What’s the Meaning of PBX? Definition, Pros & Features [2024]
By Natalia Mraz
| 29. May 2024 |
PBX, Phone system
By N. MrazNatalia Mraz
| 29 May 2024 |
PBX, Phone system
    By N. MrazNatalia Mraz
    | 29 May 2024
    PBX, Phone system

    What Does PBX Mean? Your Ultimate Guide to Private Branch Exchanges

    PBX is a hot topic, and a growing industry. Future Market Insights estimates that the total PBX market size may reach US$ 104,627.0 million by 2033. So, what’s all the fuss about, and how may the right PBX solution help your business?

    Key Takeaways:

    • PBX stands for Private Branch Exchange, which is a kind of private telephone network for businesses. 
    • Modern PBX systems, both cloud-based and on-premises, are automated but cloud PBX is much more flexible than the alternative.
    • Further advantages of cloud PBX include its scalability, wider range of features, and ease of integration with your existing software.

    What Is PBX?

    The term PBX or Private Branch Exchange traditionally refers to on-site, private telephone exchange systems. These are used by companies to manage incoming and outgoing phone calls. Both internal communication between employees and external communication with clients and customers are catered for.

    Today, the definition of PBX has typically expanded to include virtual and cloud-based phone systems, hosted off-site. This means businesses can access communication features without needing on-site hardware.

    PBX vs PABX: What’s The Difference?

    Private Branch Exchange (PBX) and Private Automatic Branch Exchange (PABX) are not all that different. They’re both telephone systems within companies used to manage both incoming and outgoing phone calls. The main difference is the degree of automation.

    Traditionally, PBX systems would require a human operator to connect incoming calls manually with the right extensions in the organization. PABX systems, however, are automated and don’t need a human operator for this purpose.

    Today, the terms PBX and PABX are frequently referred to as the same thing. That’s because all modern PBX systems are automated.

    PBX vs VoIP: What’s The Difference

    Hosted PBX and VoIP (Voice over Internet Protocol) are two terms that are also often used interchangeably, but they don’t mean the same thing. 

    Traditionally, PBX was a specific type of on-premises telephone system. In recent years, PBX systems have often become software based, with the infrastructure housed offsite. They are, therefore, hosted elsewhere. 

    VoIP, meanwhile, is the broader technology for sending and receiving voice communication over the internet. VoIP and PBX are used together—VoIP is the technology that modern PBX solutions employ for internet telephony.

    How Does PBX Work?

    PBX systems work through a combination of hardware, software, and connection methods. Precisely what’s involved depends on the type of system, with traditional on-premises setups needing much more complex infrastructure.  

    On-premises hardware can include: 

    • A control unit for managing call routing as well as other functions. 
    • Trunk lines: External phone lines that connect the PBX with the public telephone network. 
    • Extensions: Internal phone lines in the company that connect with the PBX system. 
    • Dedicated handsets used by staff members. 

    Analog connections are also necessary for old-school PBX systems, where voice signals are transmitted along copper wires. More modern PBX systems, such as IP PBX setups, can use digital connections instead. For example, Session Initiation Protocol (SIP).

    Finally, there’s cloud PBX systems that use VoIP technology, so you can make calls over the internet using data packets. For these types of solutions, all a business needs is an internet connection, your provider’s software, and a device to use it on.  

    Types of PBX: On-Premises vs. Cloud PBX Phone System

    On-premises PBX are different from cloud PBX phone systems in a few key ways: 

    Location of Infrastructure

    Firstly, the former consist of physical hardware systems, installed and maintained on-site at the location of the user. Cloud PBX systems, on the other hand, function with a connection to the internet and are hosted off-site by a third-party provider.

    Responsibility for Maintenance

    With on-premises PBX, users are responsible for maintaining the systems, dealing with upgrades, and troubleshooting. This means that you may need a dedicated IT staff to man the system, as well as additional resources. 

    With cloud PBX, the third-party provider is the one responsible for system maintenance, any upgrades required, and troubleshooting.

    Upfront and Ongoing Costs

    Finally, when it comes to costs, the initial setup expenses for on-premises PBX systems can often be higher than cloud PBX. You need to purchase and install hardware and you also have to consider ongoing maintenance.

    For Cloud PBX systems, on the other hand, you will simply pay a monthly subscription fee based on how much you use the system. 

    To summarize:

    On-Premises PBX

    Cloud PBX


    Physical hardware on-site

    Hosted off-site, internet-based


    User-managed maintenance & upgrades

    Provider-managed maintenance & upgrades


    Higher upfront and maintenance costs

    Lower upfront costs, monthly payments

    Benefits of a PBX Hosted in the Cloud

    So, what are the main benefits of a PBX system hosted in the cloud?

