A Private Branch Exchange (commonly called PBX) is a telephone system that is owned, operated, and used within a single organization. There are two types of PBX:
- on-premise PBX and
- the hosted (or cloud) PBX.
A hosted PBX (Private Branch Exchange) is a telephone switching system that’s accessible over a network in the cloud. A hosted PBX is cloud-based, which means that you can make your employee’s phone all from your web browser or an app. Phone lines and calls happen entirely over the internet, cutting down on hardware and labor costs. Plus, it allows your employees to work remotely and use their business phone number from anywhere, rather than being tied to a landline in the office.
There’s a lot of ground to cover when thinking about hosted PBX solutions. Let’s jump right in!
A virtual PBX sounds like a lot of work to set up, but it’s actually super easy and simple to use. Legacy PBX systems are much more difficult to work with because documentation is sparse, and its functionality is rather limited.
What is the difference between hosted PBX vs. on-premise PBX?
| On-Premises PBX | Hosted PBX |
|---|---|
| Lower cost per seat | No upfront costs |
| No use of internet | Modest use of network bandwidth |
| Basic calling features | No maintenance |
| Unexpected maintenance costs | Redundant data centers |
| You manage the infrastructure | Training and support included |
The main difference between a hosted PBX and a traditional PBX is a cloud PBX doesn’t require additional hardware and software on-site to complete phone calls. Both types of PBXs have advantages and disadvantages. The technical difference is in how call data is transmitted.
For an on-premises PBX, this data moves through the cloud over the internet, which is managed by a third-party. It’s particularly beneficial for businesses that desire flexibility with plenty of room to grow as the company scales. Plus, there are many IP desk phones to choose from that are fully compatible.
If you run a lean startup, you can use your computer or mobile phone connect as clients into your PBX by downloading a VoIP softphone app. The Nextiva App is available for iOS, Android, macOS, and Windows. You can make and receive phone calls like you usually would before.
A traditional PBX generally have hard-coded dialing prefixes and restrict long-distance calls. To change these options, you need to plug into it to change its settings. The hassles with an on-premises PBX is they rarely receive updates and have a steep learning curve.
However, a plain PBX might be preferable if you have a non-existent IT budget and don’t have any plans to expand your office phone service. This isn’t a dig against PBXs; instead, they are very reliable if nothing changes and the business needs don’t change.
Related: PBX Failures? Here’s How to Fix Common PBX Issues (5 Steps)
How Does a Hosted PBX Work?
A hosted PBX shifts your phone and communications infrastructure over to a trusted VoIP provider. Instead of individual phone extensions, each phone is replaced with a VoIP desk phone.
The diagram below illustrates how a hosted PBX system works:
With the implementation of the hosted PBX, your voice communications use the existing data network. Business broadband can easily support the unified communications needs of the entire office. All the top PBX features like call routing, call recording, and conferencing are provided from the VoIP service.
Instead of using a proprietary phone with your PBX, hosted platforms let you use any SIP phone for the greatest compatibility. Calls are established securely over the same network your computers use.
The information that travels over IP networks to the cloud PBX, which reaches scalable data centers. Those servers route calls to other VoIP providers, including the publicly switched telephone known as a PSTN.
To manage how your calls are handled, including advanced call features, you just need to access an online voice portal in your browser to adjust your settings. Once you click save, the changes are applied in an instant.
This process works the same for small businesses as it does for larger offices—just plug your phones in and get back to work.
There are two types of hosted PBX phone systems. Let’s compare them to see how they benefit companies like yours.
Related: What is a PBX? The Definitive Guide to Private Branch Exchange Systems
Should I switch to a hosted PBX phone system?
You should consider switching to a hosted PBX system if your company is in a growth period where you expect to regularly add phone numbers or phone lines. Another major reason to switch to a hosted PBX system is if your employees are working from home or are full remote employees. A hosted PBX system means that all your business phone numbers exist in the cloud and can be accessed from devices anywhere with the internet.
A hosted PBX system requires less upkeep and maintenance than an on-premises PBX system.
Being in charge of an on-premises private branch exchange can be a full-time job. That means a company might spend a salary on someone whose entire job is to understand the system inside and out, and continuously stay on top of changes, updates, and patches. This makes for a stiff challenge when you consider how much it costs to keep someone on staff.
PayScale estimates the median salary for a telecom manager with PBX skills is $82,340 with the market topping out at $121,000.
The startup costs are much higher compared to a hosted PBX. The maintenance and upkeep could be additional expenses that add up every year.
