How does PBX work? The definition of a PBX phone system
By Natália Mrázová
| 21. June 2021 |
PBX - Phone system
By N. Mrázová Natália Mrázová
| 21 Jun 2021 |
PBX - Phone system
    By N. Mrázová Natália Mrázová
    | 21 Jun 2021
    PBX - Phone system

    How does PBX work? The definition of a PBX phone system

    illustration call center

    Looking for new business solutions for your company may not be so easy. There are many new ideas, and it is hard to decide which one is the most suitable for your business and your customers’ needs.

    It is essential to choose wisely when it comes to customer service. You need to provide the highest quality of service and proper research is more than necessary. 

    One solution that may take your customer service to a higher level is a PBX phone system. How does PBX work? How to choose the best option? What are the benefits of it? We have covered all these topics below, so let’s dive in. 

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    What is PBX? 

    PBX stands for Private Branch Exchange. It is a private phone system used in a company. All PBX users can communicate inside and outside of their team using different channels, for example, Voice over Internet Protocol (VoIP). Thanks to this system, users can reach one another for free. The most significant benefit of PBX is the number of devices – PBX gives much greater opportunities than classic PSTN. PBX also offers functions such as call recording and IVR. This drastically improves cooperation between agents and helps them provide better customer service.

    Today, most PBX systems are digital, and they use the Internet to enable voice and video communication. The oldest type of PBX is the analog version. This type of system has been around for many years and connects to the PSTN over a Plain Old Telephone Service (POTS). A PBX system connects copper wiring to phones and faxes to manage the calls between them. The PBX routes incoming calls, and they can be transferred between phones using the system.

    But let’s return to the present. For most companies, analog PBX is ancient history, so what do they use now? There are a few solutions: the cloud, on-premises, and others. We will tell you more about them later. 

    How does PBX work?

    During incoming calls with your business, your customers will receive a professional greeting along with a list of options they can select from. They will be able to reach the appropriate agent or department via a menu listing or by dialing the extension or agent’s name.

    The system will instantly connect callers to the appropriate agent or department by selecting the right option. Members of staff located in a branch office, home office, or out on business can also be transferred to answer them.

    A PBX can range in complexity, so different equipment can be used. Copper telephone lines are usually used in a traditional PBX. In the case of VoIP, it may be hosted at the enterprise or it could be a cloud-based PBX system too. 

    An IP PBX uses digital phone signals to make calls. Due to the convenience of using Ethernet cables instead of traditional lines to connect phones, no rewiring is required.

    PBX systems will handle inbound and outbound calls and incorporate features to handle the former automatically. These features may include Interactive Voice Response (IVR)and integrations to CRM systems which is a huge help with managing all customer information. Moreover, PBX offers predictive dialer systems and call monitoring. The good news is that CloudTalk ticks all of the boxes. If you want to know more, visit the features page and explore our offer.

    On-premise vs. Cloud PBX 

    Now you know how PBX works, it is time to discuss your options. The most popular are on-premises and cloud PBX systems. Here are their main differences, including the pros and cons of both.

    On-premises PBX phone systems

    This solution entails installing the hardware on-site in your office. You can buy the phone system hardware, server equipment, networking, and if you need to make any updates or fixes, your own IT team will be responsible for that. 

    The main benefits of an on-premises PBX system:

    • It allows your IT staff to have control over the system and implement any adjustments they want.
    • In the long term the costs are lower, and thanks to SIP trunking they can be reduced even more.
    • Thanks to owning the network and server systems, you have more control and the ability to establish the security level you need.
    • Even if your internet connection goes down, calls are still accessible.

    That’s all good, but what are the cons?

    • On-premises PBX requires IT staff, so if you do not have any or if you are under-resourced then it won’t be a good idea. 
    • There is a large one-time expense.
    • The maintenance costs are potentially higher.
    • If you run a remote team, this option is virtually impossible. 

    This solution is better for large companies with well-developed IT teams and more extensive budgets.

