Written by Aimee Bradshaw Reviewed by James Macey Updated on 20 April 2023 On this page What are the benefits of a PBX system? What are the downsides of a PBX system? What is an IP PBX telephone system? What are the different IP PBX options What are the benefits of IP PBX? What are the downsides of investing in an IP PBX system? How will IP PBX help your business? How much does a PBX system cost? PBX vs IP PBX – which one should you choose? What's next? Expand Our site is reader-supported – by clicking our links, we can match you with a potential supplier, and we may earn a small commission for this referral. PBX stands for Private Branch Exchange and a PBX telephone system is made up of a PBX unit and additional phone system hardware.When someone phones, the PBX diverts the call to the required office extension number. And because everyone has their own office extension number, employees can also communicate internally by calling each others’ handsets.PBX is an analogue phone system which is typically cheaper to run, however, the basic capabilities of the hardware combined with the lack of software integration limits how businesses can communicate. That’s why many businesses are turning their heads towards VoIP (Voice over Internet Protocol). Read our guide to the best business VoIP providers if you're interested.But if VoIP isn’t on the cards for you just yet, sticking with a traditional PBX telephone system offers you the following three benefits: What are the benefits of a PBX system?1. With a traditional PBX system, all equipment is onsite. This makes it super-easy to maintain – and if the phone system goes down, it’s usually easy to figure out what’s wrong.2. When do you hear about the landline cutting out? Well, you don’t really. This means a PBX telephone system provides your business with a reliable means of communication.3. A PBX telephone system also gives you full control of your phone lines. You can easily hook up new handsets and take old ones away, while there are no external factors outside of the standard rates (which may have an influence on costings). What are the downsides of a PBX system?Expensive investment as you'll need to purchase hardware and software licensingYou'll need internal management and expertise which can become expensiveAny maintenance costs will be your responsibilityThe biggest downside of a PBX systems seem to be the cost as maintenance, in-house expertise and set-up will all cost a pretty penny. If you're not willing to invest so much a PBX system may not be right for your business, especially when compared to the more modern and simpler alternative: VoIP. What is an IP PBX telephone system?An IP PBX telephone system is a phone system supercharged by internet connectivity.The ability to make high quality phone calls over the internet is just one side of the story – in actual fact, the phone system offers up a whole host of features that will greatly improve the way your business handles its customers and partners, as well as your data.Connected to the internet, the system has the ability to channel interactions from all communication networks. Whether you’ve been interacting with stakeholders via an instant messaging service, email or phone, all communication data ends up in one place. What are the different IP PBX options?An IP PBX telephone system can be hosted by a provider’s server (Cloud-based), or it can be hosted by your on-site server (on premises). However, each system works differently.Hosted PBXA hosted or Cloud-based IP PBX telephone system can only make or receive calls via the internet, making a solid internet connection essential. When you make a phone call, it’s sent via the internet to your supplier’s server.It’s then either fed through to the VoIP system at the other end, or converted back to an analogue via an SIP trunk.Self-hosted PBXYou can set up a self-hosted IP PBX system in such a way that you can make and receive phone calls via the internet, or through the local telephone network. This means you always have back up should the internet (or landline) go down.Instead of sending your call across the internet to a supplier’s server, the call is sent to your own server room, where it either continues on its way as a VoIP call or is converted to an analogue call via the SIP trunks attached to your own PBX unit.Here are some of the main differences between hosted and self-hosted IP PBX telephone systems:Hosted IP PBXOn-premises IP PBXData hosted by a providerData hosted on on-site serverMonthly hosting feeOne off paymentInternet phone calls onlyInternet and landline phone callsVery low maintenancePotentially high maintenanceHard to expandEasy to add additional handsetsUpgrades handled by providerTechnician required to handle upgrades ▶ Read more: 10 Best Office Phones: Make the Right Call What are the benefits of investing in an IP PBX system?Discover the main benefits of an IP PBX telephone system below: IP PBX benefits explained1. Gone are the days where you have to fork out an arm and leg to call your clients overseas. Thanks to the internet, the cost of calling stakeholders and clients abroad is far less with an IP PBX phone system. And, providing you both have a good internet service, your phone call will be clear as a bell, too.2. Mobile integration is one of the biggest benefits of investing in an IP PBX phone system. Because phone numbers are hosted on the web, you can log into your account and use the same number across all of your devices. So whether you’re using your desk phone or your mobile phone in the field, clients and stakeholders will always receive calls from the same number.3. A consistent telephone number isn’t the only benefit of investing in a Cloud-based phone system. Because all of your