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What is a PBX Phone System?

PBX stands for Private Branch Exchange, which is a private telephone network that's used within a company. Traditionally, companies utilizing a PBX system would have specific proprietary phones for the software. Nowadays, however, most companies use Open-Standards-based IP-PBX, which allows the companies to use the IP in VoIP as the transport technology. Besides saving your company money, a PBX phone system bypasses many of the traditional phone system delays, such as

  • Ring groups
  • Queues
  • Voicemail, and more

A Private Automatic Branch Exchange is slightly different than a traditional PBX system in that calls and exchanges are taken care of automatically, as opposed to via a live operator. Most systems nowadays are in fact PABX systems even if only referred to as PBX. It's important to understand all of the details associated with PABX systems in order to make the most of it in your company.

You want to learn more? Try our ultimate guide to a PBX phone system

Benefits of PBX for Business

As your company grows you’ll need to scale your VoIP system as well—and a PBX system is the best way to link all of the phones in your company together, even across multiple locations.

Here are some of the benefits to incorporating PBX in your business:

  • Central control - The receptionist feature allows external callers to access your company through 1 phone number and PBX technology allows multiple callers at once.
  • Simple internal communication - When you call another employee at the office through a PBX the call is rerouted internally and doesn’t go outside the building like traditional phone systems which incur a charge.
  • Useful features - For example: Auto attendant, which replaces a traditional receptionist and cuts out wait time for callers, and call routing/follow-me, which enables you to forward calls from your office phone to any other phone in the exchange system.
  • Maintenance-free system - Since a PBX uses the internet for calls, you save money on equipment—which means less maintenance than traditional phones and lines.

Hosted PBX Vs. On-Premise PBX

Hosted PBX is where the provider hosts the PBX and handles the technology that provides the service, while on-premises PBX is, as you’ve probably guessed, where the technology is stored on the premises of the company. The IP routing of on-premise PBX may use more current technology than hosted PBX.

Here are some of the main differences between hosted and on-premise PBX:

Hosted PBXOn-Premise PBX
  • Cheaper to set-up
  • Customer pays for upgrades
  • Programming managed by customer
  • Customer responsible for staff training
  • Low monthly cost
  • Easy to add lines
  • Upgrades/new features included
  • Higher setup cost
  • Higher maintenance costs
  • Lower monthly costs
  • Provider qualifies network
  • Provider installs and programs PBX
  • Provider trains staff

How to Choose

When deciding between a hosted PBX and an on-premise PBX, the question basically comes down to your company’s size and IT capabilities and needs:

 Recommended For
Hosted PBX 
  • Small businesses that want to save money
  • Businesses that don’t have in-house IT resources
On-Premise PBX
  • Medium- to large-sized companies with IT capabilities
  • Companies that want control over their phone system
  • Companies that need a customized solution

Here’s a breakdown of the choices. If your company is small and needs to stay conservative with money, and also doesn’t have the proper in-house IT capabilities, it’s probably better that you start out with a hosted PBX system. If, however, your company has in-house IT capabilities that can handle its own phone system’s needs, then the on-premise PBX is the way to go.

Whichever type of system you choose, get informed before jumping in. Take a look at the best PBX systems mentioned above and be sure to read the details about each company in order to find the one that fits every major need of your company.