Understanding PBX and Making the Right Choice for Your Business

8 December 2021 Tags:


At the end of this article, you will be able to understand what a PBX is, the differences between an On-Premises, Hosted, and Cloud PBX, and evaluate which of them might be better for your business, both from a feature and financial perspective.

What is a PBX Phone System?

PBX stands for Private Branch Exchange. It is a private telephone network that supports a range of useful features while still allowing general telephone service. Most people are already familiar with many of the features that PBX phone systems offer, such as extension dialing, business hour settings, caller queues, call conferencing, voice-to-email, etc. In the past, PBX phone systems relied on complex analog switches managed by telephone operators. Modern systems use Voice-over-IP (VoIP) systems to send digital signals to and from users. VoIP technology is key to accessing the most advanced features that PBX phone systems have to offer, such as voicemail-to-email.

Once the system converts an incoming call to a digital signal, the system can manage the signal the same way it would any other digital information. This is how digital PBX systems obtain platform-neutral solutions for converting and routing incoming calls to any device.

What types of PBX exist and how do they differ?

The three main types of PBXs available from the most popular providers are On-Premises, Hosted, and Cloud PBX. When software is on-premises, it means that the servers are located on-site. Organizations that host software on site are responsible for configuration, administration, and management of the system. The opposite of on-premises software is hosted software, which means that the data is managed by a provider. Cloud PBX is a virtual PBX system rooted on the internet, which automatically answers all calls and routes them to the right department or user extension

On-Premises PBX

On-premises software offers more flexibility and scalability for large and growing organizations. It is more suited to organizations that have significant internal IT infrastructure. Some of the advantages of an On-Premises PBX include:

  • System Flexibility: the user has ultimate control of the phone system and may customize it to serve its own needs.
  • Reliability: it is most suitable for large organizations that can afford the infrastructure, bandwidth, and network. These allow the organization to host its phone system, unifying communication platforms, and VoIP comfortably.
  • Greater Control: organizations managing their own PBX can undertake simple tasks without the hassle of involving external providers.
  • Privacy: all systems are hosted internally.

Hosted PBX

A Hosted PBX is managed by an external provider at a physical location for the user. With a hosted PBX system, the provider charges a monthly fee, but at the same time is responsible for maintenance and feature updates, which takes the load off organizations’ IT departments. Some of the benefits of this type of PBX are:

  • Cost-Savings: given that the physical infrastructure and operational related costs are managed by an external provider, who has scale because it serves many customers.
  • Work-force Flexibility: employees can take advantage of the phone system even when working off-premises.
  • Reliability: most PBX providers are large and reputable companies, which reinforces the delivery of reliable and stable services.
  • Easiness-to-maintain: little to no end-user management is required.
  • Hardware Savings: it allows users to bring their own device.
  • Interconnectivity: multiple offices can be connected to a unique system.

Cloud PBX

Like a Hosted PBX, a Cloud PBX system is also handled by a third party, responsible for the management and administration of the system. Both systems are mostly interchangeable, with the key difference being how they are deployed. A Cloud PBX is a managed service with a Software-as-a-Service (SaaS) subscription responsible for all the maintenance and system upgrades, with all the supporting infrastructure based on a web-based cloud. In addition to all the advantages of a Hosted PBX, this solution might lead to higher security and less vulnerability since its systems run on a cloud-based infrastructure.


Choosing the right PBX system depends on various aspects, especially on the infrastructure and resources a business possesses, as well as the size of its telecommunication budget. Factors such as additional costs incurred in hiring experts and system administrators should not be disregarded. Analyzing the cost-benefit of different solutions based on the attributes each of them offer is paramount for making less risky decisions.

In highly competitive markets, it is possible to find a multitude of providers, however, a final decision should be made based not only on the specific features of each PBX system provider but also on factors such as technical support provided by the hosting company, reputation, availability-reliability of services, easiness of implementation, among others previously quoted. At the end of the day, the final choice needs to be made side by side with what an organization value most. While an On-Premises system offers potential increased reliability and greater control, a Hosted or Cloud PBX solution can offer higher savings and easier maintenance. There is not a one-size-fits-all solution, but certainly the evolution of technology has made Cloud based solutions become increasingly appealing in recent years.

The VoIP.ms team is glad to be of assistance in case you would like to discuss your unique situation and learn more about our solution. Whether you want to leverage VoIP.ms with your own PBX, or leverage VoIP.ms Cloud PBX capabilities, we got you covered.


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