communication data is stored on the Cloud, you can access your data from anywhere – whether you’re working from home or checking up on missed phone calls from the top of a mountain. What are the downsides of investing in an IP PBX system?Here are a few cons to investing in an IP PBX system to help you understand which system is best suited to your business:IB PBX can be fairly complex to both set up and maintain – if your system is premise-based and you run into an issue, you'll have to deal with it by liaising between your PBX provider and phone company.You'll need some in-house expertise to manage and maintain the system – if your system is premise-based you may face “single points of failure” which means one failure shuts down the entire system. This is only one of the reasons you'll need some in-house expertise if your choose this route.It lacks features that can be found on traditional PBX systems like call queuing or automatic call distribution. Typically you'll be receiving less features but paying a higher price. Did You Know? The IP PBX industry is expected to grow 20% by 2027. How will an IP PBX telephone system help your business?Are you tired of internally redirecting phone calls to the right team member? Luckily, IP PBX software enables you to make the customer journey and your business processes more efficient by offering the following setup options:Virtual receptionist – a system that sends callers to the right department by asking questions and understanding verbal responsesExtension setup – provide each employee with an extension so callers go straight through to the right personCall forwarding – automatically knock the call on to the next appropriate phoneline if the intended employee is away from their deskCall waiting – signals there’s another call in the queue if you’re already on the phoneAnd that’s not all. Thanks to telephone management features, you’ll also be able to find and keep track of the following on a department and company-wide basis: Incoming and outgoing call patternsCaller IDExtension numbers usedWhich lines calls are being made fromIP PBX software capabilitiesIP PBX software is a clever bit of kit. On its own, it’ll offer your business the following services:Video chatsConference callingVoicemail transcribingThe option to work remotelyIntelligent call forwardingBut what happens if you add customer relationship management (CRM) software into the equation? With the integration of this handy business software, you can log customer interactions from all of these channels: WebsiteEmailSocial mediaInstant messagingPhone callsThe software platform will become a hub where you can easily track where your customers and business contacts are within your various funnels. This will help to ensure that you never miss out on a sales opportunity, or the chance to nurture a business relationship that could benefit you in the future. How much does a PBX system cost?There are a number of factors that suppliers consider when calculating the cost of analogue and digital PBX phone systems. The biggest cost will be the initial installation of the system – and if you’re looking to host a digital system in-house, you’ll need to consider the cost of the server, too.From then on, IP PBX telephone systems should have a low monthly cost. Suppliers usually calculate the monthly cost of a hosted IP PBX system on the number of users and software features required.The best way to find out the cost of a PBX telephone system is to receive quotes tailored to your business’s specific requirements. You can do that simply and quickly just by selecting your answer below and filling in the form. Save by comparing telephone systems quotes from leading suppliers Do you already have a business telephone system? Yes No Just answer a few questions – it only takes a minute PBX vs IP PBX – which one should you choose?A PBX telephone system on its own is very basic. At the least, it lets you call other landlines across the country at a cheap rate, and leave a voicemail if the intended person doesn’t pick up. At the most, it allows you to call up your business contact in Australia, but leaves you with a hefty hole in your wallet (we’ve all been stung calling abroad).That’s not to say that a PBX telephone system isn’t the right option for your business. Certainly for small startup businesses, there may not be a need to invest in a IP PBX telephone system straight away. Instead, you can combine an analogue PBX system with a service like Skype for Business, which you can use for overseas phone calls and meeting scheduling.For small to medium businesses and above, an IP PBX system will prove invaluable when it comes to running your business more efficiently. With your phone system software helping you to manage your communications and communication data, you have more time to focus on pleasing clients and stakeholders. This is only going to help you grow your business that much quicker. What's next?If you're thinking of investing in a PBX system for your company, the best way to get an idea of costs is to receive quotes from top telephone system suppliers. Luckily, all you need to do is fill out our short form and the suppliers that best match your requirements will be in touch! Written by: Aimee Bradshaw Writer and researcher Aimee is Expert Market’s resident telephone systems and point of sale go-to. If she’s not writing about business products, you’ll find her daydreaming about dog walking on Dorset beaches. Reviewed by: James Macey Senior Business Software Researcher James thinks all businesses can improve if they use the right technology. At Expert Market, he utilises his 4+ years experience as a researcher to offer specialised advice on a wide range of categories from CRM to Fleet Management.