Hosted PBX Phone System: A Beginners Guide

With business phone systems coming in all shapes and sizes, more often than not, staying abreast of modern communications technologies can be quite challenging. 

As a business owner, entrepreneur, or executive, knowing all about phone systems is essential. After all, having the latest techniques, systems, and tools at your fingertips and taking advantage of them will give you a business edge over your competitors. Such knowledge also leads to enhanced communication efficiency, and that helps your bottom line. 

Among the technologies you may have heard about recently is hosted PBX. It’s one of those jargon words with which only tech-savvy people are familiar.  

In this article, we will discuss what a hosted PBX is. We start with a definition and go from there. 

What is a hosted PBX?

Short for Private Branch Exchange, a PBX is a telephone network that manages incoming and outbound calls within your company or organization. Designed to handle a large volume of calls, this hardware system requires a physical location, such as a room or a closet in your office. 

More than 60 years ago in its early period, the PBX system was handled by human operators using their hands to route calls. These manual operators relied on public switchboards to transfer the calls, either internal or external, to the proper recipients within a company. 

PBX has the term “Private” because it is different from a public switched telephone network (PSTN), which is the traditional circuit-switched telephone network that has been around since the invention of the telephone. Also known as plain old telephone service (POTS), PSTN’s purpose is to provide residential telephony services. 

The word “Branch” characterizes one of its functions: the phone can be connected to a PSTN, which consists of communication circuits (‘trunk” lines). The endpoints that link to these circuits and divide the traffic are known as “branches.”

Lastly, the word “Exchange” means that connections are being made via a switching network that can efficiently transfer a high volume of calls.  

Hosted PBX: Definition

The traditional or standard PBX is called “on-premise,” which means that the hardware system is placed in the office or in the building. Under this setup, you typically manage and maintain the equipment and devices that come with it yourself. 

A hosted PBX, on the other hand, is a virtual system that resides in the cloud, which are servers that are accessible through the internet. In other words, there’s no need to install or set up a hardware system that you have to regularly manage. A third-party company, commonly known as a phone service provider or “host,” delivers and maintains this cloud-based telephony service for you in a secure off-site data center. 

Also called cloud PBX or virtual PBX, this type of PBX solution offers features and services similar to an on-premise or on-site PBX. That is to say, you still enjoy the benefits the network brings to your organization. But all of your communication activities are processed virtually or in the cloud, so a physical location for storing the necessary equipment is no longer required. 

Companies that provide hosted PBX are equipped with technicians, professionals, engineers, or experts who can ensure that your system operates in full swing to deliver first-rate calls and security for your enterprise. This personnel is available day and night for support services to help you run the system as smoothly as possible. The service providers handle various data centers to make sure there are no major disruptions in your communication network.  

The PBX market is on the rise

According to the latest report issued by Research and Markets, a business and market research firm based in Ireland, the global hosted PBX markets are expected to grow significantly in the next five years. 

The report notes that the hosted PBX market across the world was valued at $5 billion in 2020 and is estimated to reach around $6 billion by 2025, with a compound annual growth rate (CAGR) of roughly 14%.

The study adds that hosted PBX enables employees to work remotely while still being connected to the office phone system. The growing number of workers under a work-from-home setup brought about by the COVID-19 pandemic is among the main factors for the continued market growth for hosted PBX. 

Similarly, Graphical Research, a consulting services firm in India, released a study noting that the hosted PBX market size in North America was estimated at $1billion in 2020 and is expected to increase at 10% CAGR over the next seven years until 2027. 

The report attributes the projected growth to the expanding demand for cloud-based unified communication solutions and services, which more companies are increasingly adopting due to their improved flexibility and scalability. 

In addition, the hosted PBX market share of network services in the said region stood at more than 40% in 2020. The large share of the growth is ascribed to rising demand for the management of internet protocol (IP) networks to offer seamless cloud communication services, including Voice over Internet Protocol (VoIP) solutions. 

The study goes on to say that the small and medium enterprise (SME) sector in North America is expected to lead the growth of the hosted PBX market, with a nine percent CAGR during the seven-year forecast. The steady increase is due to the rising demand for advanced communication services, which will help the sector reduce high expenses on telecommunications equipment and facilities. 

Furthermore, SMEs with limited budgets will set sights on using cost-effective PBX solutions. The industry will take advantage of the specialized features of the said hosted network to improve workflows in communications and other processes. 

Small businesses consider hosted PBX a reliable system since it can be easily deployed, managed, and maintained. The PBX solution not only lowers communication and network management expenses but also boosts productivity. 

Based on the report, the hosted PBX market in the United States is poised to churn out $1.5 billion in revenues by 2027. The rising number of US businesses, notably in the SME segment using cloud technology because of its advantages over legacy systems, is the largest contributor to the demand. 

