What Is a PBX Phone System?

A PBX (private branch exchange) system allows an organization to manage incoming and outgoing phone calls, as well as internal communication. A PBX is made up of both hardware and software that connects to communication devices such as telephone adapters, hubs, switches, routers, and telephone sets. 

Modern PBXs have a wealth of management features that make communication easy and more effective within organizations, boosting productivity. Their sizes and complexity vary, ranging from very expensive and complex large-scale corporate communication systems to basic plans that are hosted on the cloud for a low monthly fee. Simple home-based PBX systems offer basic features as an upgrade to existing traditional phone lines. 

The functions of a PBX can be very complex, but these are the essential features: 

• Use of more than one telephone line in an organization
• Management of outgoing and incoming calls
• Splitting of one single phone line into several internal lines, which are identified through three- or four-digit numbers called extensions, and switching calls to the appropriate internal line
• Internal phone communications
• VoIP (voice over internet protocol) calling, which has a tremendous number of features and enhancements over traditional telephony, the most prominent being the cost savings 
• Quality interface with customers through features such as call recording, voicemail, IVR (interactive voice response), etc. 
• Automated responses, which automatically direct users to the most appropriate lines through voice menus

PBXs changed a lot with the advent of IP telephony (VoIP). The newer IP-PBXes use the internet to channel calls. IP-PBxes are usually preferred because they offer a wealth of features. With the exception of old, already-installed-but-still-working PBXs and those chosen because they are inexpensive, PBX systems nowadays tend to be IP-PBXes. 

Today, you don't have to invest in the hardware, software, installation, and maintenance of an in-house PBX, especially if you are running a small business and the cost of ownership would be greater than the benefits. Numerous online companies now offer hosted PBX service for a monthly fee that doesn't require you to pay for hardware other than your telephone sets and router. These services are cloud-based and delivered via an internet connection. Hosted PBXes have some disadvantages — they're more generic, with fewer options to tailor the system to your precise needs — but they are quite cheap and don't require an upfront investment.