    Cloud PBX phone systems

    By the end of 2022, the cloud-based contact center market is expected to reach $93 billion, so it is clearly gaining popularity. Why is it worth investing in such a solution? Below you can find the major advantages of this PBX phone system. 

    • The main equipment costs of this solution are desktop phones.
    • It takes little time to set up the solution.
    • Cloud-based systems are very scalable. 
    • Most providers offer very feature-rich plans.
    • The provider takes care of any updates and changes, so you do not have to handle any of them.
    • It is easier and quicker to implement if you run remote teams. 

    Now let’s focus on the cons of cloud PBX phone systems. What to consider before choosing this solution?

    • You have less control over the system, which is mostly in the hands of the provider. 
    • All of the data is hosted on the provider’s server, so security issues here may cause some concerns. 
    • Poor quality or lack of an internet connection may result in intermittent service.
    • The monthly fees may be higher than with other solutions.

    Companies seeking reliable solutions for their businesses may find cloud PBX systems to be a good option. It is a good solution for those organizations that do not have an IT department to handle software management, and they want to implement the system and use it as-is without any further concerns. One condition to do so is having a stable Internet connection.

    This solution is ideal for companies of all shapes and sizes. It is easy on the finances and personnel, which makes it ideal for starting out.

    Benefits of using PBX phone systems for small businesses 

    PBX phone systems undoubtedly have many benefits. If you run a small business, you can profit from this solution in many ways, and there are few types of PBX systems to choose from so you can easily find your perfect match.

    Clearly, one of the major benefits of PBX systems is the ability to reduce costs. They provide automated communication so your agents can handle more customer calls, saving you time and money. Your agents will be able to improve the efficiency of service without additional job positions to create and cover. This also means a higher level of service provided, and as a result it positively affects customer satisfaction. And you know what they say, one satisfied customer can bring a few new ones with them.

    Another big advantage of implementing PBX systems is the improvement of call management. In practice, this means that your agents are able to have a comprehensive overview of each caller even before saying “hi”. Additionally, such solutions allow customers to reach the appropriate agent straight away without having to be switched between various departments or individuals. From an employers’ point of view, such systems allow you to monitor your agents’ performance and follow call statistics. It gives a bigger picture of how the customer service department is doing. 

    Speaking of communication, a PBX phone system improves internal communication. Keep in mind that this system not only connects your clients to your agents, but agents to each other too. With this system, your agents are able to set their availability status, quickly communicate with each other, and seamlessly switch a caller between themselves. It also allows one to upload customer information to specific agents, e.g. when taking time off. This is a very handy feature that allows businesses to avoid bottlenecks.  

    Scalability is the next benefit of using PBX. Some types are easier to scale than others, but the overall process is relatively straightforward. A PBX system allows you to benefit from the operating leverage and helps your business grow!

    A PBX phone system has great capacity, which means it can handle as many calls as your customers need to make. There are no limits, but sometimes the quality of your connection can cause some bumps on the road. Of course, the system does not replace an agent if a conversation is required, but sometimes, thanks to IVR, it will be unnecessary to have one. Answering questions and moving through the menu can provide the customer with answers if it is well built.

    And for some, the biggest advantage of all is third-party integrations. You can connect PBX systems with most of the CRMs and apps you use daily, such as e-commerce providers or helpdesks, thus making them a well-oiled machine. For example, CloudTalk offers integrations with Salesforce, Zendesk Sell, HubSpot, LiveAgent, Magento, and many more. 


    Through automation, PBX systems improve many processes, which increases the quality and speed of the service that agents can provide. A PBX phone system plays a crucial role in the daily responsibilities of agents and makes internal communication more seamless and smooth. No matter in which industry you operate, additional help is always appreciated. Anything to make your customers content!

    Additionally, PBX systems support tracking the performance of the whole customer service team. Many providers have features such as call recording or call notes to improve agents’ work and deliver an even higher quality of service. Check out CloudTalk and see how a PBX system can improve your customer service!