    #1 Set It Up Quickly and Easily

    Hosted PBX systems are quick and easy to set up. Often, all you have to do is sign up for a service online, and then go through the configuration steps via a web portal.

    Cloud PBX also usually offers user-friendly interfaces, as well as onboarding portals and documentation to guide you through it all. This makes it easier for your business to get the phone system up and running. And usually means you won’t need to bring in an external expert.

    #2 Cut Costs Upfront and Long-Term

    With cloud PBX, the infrastructure is hosted by the service provider. This means no significant upfront investments into physical hardware.

    You can also skip installation, setup, and maintenance costs typically associated with on-premises PBX. Your monthly subscription fee is usually all you have to pay. 

    Having a cloud system in place also reduces the costs associated with maintaining a physical office. If you don’t need to pay office rent and bills, or commute to work, you can save money for everyone involved.

    #3 Use One System Wherever You Are

    Cloud PBX systems are much more compatible with how modern businesses work. Companies spread out over multiple locations can easily connect all of their offices with a single phone system. You can make and receive calls regardless of where you are, and where your colleagues are. 

    And, of course, a lot of cloud PBX providers now also offer mobile apps. These allow you to make calls, check voicemail, and access other features through your smartphone. 

    And, finally, if an office were to unexpectedly close, a cloud-based PBX system would protect business communications. Calls can continue on, and just be  rerouted to mobile phones or other offices.

    #4 Introduce Remote Working

    The flexibility mentioned above also extends to remote working.  If you want to work remotely, you can, while still benefiting from total access to the same phone system as colleagues in the office. 

    MyHeritage, for example, was able to increase their monthly call volume by 49% within three months of implementing their PBX of choice, while allowing for remote work.

    We have a large team of agents (158) who work remotely from different locations. CloudTalk allows them to easily log in and start making calls from anywhere, without any complex setup or installation required.

    Elay Sasson — Call Center Sales Manager at MyHeritage
    What did MyHeritage achieved with CloudTalk?
    • 49% Increase in monthly call volume
    • 6% Increase in total outbound calls
    • 21% Reduction in missed calls

    And all this without skimping on collaboration and teamwork. With high quality calls, instant messaging, and more, you can still work efficiently, wherever you are.

    #5 Integrate With Your Other Tools

    Integrations with your business tools are also an option with cloud PBX solutions. Connecting your calling solution with your CRM software, for example, allows you to access customer information during calls. That is very useful for consistency and time-saving. 

    Information from your calls and other interactions can also be logged automatically in your CRM. That helps you keep records of communication, and improve customer service by offering more personalized experiences. Leadspicker enjoyed a whopping 92% reduction in sales cycles duration using CloudTalk and integrating it with Pipedrive.

    We are extremely pleased with the results we achieved with CloudTalk. We are impressed with international calling capabilities, affordable pricing, and the ease of integration with Pipedrive.

    Vlastimil Vodička – CEO of Leadspicker

    What’s more, by integrating with productivity tools like calendars, it’s easier to schedule calls and set reminders so no one misses a crucial meeting.

    #6 Scale Up and Down With Demand

    A further big advantage of cloud PBX solutions is how easy it is to add users, features, and any other resources you need. Scaling these up and down depending on demand fluctuations is super simple. 

    That gives you the flexibility to adjust your communication tools without wasting the investments you have already made, and without having to introduce brand new systems. 

    This agility allows you to adapt to changes in your business and the market cost-effectively compared to on-premises systems. 

    #7 Enjoy a Wider Range of Features

    Cloud PBX systems offer a wider range of features than traditional alternatives.

    Some of those features include:

    • Interactive Voice Response (IVR): Use an automated call routing feature to interact with callers, gather information, and send calls down the right path.
    • Call Flow Designer: Customize call flows and routing.
    • Call Recording and Transcriptions: Record calls for quality assurance, training, or compliance purposes, as well as gathering customer behavior insights.
    • Call Transfers: Seamlessly transfer calls between team members or departments.
    • Voicemail: Capture missed calls.
    • Built-In Analytics: Access detailed call analytics and reporting tools.
    • AI-Powered Features: Get AI insights  to analyze call data and offer data-driven recommendations.

    In-Depth Guide to The Best Features of a PBX Phone System in the Cloud

    Let’s delve a little deeper into the best features of Cloud PBX phone systems, which you’ll want to look out for:

    #1 Interactive Voice Response

    IVR automates interactions with callers. It routes calls to the necessary department or offers a self-service option via pre-recorded messages for FAQs.

