Quick Verdict
Pros
- Hosted PBX: No upfront hardware cost, provider handles maintenance, easy to scale, works for remote staff
- On-premise PBX: Full control over configuration, no ongoing subscription fees after setup, better for complex telephony requirements
Cons
- Hosted PBX: Ongoing monthly cost, dependent on internet for all calls, limited configuration depth
- On-premise PBX: High upfront cost, requires IT expertise to maintain, harder to support remote workers
What Is a Hosted PBX?
A hosted PBX (also called cloud PBX or virtual PBX) is a phone system where the switching hardware and software runs in a provider's data centre rather than in your office. You connect SIP-compatible desk phones or softphone apps to the provider's system over your internet connection. The provider manages all call routing, maintenance, and updates. You pay a monthly fee per seat or per user.Hosted PBX is the dominant choice for Australian SMBs today because it eliminates the need for specialised on-site hardware and the IT expertise to manage it. If you are choosing a VoIP phone system for your small business and do not have dedicated IT staff, hosted PBX is almost certainly the right starting point.What Is an On-Premise PBX?
An on-premise PBX is a phone switch that you own and operate at your premises. Modern on-premise systems use IP-PBX software (such as FreePBX, 3CX, or Asterisk) running on a dedicated server or a purpose-built appliance. Calls are routed through SIP trunks from a carrier, which you purchase separately. You handle configuration, maintenance, and any hardware failures.Cost Comparison
| Upfront hardware | Monthly per-seat fee | SIP trunk / call costs | Maintenance | Upgrades | Phones (per handset) | Typical total cost, 10 seats, 3 years | |
|---|---|---|---|---|---|---|---|
| Hosted PBX | Nil (phones only) | $20-50/seat/month | Usually bundled | Included in subscription | Automatic, included | $80-300 (same for both) | ~$7,200-18,000 |
| On-Premise IP-PBX | $2,000-15,000+ (server, hardware) | Nil (after setup) | Separate: $15-40/channel/month + calls | IT time or contractor cost | Manual, may require hardware refresh | $80-300 (same for both) | ~$8,000-20,000 (hardware + SIP trunks) |
Who Should Choose Hosted PBX?
Hosted PBX is the right choice for most Australian small businesses. Specifically, it suits:Businesses with 1 to 30 seats who do not have dedicated IT staff. Businesses with multiple locations or remote workers who need a single phone system. Businesses that want predictable monthly costs without capital expenditure. Businesses that want to be operational quickly. Hosted PBX can be provisioned in days, not weeks.Who Should Choose On-Premise PBX?
On-premise PBX is worth considering for businesses that have IT staff capable of configuring and maintaining the system, need deep customisation of call flows or integrations not available in hosted platforms, have 15 or more concurrent call paths that would make hosted per-seat pricing expensive relative to SIP trunk costs, or have specific data sovereignty or compliance requirements that preclude routing calls through a third-party cloud platform.NBN Considerations for Both Options
Both hosted and on-premise PBX systems route calls over your NBN connection. The quality and reliability considerations are the same: FTTP and FTTC connections deliver the most consistent VoIP performance; FTTN is more variable. See our NBN VoIP setup guide for detailed advice on optimising your connection for voice traffic.One difference: with an on-premise PBX and SIP trunking, you have more control over quality of service (QoS) settings that prioritise voice traffic on your local network. With hosted PBX, QoS between your office and the provider's data centre is controlled by your NBN provider.How We Compared
What is the difference between a hosted PBX and a cloud PBX?
Hosted PBX and cloud PBX refer to the same thing: a phone switching system operated by a provider in a data centre, which your business accesses over the internet. The terms are used interchangeably in the Australian market.
Can I run an on-premise PBX on NBN?
Yes. An on-premise IP-PBX connects to your carrier via SIP trunks, which run over your NBN connection. You will need a compatible router with QoS support to prioritise voice traffic. Most modern NBN routers support this. The same NBN quality considerations apply: FTTP and FTTC are preferred over FTTN for reliability.
What is a SIP trunk?
A SIP trunk is a virtual phone line delivered over an internet connection. Instead of a physical telephone line, a SIP trunk is a channel through which calls are transmitted digitally. With an on-premise PBX, you purchase SIP trunks from a carrier to handle your external calls. Most Australian carriers and hosted PBX providers offer SIP trunking.
How long does it take to set up a hosted PBX for a small business?
A basic hosted PBX for a small business can be operational within 1 to 3 business days once you have your phones. Configuration of auto attendants, ring groups, and other features can be done through the provider's portal and typically takes a few hours. Number porting, if required, takes 5 to 20 business days depending on the current carrier.
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