How does a hosted PBX work?

Simply put, a hosted PBX consists of the internet, the hosted PBX (phone service) provider, and a VoIP phone. Upon installation, the provider connects all your desk phones through the internet, allowing you to conduct inbound and outbound calls. 

Moving to a hosted PBX network means that the service provider will handle your entire phone system. The vendor manages multiple data centers, so it is in the vendor’s interest to make sure your phone system operates round the clock without problems. If a data center breaks down for some reason, your calls that go through the service provider will be directed to another center to keep your system running. 

With a dedicated team that will help you run the phone network as efficiently as possible, the service provider will set everything in place. By logging in to a web portal, your employees can start making and receiving calls. 

What is a cloud-hosted PBX system?

Hosted PBX consists of two platforms, the SIP (Session Initiation Protocol) trunking provider and the cloud-hosted PBX. 

You can use the SIP trunking provider if you have an IP PBX, a device that offers voice connectivity to phones within an establishment. The platform’s advantages over standard phone systems are lower operational costs, ease of management, and easier installation, to name a few. This setup also lets you retain your current PBX and provides a connection via a VoIP-based trunk for outside lines. 

Even though it offers fewer features than a cloud PBX system, the SIP trunk is recommended if your business operates in a large building or if you want to incorporate this platform in a hosted PBX deployment. 

A cloud-based PBX is a system that links all of your phones to external VoIP data centers. Configuring the system to your business requirements is the only process needed to do and the hosted VoIP service provider will look after the maintenance of the network offsite.

Benefits of a cloud-hosted PBX system

The reason why the cloud-hosted PBX market will grow by leaps and bounds is a direct desire for the various benefits this technology will bring to your business. 

Here are four of the main advantages:

1: Low investments and affordability

There is no need to invest in expensive hardware because the service provider will carry the financial responsibility for the equipment housed in its data center. The business phone system cost in this setup is significantly lower than that of an on-premise PBX network. 

The only expenses incurred are the provider’s monthly (or annual) fee and the desk phones your employees will need. Technical knowledge of maintaining a cloud-based PBX system is not needed because the service provider has its own dedicated team. 

2: Flexibility 

A cloud-based system is meant to provide flexible solutions that allow you to modify the communication network if your business needs to make changes. If your organization has to move to a different location, reduce/expand the workforce, or adopt a work-from-home setup, the cloud-hosted PBX solution can easily adapt to any situation. 

Its flexibility can also enhance your availability to customers or suppliers because you can connect from any location with a smartphone, VoIP phone, or desktop computer.

3. Innovative features

A cloud-hosted PBX system is a recommended option when deciding to set up the office phone in your business. This platform contains all the vital and advanced features needed to improve communications and productivity. The network has such functions as video conferencing, call control, email delivery, time conditions, voicemail, voice menu, auto attendants, and others to help keep your connections to clients and staff strong. 

Since it is a virtual system, customizing the features is not limited as it is with an on-site phone network. Having a unified communication solution where all of the different channels (voice, video, content sharing, text, or instant messaging) are integrated for more efficient communications is possible with a cloud-based PBX. 

4. Space and time savings 

Like other technologies, a cloud phone system has pros and cons. But the edge of a hosted network over an on-premise system is that it does not require a physical location since the hardware is offsite. So you can use that space in your office for more productive or value-added functions, such as putting in additional workstations or converting it to a training room.  

An on-premise PBX takes more than a month to fully set it up. The process before installation includes purchasing the hardware (plus the delivery) and waiting for the system specialist to evaluate and identify your call flow. By contrast, a cloud-hosted PBX can be fully installed within several days. A technician or a system administrator is not required to train employees to run the system. They can operate it with a simple interface. 

What is a hosted phone service?

A hosted phone service, also known as hosted telephony, simply refers to your phone system residing in the cloud and not in your physical office. This technology is considered the best network for all types of businesses, especially for small enterprises and home offices. The phone network is a program or software instead of hardware in a traditional setup. 

The hosted PBX is accessible via leased lines designed specifically for your business. Inbound calls will first be linked to the IP network before reaching the host or service provider. Then the calls will be directed to the right person or proper department.  

With a hosted phone service, you can avail yourself of the best cloud-based business phone systems on the market for your business needs. Many service providers offer a variety of products and services that serve businesses of all sizes. 

Hosted telephony allows you to install a multi-line phone network, including setting up a two-line system. Ideal for SMEs and startups, with a multi-line system you can make or take calls at the same time, such as dialing numbers within and outside the office and putting calls on hold.  By conducting research on the market and contacting the different vendors, you’ll be able to pick the best multi-line phone system for your small business.