Guide to PBX business phone systems

PBX business phone systems have been developed to provide businesses with automated telephone connectivity, enhanced telephone features and a wide range of communications functionality. This guide will help you understand the different PBX business phone systems available in the market and select the best system for your business.

This is the main photograph for the article Guide to PBX business phone systems. It shows a business phone on a desk.

Private Branch Exchange (PBX) business phone systems are one of the most common telephone systems used by businesses to operate their internal telephone networks. These telephone systems can manage multiple telephone lines, automatically route in-bound and out-bound telephone calls to/from the correct extensions within a business as well as connecting internal handsets.

PBX business phone systems were developed to replace traditional switchboards and provide more sophisticated functionality than the more basic Multi-line business phone systems. Over time they have evolved through analogue, and then digital, systems to modern models utilising Voice over Internet Protocol (VoIP) technology.

In addition to the core switching technology, PBX business phone systems offer businesses a range of more advanced telephone features including auto dial, custom greetings and conference calling, with more sophisticated IP-PBX systems providing enhanced features such as hot desking, video conferencing and remote working.

One major issue that business managers should consider in selecting a new business phone system or upgrading a legacy system, is BT’s shut down of all analogue and Integrated Service Digital Network (ISDN) telephone lines by 2025. At that date most business telephone calls will need to be carried out over the internet using VoIP technology. We cover this issue in more detail in our article What is a business phone system?

This article compares the different types of PBX systems on the market and assesses the features and functionality that they offer.

The business phone system industry is full of technical terms so to help you understand the acronyms and jargon we have provided a glossary of business phone system terms for reference alongside our articles.

In this article

What is a PBX business telephone system?

A PBX business phone system is, at its core, a programmable switching device that can automatically connect a telephone call from an external telephone line or the internet to the correct extension number within a business and vice versa. In addition to the basic switching functionality, PBX systems have evolved to offer a range of other features, such as call ID, intercom and voicemail, and functionality, such as remote working and unified communications.

Different types of PBX business phone systems

There is a range of different PBX business phone systems available in the market:

  • PBX business telephone systems:
    • Analogue PBX systems (or PABX (Private Automated Branch Exchange) systems) were developed to offer greater functionality than traditional switchboards and Multi-line business telephone systems. Analogue PBXs are conventional business telephone systems that utilise analogue technology to allow a business to connect to the Public Switch Telephone Network (PSTN) using standard Plain Old Telephone Service (POTS), telephone lines.
    • Analogue PBX systems have generally now been superseded by digital or Electronic PBX (EPBX) systems that connect to the PSTN using ISDN telephone lines. However, the term PBX has remained the commonly used term for both digital as well as analogue systems.
  • IP-PBX business telephone systems: IP-PBX systems are business phone systems that use IP (Internet Protocol) technology to transmit VoIP telephone calls over the internet. The term can include:
    • IP-PBX’s: These are business telephone systems that are designed from the start using VoIP technology. Businesses can invest in a physical IP-PBX unit or they can install IP-PBX software on a single central computer or server.
    • Hybrid PBX’s: These are conventional analogue or digital PBX systems that have been upgraded through the installation of additional VoIP technology (such as a VoIP Gateway with SIP Trunking) at a business’s premises to enable a business’s conventional PBX to connect to the internet (as well as retaining its legacy telephone lines) so that employees can make and receive VoIP calls.
    • Hosted VoIP phone systems: These are IP-PBX telephone systems that are owned by third-party VoIP suppliers and located (or ‘hosted’) in the VoIP suppliers’ data centres. 

Different location options for PBX business phone systems

Business telephone systems can be:

  • On-premise: The PBX hardware is installed at a business’s premises and it is the business’s responsibility to buy, maintain and upgrade the system’s hardware and software. This has been the conventional model until the development of hosted VoIP business phone systems.
  • Hosted: The IP-PBX hardware is located off-site with the business’s VoIP supplier at their data centre. The VoIP supplier owns the IP-PBX system and it is their responsibility to maintain and upgrade the IP-PBX systems.

The term ‘IP-PBX‘ system is sometimes confusingly used by commentators and suppliers to mean ‘hosted IP-PBX/VoIP’ phone systems as well as ‘on-premise IP-PBX’ systems. In our articles we differentiate between on-premises IP-PBX business phone systems and hosted VoIP business phone systems.

If you are interested in a hosted VoIP business telephone systems see our article Guide to VoIP phone systems.

