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Phone system: Hosted PBX and virtual PBX systems

Reading time: 3 mins

Hosted PBX systems, also known as virtual PBX, seem to bring many advantages over a “traditional” PBX system, and are attracting more and more business users worldwide. Based on VOIP networks, these solutions seem to be a flexible, powerful and affordable option especially for small businesses with fewer than 10 employees.

But understanding how they operate is a key to understanding their advantages and disadvantages.

How do they work? What are the advantages of these systems? What are their disadvantages?

 Hosted PBX

How hosted PBX work

Contrary to traditional PBX systems, which require on-site, complex installations of expensive hardware and software items, and which will need regular maintenance and time-consuming upgrades, hosted PBX systems, as their name suggests, are completely hosted in the cloud and rely on an internet connection to operate.

Setup your PC or phone or communication device through a control panel in your browser, connect it to the internet, and the device is part of the enterprise telephony system, simple as that. The hosted provider takes care of all the hardware, software, maintenance, updates, training. There are no IT or installation costs.

How virtual PBX work

Virtual PBX systems slightly differ from hosted solutions inasmuch as they are in fact part of them. With these systems, businesses can transfer incoming calls to the right contact, either on a mobile phone, landline or PC, and provide automated answering service. Users have to pay to call each other, or any number outside the company. In other words, they allow people within the company to be reached, but not people to reach others.


These systems are perfect for businesses with fewer than 300 lines. Among other benefits, these businesses will enjoy:

- much cheaper installation and hardware costs as compared with traditional PBX, as... no installation and hardware is required;

- they represent operational expenditure rather than capital expenditure;

- total peace of mind as all the maintenance, updates and installation are done by the provider;

- powerful features such as on-hold music, call routing, transfer, call waiting, auto attendants, ACD queuing, extension dialling and more;

- scalability: as the system is hosted, it doesn’t matter what software and hardware the business uses, they can just order more resources by changing their usage plan with the provider, who will take care of the setup.


Disadvantages of hosted PBX are nonetheless real. First of all, a broadband connection is required. This connection needs to be reliable and really fast as it will handle multiple operations (call communications as well as data transfers from multiples PCs and phones) at the same time. When the internet is down, you will not be able to make calls.

The cabling needs to be of good quality, with at least category 5 cables and a switch. A router which can separate voice and data traffic might also be very useful.

Also bear in mind that monthly recurring charges will increase as a direct proportion of the number of users, so the cost benefits will decrease for large organisations.

Virtual PBX systems are more limited than standard hosted solutions and will suffer from the following added disadvantages:

- System will only handle inbound calls;

- Features like voicemail-to-email, long-distance calls, extension dialling, conference calling may be paid add-ons or not available at all.