The Advantages of Using a Hosted PBX

A PBX (Private Branch Exchange) refers to telephony system where a local switch is installed at business premises and calls are routed to desired extension using this system.

Few other features like call holding, conferencing, automatic and customized announcement, free intra-office calling used to get supported with legacy PBX system. However, legacy PBX system was costly to set up, operate and used to take substantial office space.

Hosted PBX
Hosted PBX (Photo credit: Wikipedia)

Also any upgrade to any system was difficult and in many cases entire system had to be replaced. In order to overcome difficulty associated with legacy PBX system, Hosted PBX was introduced.

What is a Hosted PBX?

In a Hosted PBX system, all intelligent functionality is managed by the System and maintained by the service provider. Only telephone line extension (in case of Public Switched Telephone Network) or Internet extension (in case of VoIP) is required till user end.

Normally the hosting service is provided by telephone operators managing large switch locations. The most primitive form of Hosted PBX was the Centrex Service.

In a Centrex service, a user was not required to have a local PBX,  and with most PBX facilities like free internal calling, short number, call forwarding within a group, conferencing, Sequential call hunting for finding free line, etc used to get supported.

The Hosted PBX is another big example of cloud based service where small and medium business (SMB) are able to have all facilities availed by large organizations at a fraction of cost.

What are the Advantages of Hosted PBX?

There are several advantages of having Hosted PBX compared to traditional telephone system enumerated below:

  • Zero Initial Set up Cost – compared to traditional system wherein a local PBX system was needed to be installed
  • Ongoing Operational Cost Saving –  Since no PBX system is installed at customer premises, resources required like  a human resource for operation, space and power, etc are not needed in a Hosted PBX environment. 
  • Easy to Upgrade – The additional capacity to a traditional PBX system was complex and costly. In the  case of a Hosted PBX, additional lines don’t  require any investment. 
  • Increased Reputation of Organization – Even a very small organization opting for a Hosted PBX service is able to provide high quality professional voice response to customer which in turn enhances credibility. 
  • Geographical Flexibility – A Hosted PBX offers virtual voice service with customer office phone system even from home, through mobile or from overseas locations. 
  • Local Presence – Hosted PBX system allows offering local number in cities even if the business does not have any presence. Customer calling for any inquiry feels that he is dialing a local number. This enables business to establish virtual business across globe without any need of setting up a local office. 
  • Quick Installation – A  Hosted PBX system can be installed and made operational much faster  compared to legacy PBX. 
  • Easy to Use – In the case of a VoIP based hosted exchange, interactive web interface allows simple use of service.

Drawback Of Using a Hosted PBX

In a Hosted PBX, all services are offered from the central office location of a service provider and in turn making the entire system dependent on him. In the  case of any type of  failure, the  entire system may go down and hamper critical business communications.


Looking at the advantages associated with a  Hosted PBX system, large number of businesses are  adopting to using a  hosted PBX system.

Major demand is witnessed from SMB segment in which companies are competing with each other to provide cost efficient world class service to customers. Looking at the trend of a Hosted PBX deployment, it seems that in the coming future only the  very large scale organizations will set up dedicated PBX and everyone else will opt for the Hosted PBX.