Private branch exchanges, or PBXs, have always been money savers for companies of all sizes. In recent times, PBX systems have expanded to include a number of new technologies and additional features that offer both large and small businesses even more bang for their buck.

So how do you decide which PBX system is right for your business? In this article, we’re going to go over the ins and outs of business telephone systems, PBX functionality, and what newer PBX providers are offering.

If you already have an idea of what you’re looking for, or you know the PBX basics, feel free to skip ahead to find what you need:

This might seem like a basic place to start, but going over what a business phone system is will help you better understand all the jargon and acronyms to follow.

A business phone system is an internal communications system set up by a business to manage calls and other communications channels. In recent years, these private telephone network systems have come to include advanced unified communications features.

In a relatively short time, business phone systems have gone from traditional telephone system technology to hosted office phone systems to unified communications platforms. At the same time, the hardware used by these telecom systems has also changed immeasurably. Traditional phones have morphed into IP phones and softphones that can get accessed anywhere through mobile apps.

On top of all that, businesses also have the ability to integrate a unified communications platform into their workflow in conjunction with their IP telephony to offer an all-encompassing experience. Now, in addition to calling features, businesses can utilize video conferencing, team messaging, caller ID, and screen sharing, even when they’re not in the same location.

A private branch exchange (PBX) is a type of telephony system that enables businesses to manage their internal communications as well as perform some routing of inbound calls. This gives businesses an advantage over setting up each phone on their premises individually on the public switched telephone network (PSTN).

If a business were to set up each phone individually, they would need to have their phone company connect each and every individual telephone line to the outside telephone system. Obviously, that’s not very cost-effective and it doesn’t offer companies much in the way of scalability.

PBXs allow companies to bypass this headache by installing one internal system (the PBX) that all of their internal phones can connect to and be reached via one incoming phone line. Employees can place internal calls to one another and make outbound calls via the PSTN. This makes it much easier to scale up or down as needed.

Here’s a simplified explanation of how a PBX system works: When a call is placed to a business, after dialing, it travels through outside lines (like the copper wires used in the PSTN), eventually connecting with the business's on-site phone system via the on-site PBX setup.

The PBX system then uses switches (in the old days, switchboard operators would transfer calls!) to direct incoming calls to the correct recipients. In turn, all phones on-site would also connect to the outside lines via the PBX system.

How an IP PBX system works

An IP PBX system works a little differently than a traditional PBX system.

VoIP (Voice over Internet Protocol) uses the internet to send and receive phone calls from all kinds of different sources, including analog phones with the right adapters. VoIP technology takes a person’s voice, converts them into data packets, and sends it across the internet to the recipient.

In an IP system, which still uses some legacy hardware, traditional extensions are replaced by IP phones or any SIP-enabled phone.

SIP, or session initiation protocol, is how existing analog devices use an internet connection to communicate.

Phones for IP PBX

With IP communications, your employees can use their phone numbers from a number of devices depending on their business needs, including:

• VoIP enabled desk phones: These phones look just like traditional landline desk phones, but instead of connecting to the PSTN, they connect to the PBX or router to make calls via VoIP.
• Softphones: These software-based phones are typically accessed through a computer and can be used with headsets.
• Mobile apps: Apps on a phone, tablet, or computer can be used to make and receive VoIP calls.

Before we get into all the new telephony features and PBX offerings, let’s look at the different types of PBX out there. While each PBX phone system has its pros and cons, it’s important to assess each and determine what’s right for your business.

Analog PBX

An analog PBX uses traditional copper wires to physically connect your office phones together. It comes with a lot of hardware and requires office space dedicated specifically for it. Because of these needs, the upfront costs to install an analog PBX is a bit prohibitive. You would pay upfront for the hardware, a professional to hook everything up, and eventually new equipment updates.

IP (internet protocol) PBX

IP PBX allows businesses to use the internet to connect phones. This is often accomplished with the help of SIP trunking. SIP trunking lets a business connect phone systems over the internet and run a phone service over an office network.

IP PBX paved the way for new PBX features, as well as open the way for additional communication channels like video conferencing to be added to future comms platforms. However, even though it’s more adaptable than analog PBX, IP PBX still requires a lot of upfront costs due to hardware and needing skilled technicians to manage the system.

Hosted IP PBX

Hosted IP PBX is a complete phone system like analog and IP PBX, but the equipment is hosted offsite and managed by your hosted PBX provider. Your service provider will take care of software updates, backup and recovery plans, and any hardware issues. Choosing a hosted IP PBX solution can save your business a lot of money when it comes to upfront costs associated with hardware and PBX professionals.

However, even though hosted IP PBX is a step up from other PBX systems it’s not necessarily cloud PBX. You may only need internet connectivity but the system may still be hosted via physical infrastructure—it’s just offsite and run by your provider.

Virtual PBX

Virtual PBX, while a PBX, isn’t a full-fledged phone system like the other types of PBX. Virtual PBX is an automated answering and call routing service developed to handle incoming calls for businesses or call centers. Virtual PBX is usually a part of a broader hosted or VoIP system. UCaaS (Unified Communications as a Service) programs incorporate virtual PBX in their systems.