Conventional on-premise PBX business phone systems

As is shown in the diagram below, a conventional PBX business telephone system is located at a business’s premise and is used to connect a business’s internal telephone extensions to external analogue or ISDN external telephone lines in the PSTN.

In a conventional PBX system each piece of equipment in an office, such as handsets and fax machines, are connected by an individual wire to the PBX unit. The business has one telephone number with each device (referred to as an extension) having a designated extension number.

Conventional on-premise PBX business phone systems

This infographic shows how on-premise PBX business phone systems operate.

Antenna created by AS Design, Server created by Chunk Icons, Telephone created by Georgina Ionescu, Computer created by SELicon, from Noun Project.

When a call is made from an extension the PBX automatically selects an external telephone line to the PSTN. When the PBX receives a telephone call from the PSTN it automatically routes the call to the correct extension. The PBX also allows internal extensions to communicate directly with each other without the need to access the PSTN.

Conventional PBX systems have the PBX unit located at the businesses premises, in its telecom or server room, and it is the business’s responsibility to buy, install, configure and maintain the equipment. This gives the business control and security over its telephone system but also the responsibility for organising the system’s installation and maintenance together with related costs.

On-premise PBX business telephone systems may come with a battery based Uninterruptible Power Supply (UPS) unit which allows a business’s telephone system to remain functional for some time even if the mains electricity supply is disrupted.

As noted at the start of this article, the greatest drawback to conventional analogue and digital PBX business phone systems is that they will be obsolete following BT’s 2025 switch off unless adapted to IP telephony – see Hybrid PBX business telephone systems below.

On-premise IP-PBX business phone systems

As copper telephone lines have been replaced with broadband internet, IP-PBX business telephone systems have become much more commonly used by businesses. These business phone systems offer the benefits of internet communications, have significantly more features (such as video conferencing) and functionality (such as remote working) than conventional PBX systems and provide a business with the opportunity to integrate all of its communication systems and processes into a unified communications (UC) network (see our article Guide to VoIP phone systems for more information on unified communications)

With an IP-PBX system, instead of connecting each device (or extension) with a copper wire, they are connected to the IP-PBX over the business’s local area network (LAN) – see diagram below. Telephone calls are routed from the IP-PBX to the internet via the business’s router and SIP Trunking. SIP trunking is technology, provided by an ITSP (Internet Telephony Service Provider)/SIP Trunking provider, that enables the transmission of telephone calls via the internet and onward to the PSTN.

On-premise IP-PBX business phone systems

This infographic shows how on-premise IP-PBX business phone systems operate.

Antenna created by AS Design, Server created by Chunk Icons, Telephone created by Georgina Ionescu, Router created by Ralf Schmitzer, Computer created by SELicon, iPhone created by Saeful Muslim, iPad created by Luigi Di Capua IT, Laptop created by Jason Grube, Office created by Aham Brahma, cloud server created by Chris Homan, internet created by agus raharjo, ac unit created by Ben Davis, from Noun Project.

Employees can make calls using IP enabled handsets, old analogue or digital handsets connected via ATAs (Analog Telephone Adapters) or DTAs (Digital Telephone Adapters), or old analogue handsets connected to an FXS (Foreign Exchange Subscriber) module attached to the IP-PBX/server unit itself.

Employees can also use their computers or other devices to make calls using softphone software or VoIP apps. Employees using their computers are usually given headsets to provide privacy during calls.

Employees can use VoIP enabled devices to make or receive calls using an office’s WiFi or while working remotely using external WiFi networks.

On-premise hybrid PBX business phone systems

Not all businesses will be able to afford to purchase a new IP-PBX system or wish to move to a hosted VoIP system and so may choose to adapt their legacy PBX system so that it can make and receive IP telephone calls. This can be done with the introduction of a VoIP gateway connected between the business’s router and existing conventional PBX – see diagram below.

On-premise hybrid PBX business phone systems

This infographic shows how on-premise hybrid PBX business phone systems operate.

Antenna created by AS Design, Server created by Chunk Icons, Telephone created by Georgina Ionescu, Router created by Ralf Schmitzer, Computer created by SELicon, iPhone created by Saeful Muslim, iPad created by Luigi Di Capua IT, Laptop created by Jason Grube, Office created by Aham Brahma, cloud server created by Chris Homan, internet created by agus raharjo, ac unit created by Ben Davis, from Noun Project.

