How do business phone systems work? PBX, On-site VoIP & Hosted VoIP

Business phones are a vital component of any office setup, ensuring efficiency, productivity, and enabling seamless communication between employees and customers. With a number of different phone systems on the market and the confusing technical terminology used by most providers, how do you know which one is right for your business? In this article, we’ll take a closer look at the main types of business phone systems, the technology and infrastructure of these essential devices, and discuss which business phone system would be right for your business.

How do business phone systems work?

Legacy PBX Phone System

Legacy PBX (Private Branch Exchange) systems refer to one of the earliest and most basic phone systems that are now considered outdated compared to the latest business phone technology available on the market today.

The main function of a PBX phone system is for businesses to be able to connect both internally and externally, which works by routing and switching callers to multiple extensions or handsets in the office. These legacy systems require installation of hardware on the premises of a business which are connected to the public switched telephone network (PSTN) through traditional copper wires.

Legacy PBX phone systems are typically designed for analogue telephone lines and deliver phone calls using ISDN (Integrated Services Digital Network). Although some businesses still use these legacy PBX systems, users will soon need to upgrade their phone systems after Openreach announced that the PSTN and ISDN services will be ‘switched off’ all together in December 2025.

The functions of this phone system include multiple voicemails, call groups, and call forwarding which tends to be the primary function of the phone. Technology has since evolved, and the functions of a legacy PBX phone system are very limited compared to other business phone options such as on-site VoIP systems and cloud-based phone systems.  These modern systems offer greater flexibility, scalability, and cost-effectiveness, as well as easier installation and maintenance.

Benefits: Cheap, robust, improves productivity, simple.

Disadvantages: Not scalable, limited technology, outdated- will be switched off in 2025.

On-Site VoIP Systems

An on-site VoIP system is a telephone system that offers similar functionalities to the legacy PBX but instead of being run on the PSTN, it utilises an IP (Internet Protocol) Network. For this reason, you won’t get caught out by the PSTN/ISDN Switch-Off as you can continue making and receiving calls over the internet whilst maintaining analogue phones on-premises, assuming your phones are compatible, or you have the right adaptors. 

Other benefits include significant cost-savings, greater flexibility, and scalability for businesses of all sizes.

Benefits:  Increased accessibility, higher quality calls, flexibility, and scalability.

Disadvantages: Requires good internet connection, latency, and jitter, requires technical expertise in-house.

Cloud-Based Phone Systems (or Hosted VoIP)

Cloud-based phone systems (or ‘hosted VoIP phone systems’) are a type of Unified Communications as a Service (UCaaS) that enable you to make and receive calls over an internet connection. Unlike traditional phone systems that require hardware and physical infrastructure to operate, cloud-based phone systems are hosted and managed by a third-party provider off-site in a data centre. This type of phone system is hosted in the cloud, which means your data is securely stored on a server that can be accessed via the internet. Many providers also offer failover; so in the unlikely event of a technical outage, your setup is replicated on another server, so your service can continue with little interruption.

Cloud-based phone systems allow users to join calls from multiple devices, such as a desktop computer or a smartphone, offering all the features of a traditional analogue phone, and additional functionality at the same time. The additional features that are provided with a cloud-based phone system (or that you can purchase alongside it) are hugely beneficial. These include call recording, call reporting, video calling, and on-hold marketing. Cloud-based phone systems can also be integrated with other business applications, such as customer relationship management (CRM) software, to provide a seamless communication experience.

Benefits:  Highest level of accessibility, scalable, flexible, cost-effective, additional benefits on offer/CRM integration, minimal maintenance cost.

Disadvantages: Possible latency, needs stable internet.

What’s best for your business?

Deciding on which phone is best for your business will always depend on a lot of individual factors and requirements. However, with the PSTN/ISDN Switch-Off looming, it’s a good idea to get ahead and future-proof your business by switching to an on-site VoIP system or a cloud-based phone system.

Although upgrading to an on-site VoIP or a cloud-based phone system may seem daunting, it’s not as complicated as you might assume. 4Com will help you to set business objectives, plan the migration process, arrange number porting to your new system, ensure you have a suitable internet connection and the right hardware. 4Com manage the entire process, guiding you through it as they go.

Find out about the multiple business phone systems that 4Com offer, and which phone system would be best suited for your business here:

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