    Callers will be greeted with a pre-recorded message and then presented with a list of options to choose from. The IVR system can use the caller’s responses to route the call to the right place, give them information, or gather further details.

    IVR, therefore, helps companies improve customer service, as well as simplify call handling processes and reduce workloads through automation.

    #2 Call Flow Designer

    A call flow designer allows companies to design the overall path incoming calls will take within the PBX system. This can include things like menus, call routing processes, and voicemail settings.

    You can use this feature to set up and modify your PBX system based on your specific needs. For example, you can create personalized greetings or incorporate advanced call handling features.

    #3 Call Recording and Transcriptions

    With call recording, you can capture and save conversations for quality assurance, training, or compliance. Transcriptions convert speech into written text, making it easier for you to see and analyze calls.

    Both are useful for tracking customer interactions, checking how your agents are doing, and getting ideas for how to improve communication.

    #4 Call Transfers

    In a PBX system, call transfers are a fundamental feature, but they can be carried out in different ways. These include “blind transfers”, where a call is transferred without speaking to the recipient first. 

    There are also “warm transfers”, where the first agent speaks to the second before the transfer. They tell them who the customer they’re transferring is, and the nature of their issue. That helps the second agent pick up the conversations seamlessly and saves the customer from having to repeat themselves.

    #5 Voicemail

    Voicemail allows callers to record messages when no one is available to answer a call. Voicemail settings can be customized to meet your business needs, through tools like personalized greetings and voicemail-to-email notifications.

    This is a vital feature when it comes to ensuring that no important calls are missed, and that communication is smooth within the organization.

    #6 Built-In Analytics

    Built-in analytics gives you valuable insights into call activity and performance metrics. You can identify things like call volume and duration, call outcomes, and peak call times. 

    This helps you to optimize your communication systems for the best customer service, as well as streamline call handling workflows for greater efficiency, and enhance your overall communication.

    #7 AI-Powered Insights

    The best PBX systems also offer a selection of AI-powered features that can help you glean vital insights into your business and customers. These can include: 

    • Sentiment Analysis: AI can help you to understand your customers’ mood in real time using Sentiment Analysis, picking up on tonal shifts during a call. 
    • Topics Extraction: You can use AI to pick out relevant topics from phone conversations in order to fine tune your sales’ pitch or customer support. 
    • Talk/Listen Ratio: AI can help you track Talk/Listen Ratio, which means you can assess the dynamics of conversations.

    What Else Should You Consider When Choosing PBX Software?

    When you’re trying to decide between different PBX providers, you should also consider the following:

    Guarantee High Call Quality For Your Business

    High call quality is vital for good communication. You want a reliable network to minimize latency, jitter, and dropped calls. A strong network can offer consistent call quality for your company’s communications.

    You should also look at bandwidth requirements for your PBX system, to make sure it supports high-quality calls. Your internet connection should be able to handle the voice traffic without delays or disruptions.

    Get Access to Top-Level Support

    You want to make sure that your provider offers great customer service on top of a great product. Running a business requires access to round-the-clock technical support so that any glitch in communications doesn’t have the chance to impact your business significantly. 

    So ask yourself following:

    • How quickly do their agents take your calls and answer your queries? 
    • Do they offer 24/7 support? 
    • What’s the level of their knowledge?

    With CloudTalk, support is available 24 hours a day. Our average response time is under one minute.

    Protect Your Calls and Data With Industry Standard Security

    End-to-end protection of your customers’ data is vital for any PBX solution. Since call center agents often handle sensitive and private information, they need thorough security systems to protect them from hackers. 

    Look for end-to-end encryption, compliance with data regulations, secure call recording, and 24/7 support. You also want to make sure login processes are secure by including things like multi-factor authentication. Finally, regular software updates and patches are vital for maximum protection.

    Streamline Business Communications With the Right PBX

    The right PBX will be the one that offers the best features for your business needs. Whether you want a system for a small team or a multinational company, you can find a PBX system that suits you. 

    Get in touch.


    How Much Does a PBX System Cost?

    The cost of a PBX system depends on different things, like how big your company is, the features you need, and whether you want to opt for a hosted or on-premises system. Prices can range from a few hundred dollars, all the way to several thousand.

    Why Do Businesses Need a PBX?

    Businesses need a PBX to manage their calls efficiently, and to maintain a professional image. It can also save money by optimizing your call handling processes.

    How Do You Set Up a PBX Phone System?

    1. Pick the right PBX solution for your needs. 
    2. Decide on the number of users, features needed, and call volume. 
    3. Install any necessary hardware and software, choose settings, and connect your phone lines.
    4. Test the system to make sure it works well.
    5. Train your employees on how to use the new system.