existing outbound phone service, but will be an additional expense on top of it. Also, there are no call control features and employees cannot be connected via extension dialing. Additionally, calls between locations will not be free as they would be with a Hosted PBX and a Virtual PBX also does not provide productivity benefits such as unified messaging or presence. As your business grows, it is inevitable that you will outgrow this solution and will need to replace it.


A Cloud-based or Hosted PBX is a complete business VoIP system that routes inbound as well as outbound calls and provides enterprise-level features. Organizations with high volumes of calls or with more than 10 employees should consider bypassing a Virtual PBX and going directly to a Hosted PBX solution.

In most cases, Hosted PBX providers will replace your current phone company, you will be connected through a router, and you will likely use IP phones. A Cloud-based PBX provides one main number for all calls, with extension dialling, regardless of employees’ locations and is a good fit for organizations with multiple locations, even those geographically disbursed around the world. It offers such enterprise-class features as call forwarding, unified messaging (voicemail to email), call hold, find me/follow me, three-way conference, auto attendant and more.

Post Author: Vic Levinson