PBX Phone Systems: A Guide to Key Technology
Corey McCraw is a staff writer covering VoIP and Unified Communications. Corey has over a decade of experience in marketing, tech writing, and corporate communications and has even penned content for the former First Lady Michelle Obama’s Let’s Move initiative.
This article is part of a larger series on VoIP.
Public branch exchange (PBX) phone systems are private telecommunication networks that can connect to the public switched telephone network (PSTN) and voice-over-internet-protocol (VoIP). Employees use a PBX system to call co-workers at one or more branches for free and make external calls. Unlike standard phone services, which supply one phone line per device, a PBX assigns user extensions so multiple phones can share lines.
PBX business phone systems are a core technology for communications, providing scalability and enterprise-grade features, such as an auto-attendant and business-hours routing. However, costs vary by deployment method, number of lines, and capabilities. Below, we’ll cover how PBX phone systems work and benefit your business while comparing the different types.
How PBX Phone Systems Work
PBX phone systems for small business users are fairly simple. Your phone lines connect to a PBX server, distributing incoming calls to the appropriate extension based on caller input or preset rules. The server can be located on-premise or in the cloud.
An on-site PBX box connects to copper phone lines for plain old telephone service (POTS) or digital lines for integrated services digital network (ISDN). It can send communications data through the PSTN network, internet, or hybrid systems using both.
With hosted PBX, incoming phone calls go to your VoIP provider’s PBX, then over the internet to your desk phones, session initiation protocol (SIP) devices, and mobile phones. Companies with multiple locations and business phone systems may require additional components, such as SIP servers and VoIP gateways. While hosted PBX uses SIP, it’s quite different from SIP trunking.
Regardless of the PBX server location, call routing happens automatically without human intervention. In short, the PBX box replaced conventional switchboard operators, who’d physically connect a cable with an inbound caller to the correct extension on the switchboard.
Although cloud-based PBX systems have more features than on-premise servers using PSTN lines, both let you configure call handling settings, including how calls are greeted and routed. Hosted PBX services are the most popular option for businesses because they don’t require hefty infrastructure investments and ongoing maintenance.
Benefits of a Business PBX Phone System
PBX phone systems enhance internal and external communication, improving operations and customer experiences. As a result, organizations save money while boosting profits due to increased customer loyalty and satisfaction. The best hosted PBX providers connect your workforce and clients seamlessly. This gives your company several advantages over others that use traditional phone services.
Customer Experience Improvements
According to Invoca, 68% of consumers prefer calling a company for help with a purchasing decision. The last thing they want is to hear a busy signal or be routed to a person who can’t help. In fact, 35% of consumers report feeling frustrated, and 22% say they’re “less inclined to purchase” after being transferred.
PBX systems provide control over how calls are routed, allowing you to get callers to the right person based on a schedule, the caller’s area code, or customer history. In addition, employees can forward calls to different devices or people, so they can head into a meeting without worrying about missing a call.
Several VoIP phone features available with PBX services enhance customer experiences, including the following:
- Hold music and messaging: Being put on hold isn’t ideal, but you can improve it by playing custom music or sharing details about upcoming promotions.
- Interactive voice response (IVR): Deliver excellent experiences 24/7 using an IVR with self-service tools. Customers easily obtain account information and pay their bills even if your office is closed for the day.
- Call queues: When experiencing higher call volumes, call queues work better than placing customers on hold. It keeps callers informed of their wait time and position in line while automatically routing them to the first available agent.
- Unified communications (UC): Invoca found that 53% of surveyed consumers “need to repeat their reason for calling to multiple agents.” UC platforms centralize data and integrate with customer relationship management (CRM) software, giving employees access to caller details before picking up the phone.
Affordability & Scalability
A PBX box splits incoming phone lines, allowing multiple devices to answer calls from one phone number. This is typically less expensive than paying for one PSTN line per desk phone. However, hosted or cloud-based PBX services provide the greatest savings for small to mid-sized businesses (SMBs).