Telephone calls are routed from the conventional PBX to the VoIP gateway which converts them to IP calls and then sends them via the internet to the business’s ITSP/SIP Trunking Provider for transmission to the PSTN. IP calls from the internet are routed back the same way from the router via the VoIP Gateway and onwards through the conventional PBX to the internal extensions.

Hybrid PBX business telephone systems provide a cost-effective way for businesses to upgrade their telephone systems and achieve the benefits of IP telephony. They can also provide an interim stage in migrating the business to a new IP-PBX business phone system.

Comparison of on-premise PBX & IP-PBX business phone systems

We have compared on-premise conventional PBX, Hybrid PBX and IP-PBX business phone systems against the following criteria:

Comparison of on-premise PBX, Hybrid PBX and IP-PBX business phone systems

This table compares on-premise PBX, Hybrid PBX and IP-PBX business phone systems against a range of criteria.
  • Business size: On premise conventional PBXs and IP-PBXs can be effective for businesses of all sizes. Hybrid PBXs are a cost-effective way for businesses to upgrade legacy conventional PBX systems to be able to make VoIP calls.
  • Costs:
    • Costs can vary depending on the:
      • Number of external telephone lines required (in the case of conventional PBX systems).
      • Number of internal users/extensions required.
      • Range of features and functionality required.
      • Any additional premises (UK or overseas) that need to be connected.
      • Anticipated usage/call traffic (local and international).
      • Installation, configuration, maintenance and upgrade complexity.
    • All on-premise PBX systems need to be purchased and then installed, configured, maintained and upgraded by a business’s internal IT/Telecoms team or contractors. This can be time consuming and costly.
    • The monthly running costs of a PBX system will vary depending on the contract with the business’s service supplier, call volumes and call type (e.g. local v. international). Internet calling is likely to be much cheaper than using traditional telephone lines.
  • Range of features: Conventional PBX systems offer an improved set of features over Multi-line business phone systems but are still relatively limited. IP-PBX and Hybrid PBX systems offer extensive features such as soft phones and hot desking, and greater functionality, such as unified communications. IP-PBX and Hybrid systems also use web/GUI based interfaces which provide a much more user friendly experience for system management than a conventional PBX system.
  • Remote working: Only supported by IP-PBX and Hybrid PBX systems.
  • Customisation potential: As IP-PBX and Hybrid PBX systems are based on VoIP technology, and being on-premise are entirely controlled by the business, they provide the greatest flexibility across all business phone systems to create custom applications, dashboards and reporting tools. Conventional PBX systems, on the other hand, are based on older technology, and often use a supplier’s proprietary phones and hardware, which significantly limits customisation.
  • Scalability: Conventional PBX’s can be extended into large single premises networks although that may require significant new wiring. IP-PBX and Hybrid PBX systems utilise a business’s LAN and so are much more flexible and scalable within a premises and across other locations.
  • Portability: Conventional PBX systems are inflexible as they need to be wired into a premises’ infrastructure and will require new wiring and/or configuration to move handsets within a location. As IP-PBX and Hybrid PBX system handsets connect via the LAN they can be moved wherever there is an ethernet port allowing employees to seamlessly move and hot desk.
  • Integration with business applications: IP-PBX and Hybrid PBX business telephone systems offer extensive opportunities for integrating with other business applications such as CRM systems. Integration options are more limited and complicated with a conventional PBX system.
  • System upgrades: System upgrades to any on-premise PBX system will need to be carried out by a business’s in-house IT/Telecoms team or external IT contractors on a bespoke basis.
  • Reliability, security & control:
    • As conventional and Hybrid PBX business telephone systems use telephone lines, they are extremely reliable and have excellent call quality. Telephone lines are also extremely secure and act as a significant barrier to hacking.
    • As IP-PBX and Hybrid PBX’s use the internet, telephone calls can be adversely impacted by a business’s internet connection, resulting in poor call quality, dropped calls and/or latency issues, although it should be noted that internet service levels have improved significantly in recent years.
    • IP based systems are also vulnerable to internet piracy although businesses should have up to date internet security protocols in place and an ITSP/SIP Trunking provider will have extensive internet security measures in place.
    • All of these systems are located on-premises which gives a business complete security and control over its systems and as they come with, and/or can utilise, uninterruptible power supply (UPS) units the telephone system can continue to work for a period even if mains power supply is lost.
  • Disaster resilience: Any incident resulting in serious damage to the premise and/or restricting access by employees to a business’s premises will make a conventional PBX system unusable. However, in the case of IP-PBX and Hybrid PBX systems, if the business telephony and IT equipment isn’t damaged and continues to operate employees should be able to continue to work remotely even if access to the premises isn’t possible.
  • Installation, configuration & maintenance:
    • All PBX systems require installation, configuration, upgrades and maintenance by a business’s in-house IT/Telecoms team or external contractors.
    • As an IP-PBX integrates with the business’s existing computer system and LAN the business’s IT team or external consultants should be much more familiar with the system and find it much easier to install, configure and maintain than a conventional PBX or Hybrid system.
  • Supplier selection: Suppliers offering conventional PBX services are becoming much more limited as the market is moving towards IP-PBX and hosted VoIP phone systems.

