What is a PBX phone system (Complete guide)


What is a PBX phone system? In your search for the perfect business phone system for your business, you’ll come across different types of phone systems to choose from.

A PBX phone system is an option you can consider for your business. In this article, the PBX phone system and all its elements will be discussed in full detail.

What is a private branch exchange? 

A PBX should be considered as an internal telephone network within a business or other entity. The internal telephone network allows users to communicate with each other using internal lines, and make and receive calls outside the company.

Typical business telephony that is provided by a PBX phone system includes call forwarding, call transfer, call queue, auto-attendant, IVR, voicemail, etc.

How a PBX works 

There are three types of PBX phone systems: analogue, digital and cloud-hosted. Each PBX system works differently.

Analogue PBX (Traditional PBX)

An analogue PBX (also known as a landline) is manually installed on the business’s premises and makes use of the public switched telephone network (PTSN).

Digital PBX (IP PBX)

The IP PBX makes use of your business’s internet connection and broadband.

Cloud-hosted PBX (Hosted PBX)

A digitally hosted system is also referred to as a virtual PBX, IP PBX, or VOIP phone. This type of PBX operates entirely over an internet connection.

History of PBX 

In 1960: The first PBX was developed by lawyers. The phone system needed a human operator to manually direct calls. Private businesses preferred this because of the automated switchboard in public service due to their unreliability.

In the 1970s: Superconductors were added to automated switchboards and made them more trustworthy and faster. Thus eliminating the need for a human operator and PBX systems became more affordable.

In the mid-1970s: Someone decided to automate call switching. Automated switches made it more possible for the entire process to be more efficient and cost-effective. The PBX was born and here to stay.

There was slow and gradual growth and evolution of PBX phone systems over the years, adding popular features such as music on hold, call transfer and call recording. However, in the 1990s many businesses started to adopt newer technologies such as VOIP, cloud technology and ISDN.

Types of PBX 

There are about 5 types of PBX phone systems, they include the following:

Traditional PBX (Analogue PBX)

The most traditional PBX phone system (Analogue PBX) is mainly landline-based and connected to the public switched telephone network and relies heavily on a physical hardware box.

This type of phone system will use old copper telephone lines that enter your office and connect to the PBX box. This allows for the connection of outbound and inbound phone calls. The lines are distributed to every desk in your office.

IP PBX (Digital PBX)

Digital PBX phone systems can deploy both a traditional PBX phone system and IP phones. Unlike traditional phone lines, digital PBX phone systems can deliver a better sound quality.

In addition, you can upgrade your digital PBX by integrating VOIP systems and adding hold music. A digital PBX phone system is ideal for a businesses that still use older wiring, unsecured phone lines and an unreliable internet connection.

Onsite IP PBX Phone System

Also known as a VOIP PBX phone system, an onsite IP PBX utilises an internet connection and SIP trunks. They are easy to set up and use ethernet cables to connect telephones instead of traditional ones.

Onsite IP PBX phone systems take advantage of any readily available internet connection and your business’s internal networks. These phone systems offer a better sound quality, call stability and more advanced application of a PBX phone system.

Hosted PBX

A hosted PBX system is commonly used at the enterprise level and supports inbound routing and outbound calls. All PBX system features, applications and calling services are provided in the cloud.

This kind of phone system is perfect for companies that operate in multiple geographic locations. Your telecoms provider is the “host” and takes care of software updates, PBX maintenance and warranties.

Virtual PBX Phone System

Essentially, the virtual PBX phone system is considered the lighter version of the hosted PBX. Using a virtual PBX allows for calls to be routed to VOIP extensions, landlines, cellphones, etc.

A virtual phone system is perfect for small businesses, and small and remote teams. The costs of setting up and maintaining a virtual PBX are significantly lower compared to the other PBX options available.

PBX features 

A PBX phone systems offers businesses a variety of advanced features. A business can select relevant features that suit its business needs. Some PBX features include:

  • Call forwarding
  • Call monitoring
  • Call transfer
  • Call recording
  • Auto-attendant
  • Voicemail transcription
  • Active call controls
  • Interactive Voice Response
  • Direct Inward Dialing (DID)
  • Voicemail to email
  • Click to call
  • Audio and video conferencing
  • Advanced call routing
  • Mobile and desktop apps
  • Local numbers, virtual phone numbers, toll-free numbers, geographic and non-geographic numbers.

