What is a PBX phone system?

Understand what a PBX phone system is and how it benefits businesses


What is a PBX phone system?

Understand what a PBX phone system is and how it benefits businesses


What is a PBX phone system?

Understand what a PBX phone system is and how it benefits businesses


What is a PBX phone system?

Understand what a PBX phone system is and how it benefits businesses


A Private Branch Exchange (PBX) system is just one type of private telephone network that companies can use for their communications. A PBX can come in many shapes and sizes, so it's perfectly fine if you feel overwhelmed by all the information you find about it.

But don’t let that intimidate you - we’ve put together this simple guide to help you learn everything you need to know about PBX phone systems.

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What is a PBX phone system and how does it work?

A PBX phone system is a type of private business telephone network that can be used for internal and external phone communications. PBX systems allow voice calling plus additional features like call recording, interactive dialing menus, voicemail, call transfer, queuing, and more.

Depending on the type of PBX system, these connect users either through an analog phone line using plain old telephone service (POTS) or a digital phone line via the internet using Voice over Internet Protocol (VoIP) technology.

How does a PBX system work?

Different PBX systems don't necessarily work the same way - it can depend on the type and complexity of the technology it uses. The main categories of private branch exchange solutions are analog, IP, or cloud-based.

Traditional or analog PBX systems operate using copper-based telephone lines that are installed on-premises and connected to an in-house PBX box. Inside the PBX box, a telephone switchboard distributes calls to office phones and provides access to the outside world via outside lines.

Internet Protocol (IP) PBX systems use digital phone signals using Ethernet cables to connect office phones and eliminate the need for permanent wiring.

There’s also the option to sign up for cloud-hosted PBX systems for a monthly fee. This option is popular, since it eliminates all hardware and maintenance costs. Hosted cloud PBX from 8x8 connects businesses with international calling, SMS, and fax (plus tons of additional features).

Additional PBX features include:

  • Auto attendant functionality
  • Call recording
  • Standard and visual voicemail
  • Call forwarding & transfers
  • Music on hold
  • Caller ID
  • Call parking
  • Call logs
  • Call monitoring
  • And many more

What is a PABX?

PABX stands for Private Automatic Branch Exchange and is a PBX system created to work primarily with automated systems.

Most of today’s PBX systems are PABX systems by default. The term “PABX” is only used as a way to differentiate contemporary PBX solutions from traditional Private Manual Branch Exchange (PMBX) systems.

Types of private branch exchange

As we previously mentioned, there are a few different types of PBX. As telephony evolved and improved, PBX systems also changed to meet user demands.

Let’s take a look at the main types of private branch exchange:

1. Analog private branch exchange

Let’s start with the first PBX option that became available. An analog PBX system is the traditional phone PBX, which was widely used before the widespread use of internet technology.

Analog systems facilitate calls via copper wire networks that connect to the Public Switched Telephone Network (PSTN). Phone calls and faxes are routed to target end points (phone numbers) and transferred through a physical PBX, which is typically located in an office's telecom closet or IT room.

Given this reliance on hardware, analog PBX systems carry only basic features and lack modern business telephone system functionalities like HD voice calling and voicemail to email transcription.

2. On premises VoIP/ IP PBX

On-premises IP phone systems are still a popular type of PBX today. An IP PBX uses a broadband connection to connect callers over the internet. It offers much more advanced features than its analog ancestor.

This includes features like:

  • Call queue
  • App integration
  • HD audio
  • Flexible business hour rules
  • Conference calling

An on-premises IP PBX still relies on a lot of permanent hardware that must be stored in your workplace’s telecom room or closet. IP telephony hardware connects with the Local Area Network (LAN) via ethernet cables using a standard internet connection instead of physical phone lines.

Due to the amount of hardware required to install and maintain an on-premises IP PBX, most businesses will need to hire at least one IT professional to manage it (the cost of which will need to be taken into account when you choose your communications solution).

What is SIP trunking?

SIP trunks provide a scalable multi-channel telephone service for your PBX. By investing in a SIP trunking phone service, you’ll be able to connect your IP based PBX to the PSTN and make calls to and from your office.

What is the difference between traditional PBX and a VoIP business phone?

Traditional PBX telephone systems use analog phone lines, which tend to limit scalability. VoIP systems transmit inbound and outbound calls via the internet, which allows for more flexibility and potential for growth.

3. Hosted PBX (cloud PBX)

Of all the types of PBX system available, hosted or cloud PBX opens up the most possibilities for companies. Unlike analog and on-premises PBX options, hosted PBX doesn't need you to store any cumbersome hardware on-site.

A hosted PBX system is connected to an off-site, online server. Instead of storing your PBX system in a telecom closet, it will be stored virtually, in the cloud, and maintained by your PBX provider.

Benefits of using this solution include:

  • No more PBX maintenance costs
  • Reduced service downtime
  • No software updates or upgrades
  • Low up-front capital expenditure
  • Browser-based administration
  • Add phones, apps, and extension dialing with ease
  • Minimal equipment needed
  • No need to be at the office to connect to it

All issues will be handled by your service provider for increased service reliability. For example, 8x8 is designed with no single point of failure and a highly secure infrastructure that delivers service from a state-of-the-art data center. That means your business communications will be available to you all the time, no matter where you might be, as long as you have reliable internet connection.

Let’s recap. In the table below you’ll find a quick-fire summary of each PBX type.

PBX TypeHow It WorksAdvantagesDisadvantages
Analog PBXCopper wires connected to the PSTN. Connect multiple phone lines, route and transfer calls and faxes. Basic features lacking in functionality compared to modern systems, does not work outside of office premises.
On-premises PBXOn-premises hardware connected to LAN. Advanced features like HD audio, call queuing, app integration, and conferencing.Requires bulky hardware plus implementation and maintenance costs, doesn't really work outside of office premises.
Hosted PBXVirtual PBX hosted on the cloud by a service provider. No bulky hardware, increased flexibility, remote work-friendly, reduced downtime, and cost savings.You will be relying on a third-party service provider to run your PBX and you need to have good internet connection.

When to switch out on-site PBX telephone systems for unified communications systems

Traditional PBX hasn't been the first choice for organizations for the last decade or so, but there are still some holdovers among more old-school companies. At the same time, many businesses are still inclined towards using on-premises IP PBX solutions as their principal business communications system.

That said, this is starting to change. More and more companies are making the switch from on-site PBX to a hosted, cloud-based service from reputable service providers like 8x8.

And it’s clear why.

Cloud-based PBX solutions are more cost-effective, require less maintenance, requires virtually no special hardware, and provide near-unlimited scalability and flexibility. Instead of calling up the phone company (or your IT guy) every time you need to add a new phone to your business telephone network, you’ll be able to add and remove lines with a click.

8x8 unifies communications under one, intuitive communications platform.

With a unified communications solution in place, you’ll be able to access a whole suite of communications applications such as:

  • CRM intergrations
  • Billing integration
  • Team messaging
  • Video conferencing
  • And more

With a virtual PBX in place, you’ll get all the benefits of a traditional PBX without exorbitant overhead costs.

PBX systems have come a long way since the days of analog systems and copper wires. Today, hosted solutions are becoming the norm, meaning businesses can eradicate all that bulky hardware and minimize expenses. And if you want to take it to the next level, you shouldn't have to limit yourself to a business phone service - unified communications can give you that and more.

Find out more about how 8x8 can offer you all the benefits of hosted PBX providers, plus a fully unified communication solution.