What is Hosted PBX (Private Branch Exchange)? Your 2020 Hosted PBX Guide
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What is Hosted PBX (Private Branch Exchange)?

Hosted PBX (Private Branch Exchange) is a telephone exchange system that’s accessible over a cloud-based IP network. Because it’s cloud-based, access to this telephony solution is granted entirely over the internet, cutting down on hardware and software costs.

There are many reasons you might suddenly be seeing or hearing the name “Hosted PBX” (also known as cloud PBX and hosted VoIP) everywhere. It’s quickly becoming one of the most popular voice communication solutions for businesses today, because it cuts down on costs significantly while providing users with a suite of features that traditional PBXs can’t compete with.

Hosted PBX is a solution that’s managed completely off-site, making it so businesses no longer have to invest in expensive infrastructure, software, and training. It is quickly set up and deployed, in some cases even granting users access in less than a day, and is primarily hands off when it comes to maintenance (thanks to it being cloud-based).

Now that you know what hosted PBX is, you might be wondering how it works. It’s actually pretty simple once you understand its essential functions.

How Hosted PBX Works

The Diagram below is a simplified flow of how the hosted PBX system (aka hosted VoIP) works:

how hosted PBX works diagram

With a traditional PBX, your office phone system connected to a standard phone line (known as PSTN or POTS). It used hardwired phone systems to send communication data, so your phone would typically rely on copper wiring running in and around the building to make sure everything was connected.

That all changed with the implementation of the hosted PBX, which plugs your phone into a modem that uses the internet to send data. It makes all that costly infrastructure of the past completely avoidable.

The information that travels over the IP network is bounced to the cloud, where it eventually gets shuffled to your voice provider’s data center. The data center really functions more as a server, which connects you to your provider’s platform, a platform that is mirrored across several different data centers.

Once your call moves through the data center, it’s pushed back out into the cloud and delivered to your end caller over whichever network they use (VoIP vs PSTN).

Hosted PBX Platforms

Servers in data centers are used to host the data stored in the platform that the end user accesses. Generally, each provider has their own platform or user portal they’ve developed specifically for this use.

This platform becomes the way that businesses make changes to their features, update or add phone numbers, and cancel existing services. It cuts out the need to wait on your provider to do all of these things for you.

The best things about the platform: You can make changes immediately. How easy is this? All you have to do is type your username and password into the online platform and access a provider-based dashboard. Then, save your changes. TA-DA, your phone settings have been updated!

Another benefit of a phone line functioning in the cloud is that you can access phone calls from anywhere. Hosted PBX  (in conjunction with your VoIP provider) makes it possible to connect a line to your IP phone, cell phone, home phone, or laptop. As long as you have the right software installed it’s as simple as logging in and updating some settings.

Added flexibility to communication services is one of the many reasons why hosted PBX is growing so quickly with businesses. Not only does it come with a full suite of benefits and features, but it allows you to implement a VoIP solution that can revolutionize your business.

But first, it’s important to understand the difference between hosted and traditional PBX so that you can make the right decision for your business.

Hosted PBX vs. Traditional PBX

A simple explanation of the difference between hosted PBX and traditional PBX is that the latter still requires the use of on-site equipment (hosted does not).

They both have their pros and cons, but the major technical difference lies in how data is transmitted. For hosted PBX, this data moves through the cloud over an IP line, which opens up some sought after features businesses use today. It’s particularly beneficial for businesses that don’t yet know how they’re going to scale over time, because it’s flexible and easy to adjust when you’re still in a growth stage.

Additionally, it’s much easier to implement if you have a number of remote employees or don’t have a traditional office space. Since calls are routed through the cloud, you can access a work line from virtually any device, anywhere in the world. This is done easily through softphones or by downloading VoIP-connected tools like the Nextiva App (below).Nextiva App Hosted PBX

A traditional PBX generally has has a multi-line extension physically plugged into a server somewhere in the office. Often times a receptionist or office manager is responsible for manually answering and directing calls.

Businesses still use this option when they want to have full control of a large scale office telephone system.

Large businesses in need of built-in customizations that aren’t worried about ongoing IT maintenance costs will typically stick to traditional PBX systems. But traditional PBXs come with their own set of challenges.

