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A Private Branch Exchange (PBX) is a business phone system and is made up of three components: The Exchange (the brains of the system), the Gateway (connects users to the outside world) and the end sets (the phones).

Phone systems were developed to manage a company’s phone calling and provide a lower cost option to phone company phone features.  Phone systems can be purchased, so businesses can avoid the ongoing monthly fees that phone companies charge for services like Conferencing and Voicemail.  With a phone system, employees of a business can share phone lines.  Without a phone system, phone lines need to be on a one-to-one, employee to phone line, ratio.  So the use of a phone system can reduce the number of phone lines (and their expense) a company needs to conduct business.

Traditional phone systems are typically set up where the Exchange, the Gateway and End Sets all reside at the same location (similar to a computer local area network).  Some multi location businesses create private-line, voice networks and locate the Exchange at their headquarters.  Branch offices are connected to the headquarters and share access to the Exchange (more like a wide area network).

Traditional phone systems provide services like Call Transfer, Voicemail, Account Codes (to keep track of long distance calling charges) and allow a business to manage calls depending on time of day and day of the week.  Auto attendant is a popular feature because it performs many of the same functions that a receptionist would perform, such as connecting a caller to an individual’s extension or a particular department.

Traditional phone systems can be expensive – $5000 for a very small system; $100,000 to $200,000 for a system that could service a large enterprise.  Typically, traditional phone systems are purchased and treated as a capital expense (for tax purposes).

Hosted phone systems differ from traditional phone systems because the Exchange is owned and maintained by the company providing the equipment.  The end-user buys or rents the phone sets and the cost to access the Exchange is blended in with the cost of their business phone and internet services.  Because a hosted system isn’t purchased, the cost of a hosted phone system is treated as an operational expense.

Hosted phone systems utilize Voice over IP technology.  Voice communication is transmitted over a data network.  Call quality can be maintained because voice traffic is given a priority over data traffic and the provider controls everything – the phone equipment, the phone service and the internet access.  Some hosting companies will allow you to use your own phone and internet services but it can be difficult for them to assure call quality and trouble shoot the system.

Hosted phone systems provide all the features that traditional systems provide and more.  Hosted systems provide web portals that allow administrators to change hunting sequences, turn forwarding on and off and add new users.  Users can send voicemails to their email inboxes, can change their Follow Me (a form of call forwarding) settings and provide location and work status info.

Next week: the pros of each type of system.

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