Analogue PBX

As mention above, an analogue PBX is the most traditional PBX phone system compared to the newer and more advanced PBX options available. The analogue PBX makes use of older copper telephone lines in the public switched telephone network (PSTN).

The copper lines/wires connect every telephone in your office and allow for inbound and outbound calls within or outside the copper lines. Traditional PBX’s are expensive to maintain and often have limited capabilities.


An IP (Internet Protocol) PBX works and functions similar to a traditional PBX but has a crucial technological advantage. An IP PBX can convert internal IP phone calls into a conventional signal that works across the public switched telephone network (PTSN).

It’s important to note that an IP PBX bridges the gap between the analogue and digital calls within your business. This means that your telecommunication and data needs can be handled by one provider, saving you money in the process.

Virtual PBX

Virtual PBXs make use of IP communications and do not need to be installed on-premise or even require additional hardware. Typically, your VOIP provider will host your virtual PBX or is deployed into a cloud service.

All inbound phone calls can be routed to VOIP extensions, landlines, desktops, cellphones, etc. Simply put, a virtual PBX is an IP PBX that is hosted in a cloud service.

Hosted PBX

A hosted PBX is cloud-based. This allows a telephone switching system to be accessed over a cloud network. A hosted PBX allows employees to make and receive phone calls on the web or through mobile apps.

All phone calls happen over an internet connection, which essentially helps a business cut down on hardware and labour costs. Additionally, employees can work remotely without having to be tied to the landline in the office.

PBX comparison

Analogue PBXIP PBXVirtual PBXHosted PBX
Not compatible with VOIPCompatible with VOIPCloud-based Cloud-based
Limited to phone call transfers only Can handle both voice and data The lighter version of a Hosted PBXHosted by your network provider
Limited scalability Highly scalable Routes phone calls to VOIP extensions, landlines and cellphones. Perfect for larger teams at the enterprise level
Expensive to maintain and upgradeEasy to upgrade and add new featuresPerfect for small teams and remote teamsBest suits companies that operate in multiple locations
Relies on hardwareRelies on softwareThe cheapest to set up. All calls happen over an internet connection

Advantages of a PBX

Cloud-based PBX phone systems offer several benefits for businesses to enjoy, such as:

Internal Communications

A PBX improves internal communication by streamlining and keeping all phone calls within the business internal. For example, when one department calls another department in the office, there would be no need for the phone call to be routed outside the building and incur charges, the phone call is directly routed to its intended destination.

Centralized Control

A receptionist feature can be provided to centralise all your company’s phones into one phone number. Avoid listing multiple numbers in advertisements or directories and just use one business phone number for everything.


The auto-attendant feature eliminates the need to hire a receptionist to answer calls. In a PBX the auto-attendant allows callers to enter an extension to bypass what could be considered a time-consuming menu process.

Flexible Call Routing

A PBX phone system allows for phone calls to be forwarded to another phone of your choosing. This ensures that important calls and calls from customers don’t go unanswered and to voicemail.

Variable Access

Assign permissions and levels of access to certain extensions. You can allow some extensions to call outside the business but not long-distance or limit certain extensions to internal communications only.

Cost Monitoring

A PBX phone system helps you stay on top of your costs because the phone systems keeps records of inbound and outbound calls. Detailed usage reports can help you adjust your telephone service allocation and optimise your return on investment.

Internet Integration

PBX phone systems such as an IP PBX, Virtual PBX, Hosted PBX and an On-site IP PBX operate over an internet connection. You can access, monitor and adjust your PBX phone system on internet-enabled devices such as laptops, desktops and mobile phones.

Maintenance-Free Service

Cloud-based PBX phone systems do not need to be installed on-premise and eliminate the new for new hardware/equipment. Your PBX is maintained by your service provider.

Disadvantages of a PBX

Faster networking equipment is a must

To get the most out of your PBX phone system you will need to invest in high-performance routers and switches because older routers aren’t compatible with large-scale VOIP operations.

Requires a stable internet connection

Cloud-based PBX phone systems rely heavily on an internet connection. Unfortunately, if you’re internet connection fails, so will your telephone service. Ensure that you have enough bandwidth and alternative means to keep your internet connection going during any disruptions.

Latency & Jitter

VOIP latency and jitter can affect the quality of phone calls. Unfortunately, latency and jitter are apart of wireless connections naturally.

