PBX Phone Systems: A Simple Guide to Key Technology

Private branch exchange (PBX) phone systems refer to the hardware and software that allow businesses to utilize multiple extensions. In addition, PBX systems enable automatic call routing, interactive voice response (IVR) menus, call scheduling, and other key features to take your business communications to the next level.

It is worth noting that these systems can range from absolutely free to thousands of dollars, meaning you’ll want to know all the ins and outs before choosing the right PBX system. Below, we’ll walk you through everything you need to know, from what a PBX system is and how it works to the most trusted providers in the industry.

Why Businesses Need PBX Phone Systems

PBX systems are what give businesses the ability to offer their employees individual extensions. This also means a business requires fewer lines from its phone company, saving it money. As a result, it’s one of the most popular forms of business phone service on the market today.

The way that the software and hardware works together depends on the type of PBX system and how it is implemented. Older PBX systems, for example, were completely on-premise, meaning all the necessary components were installed locally at your office. However, advancements in voice-over-internet-protocol (VoIP) technology empower modern businesses to use a hosted PBX, which is a cloud-based system and reduces the equipment.

How PBX Phone Systems Work

PBX systems route your company calls from your PBX through landlines (or the internet with VoIP) to another business’ PBX system. The call is then connected to a specific line or extension.

Before PBX systems and VoIP technology, calls were routed by actual humans (switchboard operators) who’d physically wire a connection to the appropriate extension. Now, that entire process is updated and automated. Here’s how it works:

You get to determine how calls are handled when you configure your phone system’s settings. You’re able to determine how incoming calls are greeted, routed, and ultimately answered by the appropriate end-user.

Today’s best PBX systems are hosted by VoIP providers, such as RingCentral and Nextiva. These platforms host the PBX systems on their own servers, meaning you don’t need any on-premise hardware or software to get started. You simply sign up, download the necessary apps, and can get started with your business PBX system. Hosted PBX systems are popular with businesses of all sizes, from small startups to call center teams with high monthly call volumes.

You’ll need a fast, reliable network connection to use internet-based PBX services. Try our VoIP speed test to see if your network bandwidth can handle a virtual phone service.

Types of PBX Systems

Businesses use four different types of PBX systems. Traditional landline systems use hardware-heavy landline PBX boxes, while internet-based systems employ IP, hosted, or virtual PBX systems.

Traditional PBX

Traditional PBX systems are old, physical hardware boxes that are installed, kept, and maintained in your office. You’ll connect your business phone lines to the box, and the box will route calls to each desk in your office via a voice menu and designated extension.

Setup costs can be as high as $1,000, but the price can go up further depending on your provider. Most small businesses and large enterprises choose an internet-based phone system to take advantage of the advanced features and cost savings. However, companies that already invested in expensive landline technology and those that lack high-speed internet connections may find a traditional PBX system to be the best communication option.

IP PBX

IP PBX systems (also known as VoIP PBX) require a hardware box, but they transmit and receive calls over the internet rather than analog-based signals. Instead of using traditional landlines, you’ll connect your IP PBX box to the internet via Ethernet cables.

While internet-based calls will save you money in the long run, you’ll still need to purchase the expensive hardware box for your office. If your business has existing desk phones, IP boxes are a great way to utilize VoIP technology without replacing your entire phone infrastructure. An IP PBX system will enable your business to use advanced call features, like callout routing, voicemail, and automated attendants.

Hosted PBX

A hosted PBX system connects your business communications directly to the cloud. This cloud-based phone system gives you all the benefits of VoIP technology without any complicated physical setups or expensive phone lines. All you and your employees need is a desktop or mobile device to make and receive business calls.

Hosted PBX systems are generally the best option for small and growing businesses because they’re easy to use and affordable to scale. The top hosted PBX system providers (like RingCentral and Nextiva) provide additional communication channels, like video, fax, team chat, and business SMS, to give your business a unified communications program. However, you’ll need a fast, reliable internet connection, especially if you have several employees who’ll use the phone system simultaneously.

