What is a PBX System and How Does It Work?

A PBX is one of those things that a lot of businesses are using without realizing that that’s what they’re using. When a business has at least a couple of employees, it has always been kind of a staple for offices in the past.

It’s still widely used because it’s such an effective system, but there are now other options, including a PBX that is completely virtual. Let’s look at exactly what this system is, and how you can optimize it for your business.

The Private Branch Exchange

In basic terms, a private branch exchange (PBX) is the underlying infrastructure of a phone system that makes it possible to have multiple lines in an office or other setting, which lines are localized to that specific setting.

Anyone who has worked in an office in the last 40 years or so has probably used a PBX. They have been the preferred system for businesses for a long time (until today, when there are so many options for phone systems) because what the PBX does is turn one or a few lines from the local phone company into a lot more lines for the office to use.

This is way more cost-effective than buying a separate line for every person or desk, from the phone company. You know how you can put somebody on hold, answer another call, put them on hold, too, then open another line and call out separately? That’s because you have a PBX.

This technology was only facilitated through the use of a traditional wired line originally, but since then, new technologies have emerged to give businesses different options for creating a PBX.

Soon after access to the Internet became available, VoIP technology started to be implemented for business phone systems because it was more versatile and generally cheaper than getting the landline service from the phone company. Then, cloud-hosted PBX systems were created by new providers who made it even cheaper and more useful. We’ll get into that a little later.

The Finer Points of a PBX

A PBX essentially gives an office its own switchboard, in a manner of speaking. As we pointed out before, even one incoming line from the phone company, or one line from your Internet connection that is hosted by a VoIP service provider, turns into multiple lines that can be utilized by all the phones in your office.

The greatest advantage of the system is that you can handle multiple, simultaneous incoming calls so that callers don’t get a busy signal and always get through.

Unfortunately, there are still a finite number of lines in a regular PBX, so if you experience a period of high volume and use up all available lines, then people will get a busy signal. This is where a virtual PBX is superior in that regard, and we’ll explain how that works shortly.

Shortcomings of a Traditional PBX

Again, the number of lines in a traditional PBX are not limitless; so, it is fairly common with this type of system to produce a busy signal when your lines are flooded. Another problem you can run into is the issue of mobility.

The traditional office PBX is confined to the premises, and employees can only use it when they are in that location. The service provider can add forwarding features to allow you to take calls when you leave the premises, but those features will be somewhat limited, as well as fairly pricey.

The Virtual PBX System

We love virtual phone systems around here because we are one, and this type of PBX is one of the greatest advances in telephony that has been developed in a long time. Virtual providers have only started popping up in the last decade, as the possibilities for using the Internet to run all kinds of services and systems have massively increased, as well as the speed and bandwidth capability.

Not to mention that Internet service has become cheaper and more easily accessible. To understand how a virtual PBX works, just think of a traditional office PBX without all the hardware and physical lines.

A virtual, or cloud-hosted PBX is far cheaper than its predecessors, you can use it with all types of phones, and the number of lines you can make available is almost limitless. Your customers will never get a busy signal. If you decide to start searching for a cloud-based PBX system for your business, you will find that there are a ton of providers out there.

Even so, there are actually few providers that can execute it on the level of reliability offered by traditional providers. They do exist, however, and you can start with a free trial of a Talkroute system to see how it should work. You can use Talkroute with the existing phones you already have, and there is no new equipment that you will need to buy for it to work.

Is a Virtual PBX Better?

A virtual PBX is absolutely better. Firstly, you can enjoy all the features of an old-school PBX, while adding a whole bunch of additional features that you wouldn’t get with the old systems. Things that you get with the old systems, such as on-hold music, business voicemail, and an auto attendant, are all available with a virtual provider like Talkroute.

Now, in addition to those classic features which are necessary for a small business, you also get an online control panel to adjust your phone system settings at any time (no longer at the mercy of a phone carrier’s customer support line), customizable hours of operation, various call forwarding and routing options, call reporting and analytics, and much more.

Most importantly, you can manage calls and run your business from anywhere, using any phone, cell, landline, or other phone, as well as send and receive text messages through your business phone number using the mobile app or from your computer. There are quite a bit more call management features with a virtual phone system, which you can learn more about by starting a free trial with Talkroute.

Hopefully, this article has given you a more detailed idea of how a PBX works. Though it is widely unknown to most people, the private branch exchange is a central component of business phone systems, and more than that, it pretty much instrumentally makes it possible to manage daily calls in an organized fashion. You want this technology running your phones, and even though the traditional type is tried and true, you probably also want the virtual type to run your phones.


Stephanie is the Marketing Director at Talkroute and has been featured in Forbes, Inc, and Entrepreneur as a leading authority on business and telecommunications.

Stephanie is also the chief editor and contributing author for the Talkroute blog helping more than 100k entrepreneurs to start, run, and grow their businesses.

StephanieWhat is a PBX System and How Does It Work?