PBX (Private Branch Exchange) is a private telephone network that you can use within your company or organization. This phone system can be characterized as an internal switchboard that routes multiple calls to their correct destinations. You can find lots of large businesses that have been relying on the PBX system for many years.  PBX phone systems have the following types: traditional analog PBX, virtual PBX, On-Premise PBX, and hosted PBX. 

What is PBX 


Below you can find the basic functions of a PBX:

  • Sets up connections or circuits between users’ telephone sets
  • Provides connection as required
  • Disconnects connections as required
  • Provides information for accounting

What Is a Virtual PBX (Private Branch Exchange)?

virtual PBX (private branch exchange) has to do with a telephone system based on the Internet or VoIP (Voice over IP). It’s designed to be managed by a third party, instead of using your office switches and wires.

While talking about a virtual PBX, it’s important to note the difference between a virtual PBX and other systems available in the industry today.

With regular telephone systems, you have all the switches and wires in your office. You need to have them set up. With virtual PBXs, a third party should host these systems, and then control and manage all the necessary switches and wires.

As for the difference between a virtual PBX and a VoIP, the latter maintains and receives calls through your internet connection. Unlike VoIP, a virtual PBX uses a third-party provider as it was mentioned above. Thus, your connection gets more reliable in fact.

Today, virtual PBXs are gaining more and more popularity among users. This is thanks to the highly valuable features offered by these systems, such as:

  • Cost-Effectiveness – Unlike traditional lines, virtual PBXs are cost saving as they do not require you to buy hardware
  • High-quality Service – With virtual PBXs, you can enjoy excellent reliability and quality, and shouldn’t worry about dropped calls or similar issues
  • Quick Setup – A virtual PBX offers you fast and effortless solutions as you don’t need to hire someone to set up wires or other extensions for the system
  • Unique Features – A virtual PBX boasts valuable features that traditional services don’t offer. It offers call forwarding, voicemails scripts, touchtone menus and more.

PBXs offer a number of advantages to companies and organizations. They help businesses enjoy reduced costs and provide an effective means of communication. With a virtual PBX, you don’t have to set up the exchange inside your building since the virtual PBX turns that responsibility over to another company. Everything will work the same for your business, but you won’t have any of the tech on-site.

What Is Hosted PBX?

The hosted PBX can be defined as a VoIP-based PBX, which is maintained by a service provider and enables businesses to connect to it over the public Internet. A hosted PBX is a newer PBX technology and its operation is based on the cloud.

A number of companies online offer the PBX service against a monthly fee, without requiring you to have more than your telephone sets and router. Be aware that hosted PBXs are generic, so they can’t be geared to your own needs. However, they’re quite affordable and you can get them without any upfront investment.

Hosted PBXs and IP PBXs have the same portability. Those working remotely can connect a phone the way they can do in the office. Moreover, you can use your business number and make calls right from your mobile phone just on the go.

What Is On-Premise PBX?

The on-premise PBX phone system is also referred to as an IP-PBX. It operates like a traditional PBX system, meaning it resides at a location (e.g., a computer equipment room or phone closet). These 2 systems mainly differ in the following: IP routing associated with on-premise PBXs is realized through more advanced technology.

The signaling is done using an IP phone to the IP-PBX server through a local area network (LAN). A traditional phone company or voice over Internet protocol (VoIP) can be used for calls.

Hosted PBX vs On-Premise PBX


Here are a number of features associated with each of these phone systems that you can take into account while trying to figure out which one to use for your company:

Hosted PBX Phone System:

  • A third-party provider handles the PBX, and bears the responsibility for running and upgrading the Hosted PBX: upgrades are included in the maintenance costs
  • More affordable in terms of installation, operation, and maintenance costs
  • You don’t have to worry about network issues such as bandwidth
  • No need to have dedicated personnel to manage the phone system
  • No training associated with how to run the system, add extensions, etc.
  • Extra lines are easy to add
  • Low monthly service cost
  • Extended features such as conferencing may be included in additional costs

And more.

On-Premise PBX Phone System:

  • End-users have more control over their phone system
  • The ability to integrate the on-premise PBX with other software systems (e.g., customer relations management or CRM) run by the company
  • Better for large companies that already have the infrastructure, bandwidth and network setting required for hosting their own phone system, unified communications platform and VoIP
  • You don’t have to use the support of a third-party PBX provider for simple tasks (e.g. adding extensions)
  • End users have all the phone system data and settings
  • Higher initial and setup costs
  • Potentially higher maintenance costs
  • Once expenses are covered, you’ll have lower monthly costs
  • On-premise IP-PBX provider will qualify network, install and program IP-PBX, as well as provide training on how to use features and apply best practices

As you see, both hosted and on-premise PBX phone systems come with their pros and cons, which you should take into consideration when deciding which system you need for your organization. Go through the above-mentioned information to be able to determine the best phone system for your company.

Which PBX phone system would you prefer to use for your company? We’d love for you to share it with us in the comments below.

Lilit Melkonyan

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