hosted pbx

What Is a Hosted PBX (Private Branch Exchange)?

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PBX is an acronym for “private branch exchange”. It’s basically a way to connect phones in a business to the external public switched telephone network (PSTN) using plain old phone telephone service (POTS) lines. Originally, this was done using dedicated hardware installed within a business’ office, usually in something called the “phone closet”. Since it was located on the business’ site, this was referred to as customer premises equipment, or CPE (there are A LOT of acronyms in telephony).  

A major limitation of these original PBX systems was that all of the business’ phones had to be connected by copper wire to the PBX system. This limitation was removed when PBXs began supporting voice over internet protocol (VoIP) communications. With VoIP, all that was needed to connect a phone was an IP data network. This opened up the possibility of a vendor to “host” PBX functionality outside of the business’ physical location and sell connectivity back to the business as a service. 

A hosted PBX is also referred to as a virtual PBX, as the technology has evolved to no longer require dedicated hardware. Regardless of whether a PBX was located within a business or externally, the functionality remained pretty much the same. The PBX connected the businesses phones to the public telephone network and provided some basic features. 

These basic PBX features included the ability to forward, transfer, and conference calls, account for a business’ open hours, provide extension dialing, and provide for queuing callers and playing hold music until someone is available to answer their call. This addressed the needs for the majority of business users, but fell far short of what’s needed by a call center operation. 

Automated call distributor (ACD) systems were created to fill this gap in functionality needed by the call center. An ACD system provided abilities for advanced queuing, interactive voice response (IVR) capabilities, and more control in how callers were routed to agents. Call center agents could now be assigned to one or more queues that generally mapped to what the caller was calling about, like service requests, billing questions, sales inquiries, etc. Just as call centers are called contact centers today reflecting the fact that businesses handle more than just calls, the ACD acronym is now commonly known to stand for automated “contact” distribution. 

The evolution of both these systems has continued and today both PBX and ACD functionality is available as cloud-based services. In fact, PBX and ACD functionality has begun to merge into hybrid offerings that provide a mix of both.