Why PBX are dying & VOIP is the future

The traditional PBX phone system was once the leading telecommunications solution for business but that has since changed dramatically. These days, they are becoming obsolete because of their limited capabilities compared to new telephone system technologies.

New technologies like VOIP offer far more advanced features and capabilities compared to a traditional PBX. VOIP is the future because of the following reasons:

  • Reduced costs
  • High portability
  • Greater accessibility
  • Improved security
  • Better scalability
  • Increased flexibility and multitasking

How to choose a PBX for your business

PBX phone systems can be used by businesses of all shapes and sizes. A lot of the time the choice of PBX is informed by a company’s budget, current business environment and future plans. Here are things you should consider:

The size of your business

The truth is, both on-premise and cloud-based PBX phone systems are suitable for any size business. However, cloud-based PBX phone system suits small to medium size businesses and on-premise PBX phone systems suit larger enterprises better.

The size of your business dictates which solution is most appropriate for your business.

Where are your employees located?

Do you have employees that work remotely? or employees that spent the majority of their time in the field? If you answer yes to these questions, a cloud-based PBX phone system is best suited for your operations.

A cloud PBX allows employees to access their business extension via a mobile or desktop app and, make and receive calls from anywhere.


You need to consider any initial upfront costs and ongoing costs attached to the various PBX phone system options.

On-premise PBX phone system costs include hardware, maintenance, installation or even licensing of the system. In contrast, cloud PBX phone systems hardly have upfront costs but there are subscription fees you pay to your service provider.

Internet Connection

Cloud PBX and IP PBX phone systems require a stable internet connection with sufficient bandwidth in order to have telephone service. Traditional PBX phone systems do not require an internet connection as they use copper or digital phone lines.

Business Growth

Consider the growth of your business when choosing a PBX phone system. Cloud-based PBX phone systems have a high degree of scalability and you can expand your phone service as your business grows.

Traditional PBX phone systems aren’t as scalable as cloud PBX and are often expensive to expand your phone service.

Features required

It’s important to choose a PBX phone system that aligns with your business’s telephony needs. Cloud-based PBX phone systems offer more advanced features than a traditional PBX would.

PBX Alternative – YOOTOK

You can get a modern phone system with the hefty equipment costs. YOOTOK can provide your business with a VOIP phone system that works with your existing hardware, and is set up in minutes.

Why should you get the YOOTOK VOIP phone system?

You don’t need to invest in expensive hardware

Save money by eliminating expensive equipment purchases and maintenance. YOOTOK works well with your existing hardware. Simply connect to our VOIP service via the internet.

Your staff can work from any location and device

YOOTOK offers both web and mobile apps to keep your employees connected from any location. Our apps work well on desktops, laptops, tablets and smartphones.

You can scale up or down with a few clicks

Our VOIP service is flexible and can grow with your business needs and requirements. Use our online portal to adjust your features, numbers and users.


What can you do with a PBX?

A PBX phone system can help businesses use fewer phone lines and operate an internal communications network (phone system). The best PBX phone systems offer features like voicemail management, auto attendants, call recording and recoded messages, and phone extensions for employees.

What are PBX capabilities?

PBX phone systems offer a multitude of advanced features. Some of the most common include call blocking, call forwarding, call transfer, call waiting, call recording, voicemail, Interactive Voice Response (IVR), and Direct Inward Dialing (DID).

What is the main purpose of a PBX?

The Private Branch Exchange (PBX) is a switching station for telephone systems consisting of several branches of telephone systems. A PBX switches connections to and from telephone systems, thus linking phone lines.

How does Hosted PBX work?

A Hosted PBX solution migrates your telephone and communications structure over to a trusted VOIP provider. Individual phone extensions are replaced by VOIP desk phones. A Hosted PBX system makes use of your internet connection.

What is the difference between a PABX and PBX?

PABX stands for “Public Automatic Branch Exchange” and PBX stands for “Private Branch Exchange”. The difference is simply the word “Automatic”.

What is the difference between PBX and VOIP?

A traditional PBX is an on-premise telephone system that uses the PTSN. VOIP (Voice over Internet Protocol) is a form of phone system technology.


The majority of modern PBX systems utilise VOIP technology.

What is a PBX call centre?

PBX phone systems are private telephone systems that facilitate internal and external communications of the business. Different channels such as VOIP, ISDN or analogue are used.

What is the difference between PTSN and PBX?

The main difference is that the PTSN covers a much wider reach compared to a PBX phone system.