What Is a PBX Phone System?

Private Branch Exchange Explained

Operator of call center working - illustration

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A PBX (private branch exchange) is a system that allows an organization to manage incoming and outgoing phone calls. It also allows communication internally within the organization. A PBX is made up of both hardware and software that connects to communication devices like telephone adapters, hubs, switches, routers, and telephone sets. 

The most recent 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-cost monthly fee. You can also have simple PBX systems at home with basic features as an upgrade to your existing traditional phone line. 

PBX Functions

As mentioned, the functions of a PBX can be very complex, but when you talk about a PBX, you will be considering these essential features: 

  • Use of more than one telephone line in an organization, and 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. This saves the organization from having to pay for several lines and allows all departments to be reached through one single phone number.
  • Establishing phone communications within the organization. 
  • Setting up VoIP (voice over internet protocol), 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 like call recording, voicemail, IVR, etc. 
  • Automating responses to calling customers with IVR (interactive voice response) whereby the system can automatically direct users to the most appropriate line through voice menus. It is the kind of feature where, as a caller, you hear things like "Press 1 for the Finance Department, Press 2 for complaints."

    The IP-PBX

    PBXes changed a lot with the advent of IP telephony or VoIP. After the analog PBXes that worked only on the telephone line and switches, IP-PBXes use networks like the internet to channel calls. IP-PBxes are normally preferred because they offer a wealth of features that they come with. With the exception of old, already-installed-but-still-working-fine PBXes, and those chosen because they are cheap, most PBX systems used nowadays tend to be IP-PBXes. 

    The hosted PBX

    You do not always 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 you would gain from those important features. Now, there are numerous companies online that offer you the PBX service for a monthly fee that does not require you to pay for a lot of hardware other than your telephone sets and router. These are called hosted PBX services and work on the cloud and offered via an internet connection. Hosted PBXes have some disadvantages, tending to be more generic with fewer options to tailor the system to your precise needs, but they are quite cheap and do not require an upfront investment.