How a Hosted PBX Works

Posted on Mon, Mar 17, 2014 @ 09:30 AM by Carlos Lahrssen

PBX systems allow easy in-office or external phone calls.PBX stands for Private Branch eXchange, and is basically the core of a calling system. Traditional PBX systems consist of the hardware installed to connect office lines and allow in-office communication through phone number extensions. 

The central office lines in a traditional PBX system connect to the external public switched telephone network (PSTN). Extensions connected to a traditional PBX system may include phones, fax machines or (in days past) computer modems. Today, a PBX system may consist of a trunk and physical phone lines, or it may be a "virtual" or hosted PBX system.

What Is Hosted PBX?

To the user, a hosted PBX works just like a traditional PBX system. Parties are reached through their phone extension number, interoffice communication can be done by simply dialing extensions, and callers are routed to the proper call recipient by dialing an extension, going through an auto-attendant feature, or being transferred. The difference with hosted PBX is that the core, or "guts" of the call control system are located elsewhere and are accessed over the internet. Hosted PBX is, in other words, a way to run a PBX phone system in the cloud. 

Hosted PBX allows small and medium sized businesses to have sophisticated telecommunications without the huge initial capital expenditure required for traditional PBX systems. Hosted PBX systems are maintained by a hosted VoIP provider, and they have sophisticated features for the needs of the 21st century workforce. These systems work by connecting calls via broadband, and the only hardware required on the premises is the phone handsets (or headsets) themselves.

Advantages of Hosted PBX over Traditional PBX

  • No large up-front investment is required.
  • Long distance and international calls are much cheaper.
  • You can get local virtual numbers in cities where you're not physically located, so you could, for instance, run a virtual office based in New York or San Francisco if you wanted to.
  • Employees can work from anywhere using your business phone system.
  • With hosted PBX your small business has the "look and feel" of an enterprise-level phone system.
  • Hosted PBX allows you to easily add lines as they are needed.
  • Hosted systems can be up and running much faster than traditional PBX systems.
  • Changes can be made to the system at any time through a user-friendly web portal.

Hosted PBX allows much more flexibility than traditional PBX, and at a lower cost.Do Callers Notice a Difference?

The only difference callers notice is that they may have access to more features than with traditional PBX systems. When a customer or client calls your business number, the call may be answered by a receptionist or an automated greeting. The receptionist may route the call, or, if the system was answered with an automated greeting, the caller may dial an extension, listen to product information, or use a "dial-by-name" directory to reach the intended party. 

If a caller needs to talk to someone else after the initial recipient, the call can be routed seamlessly, even if the second contact is in a different city. For example, someone in your Los Angeles office may need to transfer a caller to a tech support worker. This call can reach the tech support worker whether she is telecommuting, working at her desk in Omaha, or traveling on business with her mobile phone, and it's all completely seamless to the caller.

How Much Can I Save?

With a traditional PBX system in a small business of 20 or so people, you'll start out with an investment of at least $10,000 to $20,000 for equipment, installation, and setup. Monthly upkeep can cost $300 to $400, and that's before the cost of long distance or international calls is factored in. By contrast, your up-front investment with a hosted PBX system is just the cost of the handsets, which cost around $49 each. Some companies (like Nexogy) include the handsets for free as part of some plans, for even greater savings. Hosted PBX systems are paid for on a monthly subscription basis, which includes the cost of long distance and international calls. 

How Do I Choose a Hosted PBX Provider?

There are plenty of hosted PBX providers, but they're definitely not interchangeable. Of course you'll want to learn how much it will cost to buy the handsets and how much each line costs per month. If you have mobile workers or telecommuters, ask how the hosted PBX handles these phone system users, and how easy or complicated it is for them to use the company phone system with their mobile phones.

Nexogy was founded in 1999, and we have helped thousands of businesses meet their telecommunications needs with innovative solutions and outstanding customer service. Nexogy works with businesses of all sizes, and we understand that no two businesses need the same telecommunications solutions. Nexogy keeps your business connected cost-efficiently, so you can concentrate on making your business the best.


Photo Credits: photostock / freedigitalphotos.netnuttakit /

Topics: business phone systems, business productivity

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About the Author

Carlos Lahrssen
Carlos Lahrssen
Carlos Lahrssen is president and CEO of nexogy, as well as founder, president and CEO of LD Telecommunications, Inc., nexogy’s parent company. Lahrssen is an industry fan, follower and advocate — more