Unlike on-premise communications infrastructure, cloud-based PBX solutions don’t require extensive hardware and software purchases. You also don’t need a large information technology (IT) team to update and maintain servers, as hosted and virtual PBX providers handle these tasks.
Cloud-based solutions work on mobile phones, tablets, and computers, so there’s no need to buy analog desk phones. If you already have them, inexpensive VoIP telephone adaptors transform your conventional devices into digital-ready tools.
In addition, you can add or eliminate phone lines using an online portal. This feature helps your company quickly scale during peak season without paying for extra users or features year-round. In contrast, a landline system requires your phone company to run additional copper lines to your business to increase capacity during your busy season.
As your organization grows, PBX systems keep employees at multiple locations connected, offering free calling between staff regardless of geography. You don’t need a separate provider for each building and can add contact center capabilities for sales and customer service teams. Plus, it’s simple to monitor costs via usage reports to ensure an optimal return on your investment (ROI).
Integrated Services & Data
Companies use many tools to capture data and communicate, from help desk software to CRMs. When this information is locked into the software program, data silos occur, putting customer and employee experiences at risk. PBX systems and VoIP software integrate with your tech stack, allowing your teams to leverage data before, during, and after calls.
As your company grows, you can integrate workforce optimization (WFO) and management tools. These use call data from your VoIP system to uncover call trends, time spent on after-call tasks, and downtime. You can optimize schedules, leading to customer service and efficiency improvements.
Data integration supports many business goals, including the following:
- Improve visibility into customers: Use call analytics and post-call survey tools to determine customer motives for calling and gauge satisfaction.
- Reduce manual errors: Integrated platforms automatically sync data between systems, so there’s less chance of employees entering incorrect information or forgetting to log a call.
- Identify trends: Review call reports to discover peak hours and learn which employees or departments are over- or under-burdened.
Productivity & Efficiency Increases
A PBX phone system lets employees take multiple calls using their preferred devices in the office, at home, or on the go. This flexibility helps teams stay engaged and productive. Additionally, VoIP tools reduce after-hours work by automating post-call summaries.
Here are a few other ways your cloud-based phone system enhances productivity and efficiency:
- Presence data reduces phone tag between employees and helps supervisors see who’s available to take calls.
- Call filtering tools decrease unwanted calls while ensuring that very important customers (VIP) get through quickly.
- Provide real-time training and get new hires up to speed using call center phone system features, such as call monitoring, whisper, and barge.
- Decrease task switching and increase employee focus with integrated phone systems that let workers communicate without leaving their current application.
- Automatic call distribution (ACD) offers several call routing methods, such as weighted or linear call distribution, ensuring optimal call center productivity.
Types of Business PBX Phone Systems
As major telecommunications providers announce plans to end landline support—but have yet to receive permission from the Federal Communications Commission (FCC)—internet-based phone systems can help sustain your business. Select the right type of PBX system to build resilience and ensure business continuity.
Learn about the three different types of business PBX phone systems: traditional, IP PBX, and hosted PBX. Below, we discussed their pros and cons to help you decide which best fits your business needs.
Traditional
| PROS | CONS |
|---|---|
| You don’t need high-speed internet services | Fewer advanced features than offered with digital phone services |
| Reliable calling, even during power outages | Expensive to install and maintain |
| Few, if any, dropped calls or call quality issues | Less scalable than internet protocol (IP) or hosted systems |
A conventional analog system uses an on-site PBX box and runs POTS lines to the PSTN. It’s a step up from a regular landline because it can route calls to multiple extensions rather than having one telephone per line. These hardwired boxes are typically placed in a large closet or server room in your office, and you’re responsible for maintaining them.
On-premise systems don’t require internet or electricity to run, making them great for companies in remote areas without reliable services. Large enterprises with significant IT resources also use PBX services as they often have heavily invested in equipment and infrastructure.
However, analog tools lack advanced features found on virtual and hosted PBX, including multimedia messaging and conferencing, team collaboration functions, and voicemail-to-email or text. An on-site PBX can’t support remote employees, and you’ll need to add new wiring and jacks to increase capacity.
