What is Hosted PBX (Private Branch Exchange)? [Updated]
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What is Hosted PBX (Private Branch Exchange)?

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

The case for switching to a hosted PBX service is quite strong, especially in 2020.

An IP PBX is managed off-site, practically eliminating expensive infrastructure, software, and training. Cloud PBX platforms can be deployed quickly without additional configuration. Since it’s cloud-based, maintenance is non-existent.

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 to level with you, 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.

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:

Hosted PBX - Network Topology Illustration

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

Hosted PBX Platforms

There are two types of hosted PBX platforms to consider for your cloud phone system. While they help you meet your business needs, they accomplish them differently.

Cloud PBXThe more common phone system is a cloud PBX where all phones connect to an outside VoIP data center. The phones are configured with an individual login and are programmed beforehand to register with a SIP server.

A cloud PBX provides all the essential features the modern employee, including voicemail to email delivery, auto attendants, and video conferencing. From a management perspective, this is the easiest PBX platform to manage.

PBX SIP TrunkingIf you have an IP PBX and you can benefit from SIP trunking because of its lower costs and rapid scalability. You’ll keep your existing PBX, but the backhaul is completed through a VoIP-based trunk for all the outside lines you need. In the event of a PBX issue, you can route calls to any brick-and-mortar or virtual office.

A SIP trunk is a good option if you have a huge office, or if you want to phase in your hosted PBX deployment. Just know that it’s less feature-packed than a full cloud PBX system.

Both hosted PBX systems offer enhanced flexibility and the control you need to manage costs and beef up your calling capabilities. The advantage with the cloud-based PBX is that you can adjust every VoIP feature and call flow the way that you need, such as phone numbers, hunt groups, and automatic call recording.

Hosted PBX vs. Traditional PBX

On-Premises PBXHosted PBX
Lower cost per seatNo upfront costs
No use of internetModest use of network bandwidth
Basic calling featuresNo maintenance
Unexpected maintenance costsRedundant data centers
You manage the infrastructureTraining 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)

Challenges of Traditional PBX Systems

One of the limitations 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 administrators could spend a lot of time (and money) troubleshooting.

Being in charge of a 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.

Telecom Manager with PBX skills - Salary Range

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 a on-premise PBX isn’t cost-effective, especially considering the rising costs of commercial real estate.

Why Use a Traditional PBX?

There are a few reasons businesses might stick with a traditional PBX. Here are some use-cases to consider:

  • Employees are located on-site and don’t work remotely
  • They’re large businesses that can handle the upfront cost of the infrastructure
  • They have a large IT staff already in place and are comfortable managing all maintenance and system updates themselves
  • Business needs are expected to remain the same for the next 1-3 years

A cost-saving upgrade to a PBX is to go with an IP PBX that supports SIP trunking. This allows for minimal resources to benefit from an internet telephony system like VoIP.

All you need to do is to retrofit your existing business communications hardware (PBX) with a SIP Trunking. Here’s an overview that illustrates this in a business-class network environment.

SIP Trunking  with a PBX

Related: Top 12 SIP Trunking Benefits You Probably Didn’t Know

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:

  • On-demand use of local or toll-free numbers
  • Affordable startup and operational costs
  • Support and service offered by the vendor’s cloud phone system.
  • Expanded communications capabilities
  • Increased scalability due to cloud communications
  • Greater ability to handle incoming call spikes

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. With VoIP, employees can 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.

Unparalleled Flexibility

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 to alert customers with urgent messaging, send calls to a voicemail, or even direct them to cell phones on your team. It’s possible because a hosted PBX operates across multiple redundant servers located across North America.

Choosing 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 features that are most important to your company.

Cloud system buyers should establish their business requirements, compare VoIP features, research security protocols, and examine service and support offerings.

A company’s hosted PBX selection criteria should include 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 your 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 way people work has shifted from structured offices to one that embraces more flexibility. Traditional phone systems haven’t kept up until now.

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 the cloud is here. Companies depend on the cloud for their business email and productivity apps. Look no further to the meteoric adoption of Google GSuite and Microsoft Office 365 across small businesses and enterprises.

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?

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About the author

Bob Kelly has over twenty years of experience in the telecommunications industry, leading teams and driving innovation in IVR, voicemail, contact centers, and UCaaS. He has held senior positions at Syntellect, Octel, and Cisco, where he led the product team to deliver Cisco’s first UCaaS solution, later renamed Cisco HCS, which is still in market. Bob leads the Nextiva product team that focuses on voice, UC collaboration, contact center, and fax services.
 

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.