Recommendations

  • Businesses where control and security over their telephone systems are critical requirements and/or which can benefit from investing in their own business phone system, will find on-premise PBX or IP-PBX business telephone systems attractive solutions.
  • Conventional PBX systems are particularly attractive to businesses that cannot risk the danger of telephone call interruption or down time. However, these systems will only form a short-term solution as by 2025 they will need to be upgraded to, or replaced by, an IP based system.
  • Hybrid IP PBX technology is a cost-effective solution to extend the life of conventional PBX systems providing more features and functionality, at a reduced monthly running cost.
  • IP-PBX systems provide the security and control of a conventional PBX system with extensive and customisable features, significant integration potential and scalability, at a low monthly running cost. More complicated IP-PBX systems are likely to result in high upfront and maintenance costs making those systems more attractive to larger businesses that can benefit from the economies of scale of investing in their own IP-PBX equipment.
  • SMEs and larger businesses with no, or limited, legacy telephone infrastructure may want to consider a hosted VoIP business telephone system.

If you are interested in a comparison between on-premise IP-PBX and hosted VoIP business telephone systems see our article Guide to VoIP phone systems.

Features of conventional PBX and IP-PBX business phone systems

Conventional PBX business telephone systems provide a step up in features compared to the basic Multi-line business phone systems. However, as can be seen below, IP-PBX systems offer businesses a much greater range of features which can be customised to a business’s specific needs.

This table shows the features of conventional PBX and IP-PBX business phone systems.

Read our article Business telephone system features for descriptions of each of these phone system features.

Components of on-premise PBX business phone systems

PBX business phone system components will vary considerably depending on the type of PBX system, as shown below:

This table compares the components of on-premise PBX business phone systems.
  • New installed hardware: A conventional PBX system will come with specific hardware. Hybrid PBX systems will require a new IP unit, such as a VoIP gateway, which is inserted between the business’s internet router and the conventional PBX. IP-PBX software may run on a business’s existing server or be provided within a new unit. The complexity and cost of these units will depend on the number of external telephone lines (conventional PBX system only), the number of internal extensions/users, the range of features required and the system’s functionality.
  • New wiring/cabling: A conventional PBX will need to be wired into the business’s premise. IP-PBX and Hybrid PBX systems connect into a business’s existing LAN. The complexity and cost of new wiring will depend on the number of new internal extensions required and the size and infrastructure of the business’s premises.
  • Phone handsets: Conventional PBX systems use analogue or digital handsets. These will become obsolete and/or require conversion to IP by 2025. Hybrid and IP-PBX systems can use VoIP phones, analogue or digital phones converted to VoIP (using ATAs or DTAs) or FXS modules. Handset costs will vary according to the features provided.
  • Softphone software/VoIP apps: In Hybrid and IP-PBX systems, phones are not necessary and computers and other devices can be used to receive and make telephone calls with the installation of softphone software/VoIP apps.
  • Internet connection: A business is already likely to have a business broadband internet connection with an ISP (Internet Service Provider). It is important to ensure that the internet connection has the appropriate security measures, connection strength and speed.
  • Other service providers: Conventional PBX systems will need the business to sign up with a telephony provider to provide the required number of external telephone lines (analogue or ISDN). IP-PBX and Hybrid PBX systems need the business to sign up with an ITSP/SIP Trunking provider to provide SIP Trunking.
  • Installation & configuration: All on-premise PBX systems will require installation and configuration by a business’s internal IT and/or Telecoms team or external contractors.

If you are interested in a PBX business telephone system then read our article Guide to UK small business phone systems suppliers.

Other guides