Any company that has moved away from a traditional telephone exchange, which is an outdated phone service, where a human has to connect the caller to the recipient manually, most likely has a Private Branch Exchange . That is especially true if the business in question relies on telephone calls for its day-to-day operations. However, though a PBX is most likely in place, it is also expected that the only person who truly understands the system, is the person who initially organized for it to get implemented. Luckily, the below provides a straightforward explanation on a PBX system so that everyone can understand what a Private Branch Exchange is, along with how it is essential to a business phone system in the current age. 

What Is a PBX?

A private branch exchange or PBX for short is a private telephone network designed for businesses. The PBX allows a company to perform both internal and external communication while working alongside a variety of business communication channels such as a VoIP service or an ISDN. With a PBX, a company can have more phones than phone lines, and each employee of the company can communicate with each other, free of charge. A Private Branch Exchange system can also provide external call queuing, call recording, hold tones, conference calling, and out of business hours routing. These advantages typically come with a digital PBX, which uses the internet to send and receive audio, text, and video. However, to understand what a PBX is and what it can do for a company, there should be an understanding of where it began, with the oldest type of PBX system, the analog PBX.

Analog PBX 

When someone says telephone exchange, unless they have direct experience in the telephony sector, they are most likely referring to an analog PBX, or traditional PBX as the system is also known. These Private Branch Exchange systems directly connect to the PSTN or Public Switch Telephone Network. The private branch exchange then connects any incoming calls and faxes to the connected devices via copper wiring. Transferring of calls will also go back to the PBX operator, who will manually route the transfer. An analog PBX was essential for a business that dealt with a large volume of incoming and outgoing calls, before the days of the internet.

However, because a traditional PBX system relies on manual input, they are now mostly phased out. One reason for this is that they cannot provide unified communications, such as combing email, SMS, instant messaging, emails, and calls all into one package like more modern PBX systems can. Another reason is that the machines that provided the service were very large, requiring a lot of space that could be better used. 

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On-site IP PBX

As the internet, in the form of SIP trunking, replaced the copper telephone lines of old, so does the IP PBX replace the analog PBX. That’s not to say that a company can’t employ the use of an analog PBX, though it would be difficult to justify the reason behind that decision when a SIP trunk does everything a physical phone line can and do it better. An IP PBX is used to transfer calls over the internet, via a system called VoIP or voice over internet protocol. There are two types of IP PBX systems, with this section addressing the on-site type. For a company to have an on-site IP PBX, the business should have a VoIP system for its phones located on its premises.

Many onlookers would mistake the system for that of a computer server, in that it is a computer device that comes with a lot of wires. As stated, where an IP PBX differs from the analog variant, is in how it manages the incoming data. In the case of an on-site IP PBX, a company’s phones connect to the central private branch exchange server over the company’s LAN or local area network. With the Private Branch Exchange connected to the network, it will also utilize the internet like the rest of the connected devices, thus able to transfer audio data packets through the network. It is also this internet access that provides the advanced features not found in an analog system, or at least not without some substantial modification.

One advantage of an IP PBX not found with an analog PBX is the ability to connect it to a CRM platform, making life much easier for a company. However, there is one downside to an on-site IP PBX, which comes in the form of the initial installation and regular maintenance. An on-site system needs an on-site IT professional to install and manage it. In comparison to the next alternative, things can start to get expensive when also considering the SIP trunking and the equipment needed for a PBX, including the central physical hub, which includes the VoIP gateway and the IP phone systems necessary for taking the calls.

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Hosted PBX

A hosted PBX, also known as a cloud-based PBX or virtual PBX, removes the bulky physical computer and the numerous wires a business needs to run an on-site IP PBX. It then takes all that infrastructure and places it in the cloud. A hosted Private Branch Exchange , as the name suggests comes from a PBX provider who hosts the VoIP based PBX system off-site, and then allows the company employing the services of the provider to connect to the PBX over the internet. For a business, this eliminates multiple factors found with other PBX systems, including:

  • An on-site IT professional to manage the PBX systems.
  • The PBX hardware that takes up space.
  • The associated costs that come with the PBX hardware.
  • The fact that the implementation of third-party call center software may not be compatible with the installed system. 
  • Service downtime and overall hassle from upgrading an on-site system. 

A hosted Private Branch Exchange solution has a service provider that will handle all of the maintenance, and installation is simple and unobtrusive. The implementation of a hosted PBX platform is affordable, making it an excellent solution for smaller businesses that can’t afford the investment of an on-site PBX system. Typically, the only equipment necessary, are the IP phones used to take calls, and even then, through the use of softphones and smartphone apps, these can be avoided. Even the connection to the PSTN gets handled by the hosted PBX provider. Someone on the IP PBX end makes an outbound call, which travels over the internet via SIP trunking, or similar, to the PBX system, which then hands the call over to the PSTN. The process gets reversed when the call goes the other way. 

How Can It Benefit Your Business?

