What Is a PBX Phone System, and How Does It Work?

By: Chris Darr
August 29, 2022

PBX stands for Private Bank Exchange, which just means a private phone network within an organization. Although the first use of a PBX was in 1882, until the 1960s, most organizations relied on the local telephone company to direct internal calls.

PBX systems were a huge leap forward because they allowed companies to invest in their own switchboard hardware and hire operators to handle internal calls. It got even better in the 1970s when companies could rely on automation instead of using staff to manually transfer calls.

What Did an Analog PBX Phone System Offer?

PBX systems were once indispensable to larger organizations, as they could offer things residential phones couldn’t, like extension dialing, after-hours responses and call routing, on-hold recordings, and call queues.

Many organizations still prefer a PBX system over other solutions like hosted voice. They have their reasons: traditional PBX systems are reliable and secure, and call quality is also very high. However, the equipment is expensive, and the setup requires sophisticated skills.

More Big Changes for Phone Systems

Landlines are already obsolete, and according to the FCC, your phone carrier no longer has to maintain them as long as they can offer a suitable replacement. The continued maintenance of Plain Old Telephone Service (POTS) lines is not feasible — technicians with the necessary skills are retiring, parts are becoming unavailable, and copper wire is costly.

While many may have a fondness for the traditional landline, the technology that’s available now offers more features for much less. Companies that want to upgrade to a digital PBX system also have more options than ever before.

What Are Digital PBX Phone Systems?

Digital PBX phone systems offer the same features traditional PBX phone systems do (plus many more), but calls are placed and received over the internet instead of a traditional landline. There are now two types of digital PBX systems available: on-premise and hosted PBX, which is managed in the cloud.

On-Premise PBX

Companies that like to own and maintain their own system can still do so if they choose. PBX systems obviously require more of an upfront investment, but they can deliver more ROI over time.

Cloud PBX Phone System

Hosted PBX is often called hosted VoIP, cloud PBX, or virtual PBX. With this option, instead of investing in new equipment, your provider will manage and maintain your PBX in the cloud. That alone can be a significant advantage for IT departments that are already overwhelmed with cybersecurity and managing remote workers. And speaking of, because this option is managed in the cloud, your workers will be able to connect to your system from just about anywhere.

It’s also much easier to add or remove users and features with a cloud solution, so if your organization grows quickly or needs to scale back, you’ll have more flexibility to adjust your phone system accordingly.

Whether you prefer an on-premise or hosted voice solution, or you’d like to explore other options, this free guide can help you comparison shop.

Finding the Right Provider

When you have newer technology, you often have a gold rush of new providers. But when it comes to your business phone system, chances are, you’d prefer a provider who will go the distance. Marco has been in business since 1973, and our phone experts take pride in getting to know the organizations they serve so they can make the best recommendations.

I don’t know you, but I’m guessing you probably have a list of things you’d rather focus on than worrying about your phone system. Our experts can take this task off your plate, come up with the best solution, and save you money in the process.

Learn More About Phone Systems Contact a Marco Rep

Topics: Phone & Collaboration