Challenges of Traditional PBX Systems

One of the major challenges of a traditional PBX is the upkeep and maintenance required to care for a complex system. It isn’t always easy to determine where a problem originates, meaning whoever is in charge of the system could spend a considerable amount of time troubleshooting.

Which brings us to another point. Being in charge of a system like this can be a full time job. That means a company might spend a yearly salary on someone whose entire job is to understand the system backwards and forward, and constantly stay on top of changes, updates, and additions. This makes for an expensive challenge when you consider how much it costs to keep someone on staff.

Hosted PBX IT Professional Salary

In addition to needing a full-time employee to manage your traditional PBX, the startup costs are much higher than that required for hosted PBX— maintenance and upkeep could be additional expenses that get tacked on year after year.

And then, there’s the space. With phones that are still hardwired, you’ll likely need space on-site (typically a server closet) where your physical equipment and wired phone lines are housed.

Why Use a Traditional PBX?

So, you might be wondering why anyone would use a traditional PBX when it comes with these specific challenges. There are a few reasons businesses might continue to implement this system, including:

  • All of their employees are located on-site and not working in a remote capacity
  • They’re a large businesses that can handle the upfront cost of the infrastructure
  • They have a large IT staff already in place and are comfortable handling all maintenance and system updates themselves

The Benefits of Hosted PBX

When comparing the two, you’ll notice that hosted PBX has a lot more benefits than what people expect from traditional PBX. That’s because there are a whole lot of them to choose from. At a quick glance, here are just a few of the benefits of switching to hosted PBX compared to a traditional PBX:

  • A lower up-front implementation costs
  • Lower overall support and maintenance costs
  • The ability to route calls to any phone or device
  • Supports distributed employees
  • Easily scalable (it grows as your business grows)
  • Supports a very high call capacity
  • The ability to add numerous special features
  • Easily integrates connects with other UCaaS tools

Remote / Travel Employees

One of the things that makes hosted PBX the top choice for many small and growing businesses is the flexibility employees have to work from remote locations. With VoIP, employees can log into an app, set their phone number to remote mode, and immediately have their calls forward to any device. Whether they want a call to go directly to their cell phone or access a call off of their laptop, VoIP makes it happen anywhere in the world.

remote work chart - based on industry

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 and Easy to Maintain

Another important factor is the setup time and how easy the system is to maintain. Unlike traditional PBXs, hosted PBX can be set up within a number of days, sometimes even on the same day that you order it through your provider. Setup requires no on-site infrastructure (like server closets or data centers) 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 necessary changes or troubleshoot problems. hosted PBX takes that need away, saving companies a full-time salary that otherwise would have been attributed to their telecommunication costs.

Unparalleled Flexibility

With Hosted PBX a business can change their call settings in a flash. The same way an employee can log into an app and easily route their phone number to a new device; Hosted PBX makes accessing features like call forwarding, conference bridges, Caller ID, and Voicemail to SMS as easy as toggling an on/off button.

hosted PBX increases flexibility with taking calls

To update features and settings for a traditional PBX, there was always a middleman. Businesses had to call voice providers to implement the options they wanted (sometimes at an additional cost to them). hosted PBX has put the power of flexibility and total call control in the hands of the user.

A Service You Can Count On

For businesses, reliability is arguably the biggest benefit.

Hosted PBX, since it’s not a physical landline or housed in an on-site server that can have a whole lot of problems, is virtually unstoppable no matter the natural disaster or physical damage that impacts a business year over year. With back-up options like failover redundancy or something like fixed wireless, businesses can find ways to ensure they’re always up and running.

When you don’t have to have your provider come out and troubleshoot issues for you, it’s just another cost savings. In fact, hosted PBX is estimated to save businesses up to 60% compared to in-other systems.

That should be reason enough to switch. But, if you have the right provider, hosted PBX can give you even more power.

VoIP Providers & What They Do

Pairing your hosted PBX with the right VoIP provider can make a huge difference. With so many of them on the market, and their influx of features and benefits, it can be hard to find the provider that’s right for you. That’s why we made it easy.

The graph below takes five of the most popular VoIP providers and compares the features they offer. The companies we highlight include Nextiva, Vonage Business, RingCentral, Mitel, and 8×8, Inc.

