Hosted PBX is a business phone system that runs in a provider’s data centers instead of in a closet at your office. The provider operates the call control, voicemail, auto attendants and call queues, and your staff connect to it with IP desk phones, computer and mobile apps over the internet or a private network. You pay a monthly fee, usually per user or per line, instead of buying and maintaining PBX hardware at each site. It is also called a cloud PBX or virtual PBX.
At a glance
- The provider owns and runs the phone system; you manage extensions, call flows and users through a web portal.
- Phones and apps connect to the provider over your network, so internet quality and backup at each site matter.
- It is usually priced per user or per line per month, with devices, numbers and calling plans sometimes billed separately.
- It covers the phone system only; plans that add video meetings and team chat are usually sold as UCaaS.
- Emergency calling, analog devices (fax, alarms, door phones) and number porting need planning before cutover.
What problem it solves
A PBX (private branch exchange) is the system that gives a business its extensions, transfers, voicemail and main-number menu. Traditionally it was a box on site, connected to the phone company with analog or PRI lines. Each office needed its own hardware, a maintenance contract and a technician for changes, and the system had to be replaced every several years.
Hosted PBX moves that system into the provider’s cloud. There is no PBX to buy, patch or replace, and offices share one system, so on most services a caller can be transferred from one site to another much like to the next desk. Staff can take their extension home on a softphone or mobile app. Changes that used to need a service call, such as adding a user or changing the after-hours greeting, are done in a web portal.
How it works
The provider runs the phone system software in its data centers, usually with redundancy across more than one location. Each user has an extension and, usually, a direct number (DID). Devices register with the provider over the internet or a private connection using SIP, the signaling protocol most IP phone systems use.
Typical features include:
- Auto attendants and IVR menus that answer the main number and route callers.
- Ring groups and call queues for teams such as reception, sales or support.
- Voicemail, including voicemail-to-email, and call forwarding to mobiles.
- Call recording, reporting and integrations, which are often tier-dependent or add-ons.
- Multi-site dialing so every office is on one extension plan.
The provider connects your calls to the public telephone network through its own carrier arrangements, so you usually don’t buy SIP trunks separately. Your existing numbers are ported to the provider.
Devices that still expect a traditional phone line, such as fax machines, paging systems, door entry and some alarm panels, can often be connected with an analog telephone adapter (ATA), but compatibility varies by device and provider.
Emergency calling. The system has to send the right location with each 911 call, including for people working from home. Our E911 entry covers how this works; requirements differ by country and, in the US, by state.
When it matters for buyers
- When an on-site PBX reaches end of support or the maintenance renewal is expensive.
- When the phone company is retiring PRI or copper lines that the old system depends on.
- When opening or consolidating offices, since a new site needs a network and phones rather than its own system.
- When staff work remotely and need their business number on a laptop or mobile.
- When deciding between hosted PBX and full UCaaS. If your company already has meetings and chat (for example through Microsoft 365 or Google Workspace), a phone-focused plan may be all you need; if not, a UCaaS plan may replace several tools at once.
Questions to ask vendors
- What is included in the per-user price, and what costs extra (call recording, queues, reporting, integrations, toll-free minutes, international calling)?
- Which desk phones and analog devices do you support, and can we reuse any of ours?
- How is your service made redundant, and what is the uptime SLA and credit if you miss it?
- What happens to calls when our site loses internet, and how do we set failover rules?
- How do you handle 911 for in-office and remote users, and what must we configure?
- Who manages number porting, and how long does it usually take for our number types?
- What are the term, renewal and price-increase terms, and can we reduce users mid-term?
- If we leave, can we take our numbers, recordings and configuration with us?
How it differs from UCaaS
Unified Communications as a Service (UCaaS) includes the hosted phone system and adds video meetings, team messaging and presence in the same app. Hosted PBX is the phone system on its own. The two are often sold by the same provider from the same platform as different plans, so the deciding question is whether you need meetings and chat from the same vendor.
How it differs from an on-premises PBX with SIP trunks
Some companies keep their own PBX, on site or in their own data center, and replace phone company lines with SIP trunking. That keeps the system under your control and maintenance, while the carrier only provides the connection to the phone network. With hosted PBX, the provider runs both the system and the connection.
For buying guidance, see our hosted PBX solution page.
Problems this helps with
- An old phone system nobody can support anymore
- Paying for maintenance on PBX hardware at every office
- Calls that can't follow staff to home or mobile
- Adding or moving extensions takes a vendor visit
