Definition

cloud PBX (private branch exchange)

What is a cloud PBX (private branch exchange)?

A cloud PBX (private branch exchange) is a business phone system for connecting employees to a telephone network using a managed service running in the cloud. Cloud PBX brings together management, control, integration and connectivity with the public switched telephone network (PSTN) into the cloud. A PBX traditionally required dedicated hardware a business installs somewhere on-site.

Early PBX systems introduced many new features beyond simply routing calls. For example, call hunting could automatically route a call to a shared phone number to the next available person in a group, such as sales or support. Telephone companies introduced similar services on their own equipment called Centrex. Voice over IP (VoIP) technologies, such as Skype, enabled phone systems to route calls over an internet connection and local data networks. This gave rise to a new kind of IP-PBX that could be deployed on premises or in a data center.

Today, most modern phone systems route calls over data networks rather than separate copper wires. It is far cheaper and more effective. This type of on-site telephone system may be called a traditional PBX, legacy system or on-premises PBX. When this is hosted in a data center and provided as a service, it may be called a cloud PBX, unified communications as a service (UCaaS) or a contact center as a service (CCaaS).

UCaaS also supports new communications channels, such as video conferencing, text messaging, screen sharing or collaborative navigation, to walk customers through a demonstration. CCaaS is a specific type of cloud PBX optimized for managing call center operations. Vendors and users may use all three terms interchangeably since most leading PBX vendors have added UCaaS features and vice versa.

The biggest plus about cloud PBX and similar approaches is that they enable enterprises to take advantage of modern workflows. For example, cloud PBX makes it easier to connect phone calls to customer relationship management (CRM) applications, such as Freshdesk, Salesforce, Slack or Zendesk. It also enables enterprises to route calls to employees in the office, at home or on a mobile phone. Mobile phone calls can be routed via a regular telephone call or a dedicated app from the cloud PBX provider.

Cloud PBX services also include numerous integrations with other services, such as recording calls for compliance, coaching sales reps, transcribing calls and voice messages, and connecting with customers through alternative channels, like text messages, when required.

How does cloud PBX work?

The significant innovation behind cloud PBX is that it moves PBX location, management and functionality to the cloud. This takes advantage of the much faster innovation in cloud technology, integration, cost reduction and management.

In a traditional PBX, an enterprise would order a collection of analog telephone lines or Integrated Services Digital Network lines that mimicked multiple analog lines and routed these to a single physical PBX box. Then, technicians needed to lay and manage separate copper wires from the PBX to each desk. Some older systems required technicians to route a thick bundle of wires to each desk to patch calls between phones.

With a cloud PBX, companies can take advantage of the data network already in place. Connecting each employee to an enterprise-wide wireless network may be enough to ease maintenance and rollout of new phone services. However, some companies may decide to invest in running an Ethernet cable to each desk to improve call quality and reduce interference. While it is more effort, it's still far less work than with the old systems since a single wire can support both voice and data. In addition, software takes care of figuring out which employee is sitting at each desk rather than a manual process.

Employees can access the cloud PBX through a dedicated VoIP phone, an application running on their computer, an application running in a browser tab or a mobile app. Each approach has its own benefits and use cases, including the following:

  • A dedicated VoIP phone simulates the traditional telephone experience. It can also take advantage of telephone peripherals, like headsets or high-performance wireless phones, that use digital enhanced cordless telecommunications for better call quality.
  • An application running on the computer may integrate better with other local apps.
  • A browser-based application may support better integration with cloud-based applications and services.

Finally, a mobile phone could access the cloud PBX either through a dedicated mobile app or by routing calls through the phone network. The mobile app can enable employees to control more features or to set presence features, alerting the service when they are available or offline. Connecting through the phone network may be preferable if an employee is accessing the call in an area with poor reception since phone companies prioritize voice quality traffic in spotty areas.

Cloud PBX systems enable managers to add, change or drop employees using a modern cloud interface. No physical installation is required, and they do not have to be familiar with the specifics of wire routing plans necessary to change legacy PBX systems.

