Learn what hosted PBX is and how it can help your organization
Hosted PBX is a private branch exchange (PBX) that is “hosted” by a service provider. It's used by companies to make and receive phone calls via the internet and is a popular alternative to traditional PBX, which uses copper wires and landline phones.
Businesses often choose hosted PBX or switch from traditional PBX to hosted PBX as a way to cut costs, get access to telecommunications features, and unify their workforce.
If you’re exploring telecommunications options for your business and think hosted PBX systems might be the way to go, here’s everything you need to know - what they are, their benefits, and why you might want to invest in one yourself.
Before explaining how hosted PBX works, it’s helpful to understand what a PBX system is and what it does. A PBX, or private branch exchange, is a private telephone network that is used within an organization or company.
The system is what allows your company to communicate with others within and outside of your organization, typically using office phones in the case of traditional PBX or via softphones on other devices via the internet in the case of systems powered by Voice over Internet Protocol (VoIP).
Traditional PBX systems are also known as on-premises PBX or analog PBX. These PBX systems work using physical hardware, such as copper telephone wires, and on-site software installed at your company’s office.
When you make a call, your on-premises PBX connects your landline to the Public Switched Telephone Network (PSTN). That system is also known as the Plain Old Telephone Service (POTS).
Hosted PBX sends voice traffic via the internet, usually using VoIP technology. Businesses that use hosted PBX for their communication systems tend to use VoIP phones (also known as IP phones) or softphones rather than traditional desk phones with individual extensions.
The infrastructure of hosted PBX is maintained entirely by the service provider and relies on an internet connection rather than copper wires and the PSTN.
Here are some of the key differences between on-premises traditional PBX and hosted PBX:
| On-premises PBX | Hosted PBX |
|---|---|
| On-site hardware and software | Infrastructure is managed by the provider and via the internet |
| No use of internet for telephony | Relies on internet connectivity |
| High initial set-up costs | Minimal set-up costs |
| Requires IT staff | Provider handles maintenance |
| Expensive to scale | Easy scalability |
| More control over PBX system | Hand over control to service provider |
| Basic calling features | Additional calling features such as interactive voice response (IVR) and automatic call distribution (ACD) systems can be included |
Traditional PBX systems have been used by businesses for decades, but they come with their limitations, especially when compared to hosted PBX solutions:
Hosted PBX uses internet protocol (IP) for communication. Rather than calls being coursed through physical lines, calls are delivered over the IP network. Voice traffic can be transported over the PSTN, over the internet (using VoIP), or a combination of both.
Sometimes, “hosted PBX” is used synonymously with “virtual PBX”. This isn’t entirely correct in the technical sense. Virtual PBX systems are a component of hosted PBX. An example of a virtual PBX system might be an auto attendant that provides automated IVR and call routing.
A hosted PBX is a phone system, whereas VoIP is the method by which you make calls.
Hosted PBX uses VoIP in its operation to make IP calls. VoIP can also be used for other types of telecoms, like video conferencing. Providers of hosted PBX systems are usually VoIP service providers and can offer a range of cloud-based communications for businesses, including what are sometimes known as business VoIP phone systems. Those are holistic systems that combine the functions of PBX with other telephony and communications features.
A hosted PBX can be achieved in your business’s telephony system via one of two avenues. The one you choose mostly depends on what PBX system you already have in place.
If you already have a SIP-enabled IP PBX server, you’ll want to opt for SIP trunking. If not, cloud hosted PBX is the best option for your business.
A cloud PBX platform is a popular type of hosted PBX in which all of your business’s VoIP phones are connected to an external cloud system, usually hosted in a VoIP data center provided by a VoIP service provider.
Cloud PBX does not require a physical, on-premises PBX server, and is managed entirely by the provider.
SIP trunking allows you to connect your current on-premises PBX system to the internet via a SIP trunk.
It also allows you to connect any communications or virtual PBX software you use via the internet to your existing on-premises PBX infrastructure.
SIP trunking is great for businesses with a legacy PBX system in place, especially if you want to gradually phase out your traditional on-premise PBXs for a hosted PBX system replacement. Unlike cloud PBX, SIP trunking often still requires on-site maintenance.
Whether you opt for a cloud PBX system or SIP trunking depends on what systems you already have in place. Here is a rundown of the difference between the two so you can be sure to make the right choice:
| Cloud PBX | SIP Trunking |
|---|---|
| Low setup costs | Low setup costs as long as you already have on-premises PBX equipment |
| Maintenance is handled by cloud phone systems provider | At least some maintenance is handled by your IT staff |
| Best for small businesses | Best for larger businesses |
| Security is dependent on cloud phone system provider’s security protocols | Very secure infrastructure |
More and more businesses are switching from traditional, on-premises PBX to hosted PBX.
From cost savings to increased flexibility, here are the top benefits of hosted PBX that encourage businesses to make the switch and startups to immediately opt for a hosted PBX solution rather than traditional PBX for their telecommunications:
Now that you understand how hosted PBX works, the platforms it uses, and its benefits, let’s discuss when hosted PBX is the most useful for businesses.
While many businesses can benefit from a hosted PBX solution, there are four use case examples that are especially relevant.
* Note: if you want a unified employee and customer communications platform, check out 8x8's XCaaS.
Switching from a traditional PBX system or opting for a hosted PBX setup from the very beginning means you’ll need to choose a hosted PBX provider.
There are plenty of service providers out there that offer a range of features and are cheaper than traditional PBX solutions, so here is what you should look out for:
The 8x8 cloud PBX business phone system has a wide range of features and functionalities, including:
With our multi-level auto attendant you can also quickly connect to employees and give customers a self-service option to get the information they need when they contact you.
With 8x8 cloud PBX, you can unify your workforce, stay connected, and access all the features that suit your business needs. Chat with sales to find out how you can upgrade your business communications today.