Top VoIP Hosted PBX Providers

One quick glance and you can already see that VoIP allows users more options and features than they ever had with traditional phone systems.

Most of these businesses offer the standard features like Auto Attendant, Busy Lamp Field, and Call Forwarding that users typically expect with their voice services. But, as you go down the list, you’ll notice there are some exciting features that are missing from several providers.

Call Whisper

Call Whisper, for instance, isn’t offered across the board. Call Whispering isn’t as popular a feature as some of the others, but it can be a huge help to businesses that are running various campaigns. It gives users the option to set up a brief message when they pick up an incoming call. This message could be a motivational statement, specific details about the call itself, or even a reminder about what promotional offers they should present on the call.

It’s the kind of feature that might not be right for every company, but could be very helpful for just the right one. In this case, it’s only offered by Nextiva and a few others.

Integration Abilities

There’s also the ability to integrate your VoIP with internal software that your business might be using, such as CRM or customer service systems. In this case, something like a Zendesk integration can be a big bonus for companies that have call centers or a business in which they’re dealing with customer support tickets daily. As you can see, not every company offers these integrations either.

Choosing the Right Hosted PBX Provider

As you can tell, partnering with the right voice service provider for you VoIP PBX solution can make a huge difference in your goals of your business. Before implementing a hosted PBX solution it’s important to decide on the features that are most important to you, and then research the providers that offer exactly what you need.

Take one more look at the graph above, you’ll notice that Nextiva has the highest amount of features listed. Nextiva prides itself on being your all-in-one communications platform, offering a full suite of features that businesses need the most. So, of all the companies we listed, you might be wondering what sets Nextiva apart?

The Nextiva Difference

Nextiva is an all-in-one communications platform currently being used by the nation’s leading brands.

So what did all these companies see in Nextiva that inspired them put their communication solutions in our hands? It comes down to a few essential needs that every organization is looking for: reduced VoIP cost, reliability, and of course an incredibly passionate customer service team.

Nextiva’s Enterprise-grade Platform

Nextiva is known for going above and beyond to keep business communications on track. In fact, the platform we use was developed by over 1,500 engineers and supports 18 of the 25 leading global communications providers. It’s their reputation for keeping business communications on track that has made them the leading platform out there.

Why is their platform so powerful?

  • 7 POPs (Points of Presence) with two more expected this year
  • 99.999% uptime and total failover redundancy
  • Real-time status updates that keep businesses in-the-know
  • A core infrastructure that’s used by 16 of the 20 top Telecom providers

Amazing Service

But, as always, service is the real bread and butter of what we do. We’ve built a culture around being passionate and excited about providing exceptional customer service we deem, “Amazing Service.” We pride ourselves on being available when we’re needed. Whether that’s over social media or on-site to walk customers through issues, we’ve done it all. Our biggest goal is being able to provide customers with the best service, so that each client can put their best foot forward.

What can you expect when you work with Nextiva’s customer service team?

  • A 95% chance your call will be answered on the second ring
  • You don’t have to wait to get your questions answered as there is little or no hold time
  • We’ll help you customize a solution so that it fits your business goals

That’s just the tip of the iceberg. Nextiva works effortlessly, every day, to ensure we’re creating the most complete and customer-focused user experience for every company.

So, what to do you need for your hosted PBX and VoIP phone service? Choose the platform that goes where you go, and grows when you grow.

Visit the Nextiva website to find out how we can help build you a customized solution that will give your business the flexibility it needs to succeed.

Thinking about Nextiva? Our customers are thinking out loud here >>

About the author

Yaniv Masjedi serves as Nextiva's CMO. An avid reader and lover of all things marketing, leadership, and personal growth, Yaniv is obsessed with creating strategies that drive awareness, strengthen brands, and create customer-centric culture. To get in touch, follow Yaniv on LinkedIn.

Contact an Amazing Service
Sales Expert
(800) 799-0600

See how Nextiva will transform
the way you communicate.

Contact an Amazing Service
Sales Expert
(800) 799-0600

See how Nextiva will transform
the way you communicate.

Contact an Amazing Service
Sales Expert
(800) 799-0600

See how Nextiva will transform
the way you communicate.