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_{^{Private automated branch exchange (PABX) was a term commonly used when there was a distinction between automated PBXs and manually operated public exchanges (PMBX). Today, all modern systems are automated, so PABX is just another way of referring to PBX.}}

So why should you invest in a hosted IP PBX system? Outside of the features you can take advantage of, there are lots of reasons to choose hosted IP PBX for your business:

• Cost
• Maintenance
• Mobility
• Growth
• Omnichannel experience

Let’s look at each in a little more detail:

Cost

With a hosted IP PBX system, there aren’t as many costs to worry about outside of your monthly subscription fee each month. You’ll save money on long-distance and international calls, which are much cheaper and sometimes free with an all-round VoIP phone service.

Maintenance

Your hosted IP PBX service will make sure upgrades are taken care of, and you’ll have little to no maintenance requirements. On-premises PBX systems are expensive to set up and maintain, and they usually incur additional costs. Upgrades and maintenance will need to be performed by someone in-house or an outside IT professional, which can add up over time.

While a hosted IP PBX system will still require some hardware and equipment on-site, it will be much less than other PBX systems.

Mobility

Because a hosted IP PBX works over the internet, it opens your business up to increased mobility and remote work options. As long as they have internet access, team members can work from their home or anywhere else, from multiple devices.

Scalability

If your business experiences bursts of growth, being able to add phone lines quickly is probably a must for you. A hosted IP PBX allows you to add phone lines for multiple employees in minutes, usually through your admin portal, with no help necessary.

This is in sharp contrast to an analog PBX that would require new telephone lines to be physically installed.

Omnichannel experience

A hosted IP PBX is much easier to integrate with a wider cloud-based phone system, opening your business up to extra features that you can’t get with other PBX systems.

You can easily connect with team members, clients, vendors, and customers via multiple channels. Your teams can connect with messaging and video conferencing, while your customers can choose to reach you on their preferred channel when your PBX is part of a comprehensive hosted business phone system.

Besides connecting calls internally and externally to the outside world for a business, a hosted IP PBX phone system offers businesses a number of extra phone features either in of themselves or when part of a broader hosted communications platform.

The following are just some of the features you can expect to find.

• Voicemail: While any PBX system will offer some kind of basic voicemail feature, some hosted IP PBX providers that provide more comprehensive phone systems offer voicemail and visual voicemail. Visual voicemail allows you to read your voicemails and have the transcription sent directly to your email so you can read them when you’re ready.
• Auto attendants: Callers can choose between a number of options to decide where their call is going to be transferred. This benefits both the business and the customer; calls are routed efficiently, and customers can choose where they want their call to go without waiting on hold.
• Call recording: Some hosted IP PBX providers will offer you the option to record your incoming and outgoing calls. You can then review, delete, or download the recordings. This is beneficial for supervisors that want to use call records for a variety of training reasons or for employees that want to record calls for future reference.
• Call forwarding: Individual users can set rules for what happens to calls when they’re at lunch, out of office, or on another call. You can even have calls forwarded to your personal mobile number.
• Call routing: Quickly and easily route calls based on customer information. Call routing also helps you connect multiple offices across many locations.
• Call queues: Sends customers to a queue until the right agent or employee becomes available to take their call. You can even set up announcements or promotions to play while the customer is on hold.
• Conference calling: Many providers offer conference call capabilities (and video conference calling) with lots of advanced features like screen sharing, moderation controls, and cloud-based recording as part of a system which also includes IP PBX.
• Hold music: Choose what music callers listen to while they're on hold. Many providers will offer a menu of songs to choose from or upload your own.

Choosing which PBX system to adopt will largely depend on what existing hardware you have on-site already. Below we’re going to break down what your existing setup might look like and what your best options for a PBX system are as a result.

Zero on-site equipment

If you’re starting from scratch and you have no PBX hardware on-site from an existing setup (or very little), then your best bet is to choose a hosted IP PBX system. This will allow you to get up and running as fast as possible, in as little as a day in some circumstances.

You won’t have to worry about upfront costs, and you can immediately take advantage of all the features mentioned previously, not to mention the ability to customize IVR and integrate your customer relationship management (CRM) software.

Complete on-site PBX setup

If you have an analog PBX on-site already, you can still transition to a VoIP-enabled telephone service, you just might have a little more work to do. Luckily, you won’t need to install new hardware, but having someone in the office who knows the PBX system will save you a lot of time.

You have the choice of IP PBX or hosted IP PBX and the decision is entirely yours. If you have the money and resources, you may prefer to keep your IP PBX on-site and managed in-house. If you want to save money and let someone else do the heavy lifting you can go with a hosted IP PBX.

Here’s a chart to help you visualize the breakdown:

So now that you know the ins and out of PBX systems, you’re probably ready to get online and look for the best option for your business. May we offer a suggestion?

8x8 offers a competitive service with all of the features we’ve covered in a hosted PBX system, not to mention a number of others. Here’s are just some of the features you can look forward to with 8x8 as your hosted IP PBX provider:

• Unlimited calling in over 40 countries
• Local and toll-free numbers in over 120 countries
• IP fax services and SMS capabilities
• Visual voicemail
• Call monitoring
• Call transfers and forwarding

With 8x8’s communication platform, your entire team can collaborate, chat, and make voice and video calls, all while working in the office or at home. Contact 8x8 today to get started with a business communications system that will truly optimize your business.