As stated, an analog PBX is somewhat redundant in modern times. However, an IP PBX hosted, or cloud-based PBX, plays a significant part in telephony services, with that role only becoming more prominent as time goes by. If the above doesn’t sell the idea of why a Private Branch Exchange service, especially a cloud-based PBX, is so essential, hopefully, the below will bring some further clarification.


Scalability is a primary PBX feature of a hosted PBX, though even an on-site PBX is easier to scale than an analog PBX. For a cloud PBX, when a business needs more phone lines, they can call up the Private Branch Exchange provider, and ask for more to be allocated. There will most likely be an additional charge, though, the extra line can be up and running in minutes. The same can be said for when the reverse needs to happen. A company might see a loss of consumers, or realize its expectations were higher than the achieved results. These obsolete lines can get removed without any resources going to waste, and can easily get reinstated as soon as a busy period comes around.

Save On Costs

Once more, in case it’s not yet clear, a Private Branch Exchange service will save company money. The automated attendant of a PBX eliminates the need for an employee to route calls manually, which in turn eliminates the need for that employee, along with the training and work benefits that would have been necessary. Again, all things an auto attendant does not require. As already stated, there is no expensive PBX infrastructure to implement. The actual savings will depend on the business, but any money saved is a bonus. 


Heavy snow? Road closures? With a cloud Private Branch Exchange system, call agents don’t need to get to their desks to get to work. All a virtual PBX system needs to do its job is an internet connection and a device that can make a receive calls, which in the age of smart technology, is almost any device. Because the PBX server is internet-based, any device can connect with either a URL or a mobile app, and can then get contacted by the same set of phone numbers customers are used to.


It only takes one telephone tower to get disrupted, for an area’s phone lines to stop working. For the business that employed a cloud-based Private Branch Exchange, that won’t matter as provided there is an internet connection, like above, the lines will work, and the calls will come through. However, even if the internet connection does go down, most reputable Private Branch Exchange service providers have a disaster recovery plan in place. These plans ensure that if the main business location loses its ability to make and receive calls, then the calls get routed to another location instead of simply going to voicemail or, worse, a deadline. The backup location could be another office or a selection of cell phones. PBX ensures a business never has to suffer downtime again. 


A PBX phone system allows a lot of customization for a company. They can decide what they need the system to do, whether it’s a desire to have unified communications, or to only rely on phone calls, along with how many lines they need for each channel. However, the customizability extends to the single user of the Private Branch Exchange interface. The user can edit the interface to work for them, whether its simply swapping two tabs over, or changing the entire layout of the interface. Doing this doesn’t require deep computer knowledge, and only improves the work done, as the user is more comfortable with the system. 

The Downsides Of PBX

Until this point, a PBX phone system has seemed like a solution to all telephony problems a business might have. That can be the case. However, there are some potential downsides to the system a business should be aware of before investing. 

The biggest advantage of a PBX is the fact that it relies on an internet connection instead of copper phone lines. However, that fact is not always an advantage. If a business has a slow internet connection, or the ISP is generally unreliable, then the Private Branch Exchange service will struggle to prove its worth to a company. Depending on the area of the business, this might not be something a company can change. 

The next disadvantage of a PBX is one that can get countered. A PBX handles a customer’s private data, so it needs to be secure, and because a hosted Private Branch Exchange transfers data over the internet, it can easily be intercepted. Before taking on a Private Branch Exchange phone system, a business should ask the PBX provider to outline the security measures they have in place, along with what they will do to protect the company’s system. Some security measures often utilized by a PBX provider include fraud monitoring and protection, SIP authentication, endpoint security, and active monitoring of a data network. 

A final disadvantage that affects an on-site Private Branch Exchange more than a hosted Private Branch Exchange comes in the form of the necessary infrastructure. An on-site Private Branch Exchange will always be better than an analog PBX, though it can be a costly investment for smaller companies. The set-up and maintenance alone, combined with the fact that an expert needs to put the whole thing together, far outweighs the cost of a hosted system. And that’s before updating the system comes into the equation. However, once everything gets set-up, the monthly fees may end up less than the cloud alternative. The business just has to get to that point without going bankrupt, hence an on-site Private Branch Exchange being the preference of large companies. 

PBX Advantages Outweigh The Downsides

As per the above, there aren’t any disadvantages that can’t get overcome, at least when discussing PBX services. A smaller company might not be able to opt for an on-site PBX because of the cost, but that doesn’t mean the resource is unavailable. With either type of digital Private Branch Exchange system, a company will end up sending money. However, a great way to make more money, which isn’t a revolutionary idea, is to provide excellent customer service. A business with a Private Branch Exchange can do this as it eliminates holding calling customers in a queue and ensures that downtime gets kept to a minimum. However, dipping into any form of unfamiliar technology, such as PBX or VoIP technology, can be daunting, so hopefully the above has made it clear as to both what a Private Branch Exchange is, and what it can do for a business. 

On the other hand, if a company truly desires the traits of an analog PBX system, they might consider an IVR, which allows a consumer to route themselves to their intended destination with voice or keypad prompts. Utilizing IVR will enable them to keep the initial introduction needed from a manual call operator, along with the benefits of a digital Private Branch Exchange .

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