And then, there’s the space. With phones that are still hardwired, you’ll likely need space (typically a server closet) where your physical equipment and wired phone lines connect calls to the telephone system. Setting up an on-premise PBX isn’t cost-effective, especially considering the rising costs of commercial real estate.
A cost-saving upgrade to an existing on-premises PBX is to go with an IP PBX that supports SIP trunking.
The Benefits of Hosted PBX
There are many reasons why businesses switch from an on-premises PBX to host their business phone system in the cloud.
When comparing the two, you’ll notice that hosted PBX offers a wealth of features. That’s because there are dozens of VoIP features to implement.
At a glance, here are just a few of the top reasons why people switch to hosted PBX:
- Business phone numbers that can fully support remote employees
One of the reasons why a hosted PBX is a top choice for many small and growing businesses is the flexibility employees have to work remotely. Voice over Internet Protocol lets employees use an app and immediately have their calls forward to any phone number or device. Whether they want a call to go directly to their cell phone or their laptop, VoIP makes it happen anywhere in the world.
What’s needed to make this happen? Simple: a VoIP service provider and a reliable internet connection. With those two factors coming together, hosted PBX can accomplish something the traditional PBX never could.
- Fast Setup with Minimal Maintenance
Another critical factor is the ease of set up and how easy the system is to maintain. Unlike traditional PBXs, hosted PBX can be set up within a few days, sometimes even the same day. Because the implementation requires no on-site infrastructure, which makes the entire solution easier to maintain.
You’ll remember that with the traditional PBX, it was sometimes necessary for a business to hire a full-time employee that was trained on the system and could make any significant changes or troubleshoot problems. Hosted PBX takes that need away, saving companies a hefty amount in their IT budget.
- Flexibility & customization on demand
With Hosted PBX, a business can change its call settings in a flash. The same way an employee can log in and easily route their phone number to a new device. Cloud-based PBXs make accessing features like call forwarding, conference lines, Caller ID, and Voicemail to SMS as easy as toggling a setting on or off.
A middleman is often needed to update PBX features. Businesses had to call telecom providers to implement the options they wanted (usually at an additional cost). A hosted PBX has put the power of flexibility and total call control in the hands of the user.
- Enterprise-grade Reliability & Performance
For businesses, increased reliability is arguably the most crucial benefit.
Hosted PBX, since it’s not a physical landline or housed in an on-site phone system that can have a whole lot of problems, from the building’s wiring to downed telecom lines. With built-in redundancies like failover, interconnected data centers, businesses can find ways to ensure they’re always up and running.
Even in the event of inclement weather that requires evacuation, you can configure your VoIP phone system for remote employees, to alert customers with timely messaging, forward calls to voicemail, or even route them to cell phones. It’s possible because a hosted PBX operates across multiple redundant servers located across North America.
How to Choose the Right Hosted PBX Provider
Not all cloud PBX providers are the same. Selecting the service provider makes a massive difference in achieving the goals in your business. Before implementing a hosted PBX solution, we recommend deciding on the most important features to your organization.
Cloud system buyers should establish their business requirements, compare VoIP features, research security protocols, and examine service and support offerings.
Choose a hosted PBX provider that covers the following factors:
- Initial and recurring phone service costs
- Capabilities of the business phone system
- Price, availability, and quality of support
- Third-party reports on uptime and system reliability
- Security best practices and certifications like PCI, SOC, and HIPAA
- Number of data centers and its security profile
- Accessibility and ease of use of the unified communications platform
- Verified customer reviews and industry benchmarks
When you score your hosted PBX service, you will see that Nextiva consistently ranks as the best business phone service in the industry. Why? Nextiva is easy to use, offers unrivaled reliability, and the support team is legendary.
The Future of the Hosted PBX
The workplace has changed a lot in 20 years, let alone the last five. The pandemic forced us to work exclusively from home and many businesses moved to hosted PBX solutions so their employees could continue to receive calls and work remotely. Those still on a PBX (like hotels that have a phone in each room) are usually doing so because they paid a ton upfront for the equipment and software licenses, and may still be paying off the loan. It’s a fact that work has fundamentally shifted from structured offices to ones that embrace more flexibility. It’s time for your business phone system to keep up with the change.
Business owners and IT administrators share universal respect for products and services that just work. Gone are the days of tinkering with an old Windows server with outdated PBX software to save a few dollars. This is a classic case of tripping over dollars to pick up pennies.
The move to the cloud is here.
The modern office will continue to shift towards using less hardware. Softphones will replace desk phones as the new standard. Call centers will continue to upgrade their aging PBXs with a modern hosted PBX that connects their agents around the world using nothing more than an internet connection.
With the rise of work-from-home employment, will your PBX keep up?