How to Decide Between 4 Types of PBX Systems for Yearly Business Savings

By Jennifer Cuellar | Small Business

All businesses that have multiple extensions lines need a PBX, but that doesn’t have to mean a hefty price tag each month. Technology like Internet calling creates monthly saving for all aspects of the phone system, including the PBX.

A PBX (Private Branch Exchange) is the software that connects multiple incoming calls to the right company departments, and connects internal office calls with each other. With a PBX, incoming calls first reach the automated attendant that helps direct the call to the right department and employee extension line with a friendly pre-recorded voice. Outgoing calls are routed through the PBX to connect to outside callers.

There are 4 major types of PBX systems, and each has particular strengths and weaknesses. As a result, different types of businesses will get the most out of different PBX systems, depending on their size, average number of callers, and resources available for new equipment.

1. Traditional PBX

A traditional PBX connects callers through multiple phone lines to multiple extensions, as stated above. Unlike the other entries on this list, this type of PBX uses traditional landlines to make and connect calls. Other types of PBX systems use Voice over Internet Protocol (VoIP) technology for cheap Internet calling, meaning this type of PBX system is more expensive to run. They also require a large amount of equipment with expensive down-payments and maintenance fees.

Many businesses already have these legacy systems in place from before VoIP was popular, and so businesses picking a PBX today should almost never go with an outdated traditional model. Businesses that already have the IT department to maintain and support such a system are the only ones that would use it, and even then only if they already have one.


An IP PBX is strictly an upgrade to a traditional PBX. Like a traditional PBX, there is a large start-up cost to purchase and install the network, but overall costs are lower and more features are available thanks to VoIP calling. A business VoIP phone system saves businesses around 50% on the average phone bill.

An IP PBX is also easier to maintain. Traditional PBX systems are limited by the number of phone lines they have, while an IP PBX is only limited by bandwidth space on a company’s Internet connection. Since the call data is compressed into digital packets, each call takes up very little space.

An IP PBX is good for companies that want direct control over exactly how their PBX is configured in-house, and don’t want to pay subscription fees associated with other PBX options.

3. Hosted PBX

A hosted VoIP PBX is the most popular option for businesses. A hosted PBX is operated off-site maintained by a VoIP provider. Since it is at an off-site location, businesses simply pay a low monthly fee to have all of the advantages of a PBX phone system with none of the headache. Since there is no initial investment, a hosted PBX option is almost always the best choice for a small business.

Even businesses that can afford a PBX system of their own might want to save money by using a hosted PBX system. A good rule of thumb is that if a business has more than 20 people operating phones, it will be cheaper in the long run to operate an IP PBX of their own, but every case will be different.

4. Virtual PBX

A virtual PBX is almost exactly the same as a hosted PBX and is often called a cloud PBX. These usually cost less than their hosted PBX counterparts, but also offer fewer features.

Often, a virtual PBX will only run internal calls through the Internet, so companies that don’t make a lot of external calls find them attractive. For businesses that only need to use a few calling features like voicemail and hold music, a cheap virtual PBX may be the way to go.

In any case, a VoIP PBX will save a business time and money, while increasing sales. By managing phone lines effectively, companies with PBX systems installed can pay for fewer phone lines overall and take advantage of cheap VoIP calling for yearly savings.

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