Virtual PBX

Virtual PBX systems share a lot in common with hosted PBX systems, but they trade features for simplicity and affordability. You won’t be able to take advantage of a sophisticated interactive voice response (IVR) menu, but you’ll have access to call forwarding and basic call routing.

This paired-down platform makes virtual PBX systems more affordable than hosted PBX systems, but you’ll still need an existing business phone system to make it work—which will eat into your cost savings.

PBX Phone System Costs

PBX systems could be as cheap as $20 per month or as expensive as thousands of dollars annually for setup, service, and maintenance. Plus, traditional PBX systems will require you to purchase analog-compatible desk phones, which can cost a fair amount per employee.

Common PBX-related costs include:

• PBX box: Expect to pay around $1,000 for a traditional PBX system. This price includes the cost of the box and the installation fees. If it doesn’t exist already, you’ll have to pay for landline wiring to be installed in your office.
• Phones: Desk phones and VoIP-enabled devices can cost as much as $500 per unit. You’ll have to pay more for touchscreens, Bluetooth, and video chat functionality.
• Monthly service fees: You’ll have to pay ongoing monthly service fees for all the most popular solutions. RingCentral’s hosted PBX system starts at just $19.99 per user, per month, but you can find providers who offer varying services for less or more.
• Maintenance: Traditional PBX systems will require on-premise maintenance and software and hardware updates from an expert. Hosted and virtual PBX systems also go through maintenance and updates, but this happens seamlessly in the cloud.

Additional PBX Phone System Benefits

• Advanced features: Take advantage of automated attendants, call routing, voicemail, and transcriptions.
• Internal communications: Save money by routing your calls internally without ever leaving your PBX system.
• Internet integration: Utilize VoIP technology by choosing an internet-based PBX system.
• Affordability: Hosted and virtual PBX systems will save you money with cheaper setup and monthly service fees, as well as lower costs per call.
• Integrations: Connect your hosted PBX system to your favorite customer relationship management (CRM) platforms or integrate it directly into your apps with powerful developer APIs.

Best PBX System Providers

There’s no shortage of options for PBX system providers, but not all platforms are created equally. Each solution services different businesses, so you’ll need to shop around to find an affordable service that fits your small business’ use case.

Here are three of the most powerful PBX system providers for small businesses. However, you can learn about more of the top providers in this place by visiting our guide on the best hosted PBX system providers.

1. RingCentral

RingCentral provides a hosted VoIP business solution to empower your business with calls, video, SMS, and team chat. This internet-based communications provider can scale with your business from start to finish.

2. Nextiva

Nextiva delivers a hosted PBX system that’s perfect for growing businesses. With affordable entry-level plans and advanced call management functionality, your business will have the entire communications suite it needs.

3. Vonage

Vonage provides small businesses with a virtual PBX system. Its features are paired down compared to RingCentral and Nextiva, but it makes up for its lacking features with easy-to-use simplicity and more affordable pricing plans.

Frequently Asked Questions (FAQs)

What is the difference between a landline & a VoIP phone system?

VoIP systems transmit calls as data via the internet, while landlines transmit calls as analog signals over the legacy copper network. For more details, check out our guide to landline vs VoIP systems.

Is there any reason I should ever choose a traditional PBX system in 2021?

In most cases, no. However, if you have an expensive legacy system that you don’t have the budget to upgrade or your business operates in an area with a poor internet connection, then a traditional PBX system might be right for your business.

Do I need an internet connection for a PBX?

You don’t need a fast internet connection if you’re using a traditional PBX system. However, internet-based PBX systems (like IP, hosted, and virtual) require a quick, stable network connection.

Can landline & VoIP phones call each other?

Yes, they can. Both technologies have evolved to make calling each other completely seamless—you’ll never notice a difference.

Bottom Line

PBX systems have forever evolved the way businesses make and receive calls. Combined with VoIP technology, you can take your business with you wherever you go—on a hardphone, desktop, mobile, or even tablet device.

There’s no one-size-fits-all solution when it comes to choosing the right PBX system for your business. However, a hosted PBX like RingCentral will give your business the flexibility it needs to adapt the service to your business. With mobile and desktop apps, third-party integrations, and additional communication channels, there’s no better platform to upgrade your business phone system.

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