Modern employee onboarding tools can also automatically set up and configure new employees in the cloud PBX when an employee joins the company, schedule their availability and terminate access when they leave.

On-premises PBX vs. cloud PBX

Some of the key differences between traditional on-premises PBX and cloud PBX systems are the following:

  • On-prem PBX requires physical hardware, while cloud PBX requires no hardware.
  • Technicians must manually update on-prem equipment, while cloud PBX can be automatically updated.
  • Specialized technicians are required to fix problems, while cloud services can be resolved online.
  • New lines must be physically added on premises, while cloud services can be added on demand.
  • On premises is challenging to extend off-site, while cloud PBX can easily shift to work from home.

Benefits of cloud PBX

Some of the top benefits of cloud PBX systems for both large and small businesses are the following:

  • Reduced pricing takes advantage of cheaper VoIP infrastructure compared to traditional PSTN services.
  • Bundled phone lines and services lead to easier management and cost control.
  • They introduce better integration into third-party apps for CRM and help desk support.
  • There is automated support for call recording, transcription and coaching capabilities.
  • New lines can be brought on in a few minutes.
  • They enable flexible routing to the office or workers at home.

Challenges of cloud PBX

Although cloud PBX systems can simplify many aspects of office communications, they can also introduce several challenges that managers need to consider, including the following:

  • Enterprises need to weigh the pros and cons of phone, computer and mobile implementations.
  • Employees may struggle with poor user experience compared to traditional phones.
  • Wireless interference may require firms to roll out a physical network on premises or at employee homes.
  • IT teams must assess integration capabilities with existing CRM and help desk apps and services.
  • Teams must assess vulnerabilities from unauthorized calls and set up alerts to mitigate fraud.

Cloud PBX providers

There are dozens of cloud PBX providers that range from modern offerings, traditional PBX providers and newer, cloud-only innovators. Here is a representative sample of how different companies have evolved to support cloud PBX capabilities.

Avaya

Avaya is an example of a traditional PBX provider that moved into the cloud. It can trace its history to the original AT&T breakup in 1984, which spun out Lucent and rebranded its hardware division to Avaya. Its cloud PBX offering, Avaya Cloud Office, includes a virtual office app, provides team collaboration features, supports any device from any location and includes popular UCaaS features. It also provides integration with various self-service support capabilities to help customers place an order or resolve issues and automatically route calls to a live person when required.

Dialpad

Dialpad started life as an internet telephony offering in 2001 to help consumers take advantage of cheaper development rates available through VoIP technology. It was later sold to Yahoo and became Yahoo Voice. The founders later developed the predecessor to Google Voice, started UberConference and then bought back Dialpad from Yahoo. The company's current cloud PBX offerings provide an extensive suite of integration capabilities into various CRM and help desk apps. The company also includes AI capabilities for transcription, post-call summaries, live speech coaching, and real-time analytics and reporting.

Mitel

Mitel is another legacy PBX provider that has also moved into the cloud. The company was founded in 1973 by two employees of Bell Northern Research. Today, it offers a suite of on-site, cloud phones and hybrid services depending on business needs. Its MiCloud Flex offering is a fully hosted PBX with UCaaS features. It enables employees to work from home or collaborate using video, visual voicemail and desktop sharing capabilities.

RingCentral

RingCentral was founded in 1999 to modernize the PBX with new VoIP capabilities. Its current cloud PBX offering, RingCentral MVP, combines messaging, video and phone into one consolidated solution. It also supports direct integration with popular CRM apps, like Salesforce, Microsoft Dynamics 365, Zoho CRM, Slack and ServiceNow. It provides services in over 110 countries around the world.

Zoom

Zoom is an example of a company that has evolved from an innovative video conferencing service to a cloud PBX offering. The COVID-19 pandemic boosted the company and drove investment in various new features. Its Zoom Phone offering helps extends its lead in video collaboration to support secure, reliable and clear calls. Zoom One combines phone, chat, whiteboard and video meeting capabilities into a single offering.

This was last updated in November 2022

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