IP PBX
| PROS | CONS |
|---|---|
| Provides advanced call management and handling features | Requires ongoing maintenance and potential infrastructure upgrades |
| Less expensive than a landline system connected to an on-site PBX | Can be overkill for small businesses wanting a VoIP phone system |
| Scalable to a nearly unlimited number of employees | Costs more to install than hosted solutions |
An IP PBX system or VoIP PBX are hosted on-site and use SIP trucking or primary rate interface (PRI) to transfer data over your internet lines. An Ethernet cable connects your IP PBX box to the internet, allowing you to lower your monthly phone costs by switching from a landline-based service to VoIP.
You maintain control over your hardware and data, yet can take advantage of the latest VoIP features, such as video conferencing and document sharing. Using an IP PBX is a cost-effective route if your office is already equipped with analog desk phones. If you want to use internet-based phone services without hiring an IT team to maintain your PBX, consider a hosted PBX system.
Hosted PBX
| PROS | CONS |
|---|---|
| Costs less to install than analog and IP PBX systems | You don’t have total control over your infrastructure and data |
| Doesn’t require ongoing maintenance or updates on your end | The monthly hosting subscription makes it slightly more expensive than an on-site IP PBX |
| Offers advanced communication and collaboration features | Requires a high-speed internet connection and electricity to work |
A hosted PBX system is the best choice for small businesses wanting to switch to internet-based phone services. Unlike on-premise systems, your provider oversees servers in their data centers, reducing the burden on your IT staff. You will pay a subscription fee to outsource PBX management, upgrades, and maintenance.
It’s also more scalable because you don’t need to boost server capacity if you add on a call center or a new location. Instead, you simply add or remove users through your software as a service (SaaS) provider’s online portal, and they handle the rest. Your employees can almost immediately start using new phone lines from their mobile phone, computer, or tablet by installing a softphone application.
Since a VoIP PBX requires high-speed internet and reliable power, it may not be suitable for companies in rural locations or those needing phone services during power outages. Also, organizations in the financial or insurance industries may prefer the security of on-site PBX systems.
Important Statistics on PBX Phone Systems
Communication issues cause big problems for businesses. According to Nextiva, “one in three companies have lost a customer due to internal communication issues,” and “30% of business professionals have missed an important deadline.” Switching from a standard landline to a PBX system improves internal and external communications while providing the necessary tools to monitor, measure, and adjust experiences.
Furthermore, PBX phone systems support fully remote and hybrid workforces. Nextiva found that “more than one in three businesses have remote employees,” and Accenture noted 83% of workers “prefer a hybrid work model.” Improving mobility in and out of the office leads to better employee experiences, higher engagement, and increased worker retention rates.
Frequently Asked Questions (FAQs)
Is PBX the same as VoIP?
VoIP (voice-over-internet-protocol) sends calls over the internet, whereas companies can use PBX to make calls through the public switched telephone network (PSTN) or VoIP. Therefore, it’s possible to have a PBX system without internet service, but you can’t say the same for VoIP.
How much does a PBX system cost?
PBX systems vary in price, depending on the number of users, location of servers, and type of hardware required. According to RingCentral, a company with 20 employees could pay up to $14,500 to install an on-premise PBX system. In contrast, a cloud-based PBX has minimal upfront expenses as you only need to pay for desk phones if you want them.
What type of providers offer hosted PBX services?
VoIP providers offer hosted PBX services for a monthly subscription fee. Some, like RingCentral and Nextiva, charge per user and provide tiered plans that add features to more expensive packages. Others, like Grasshopper, give a set number of phone lines and unlimited extensions, allowing employees to share lines.
Bottom Line
Your business phone service plays a key role in building customer relationships. It also affects your budget and employees. In fact, Nextiva found that “60% of people face a crisis at least once a month due to communication issues.” The right PBX phone system grows with your company and supports how and where your staff works.
