With the simplest arrangement of a single landline phone connected to the local phone company, there really isn’t much to manage. You pay so much per month for “dial tone” that makes your phone work and gives you typically unlimited local calling. You have the option to switch to a different provider for long distance service or use a dial-around service for international calling. These are options to save you on the per minute calling rates.
The basic analog or POTS (Plain Old Telephone Service) phone service seems simple because all the complexity is at the other end of the wire. What you don’t see or have to deal with is the intricacies of connecting your line to any of billions worldwide or to even more billions of wireless callers. If you have, say, 3 business locations with 1 phone each, they talk to each other by dialing up the desired location just like any other phone number.
Businesses found out just how complex the PSTN (Public Switched Telephone Network) was when they got big enough to have lots of desk phones and a dozen or more outside lines. What many companies did was to buy their own telephone switching system called a PBX (Private Branch Exchange.) The advantage of having your own PBX system is that calls within the company stay on your own wiring and you don’t have to pay the telephone company to connect them. That includes more complex PBX arrangements with digital tie lines that connect multiple locations in a private network. Once again, the motivation is to keep as many calls as possible off the public network to avoid “toll” charges.
Many companies have rued the day the got into the telephone business. PBX systems are expensive to buy and need constant updates as employees move within the company. There is also maintenance activity for both the PBX and its telephone network wiring.
Hosted PBX is a fairly new service that offers to offload the expense of in-house phone systems. It only became possible when most companies installed Local Area Networks for their computers and the price of private digital lines became affordable. The enabling technology is VoIP or Voice over Internet Protocol. In this case, Internet refers to the technology standard and not necessarily use of the public Internet.
Hosted PBX refers to using a large PBX telephone system that is located or hosted by a third-party service provider. This PBX is big enough to handle the telephone traffic of many different companies to gain an economy of scale. In a way, this is similar to going back to the days where each phone was individually connected to a local telephone company that took care of call switching.
So, where does the cost savings come from? Network consolidation is one area. Both telephones and computers run on a single converged voice and data network. There are no separate telephone wires. This network is extended to the hosted PBX provider using a private digital line called a SIP trunk. You are not tied to a particular service provider. There are many competing hosted PBX solutions and that competition is another way that cost savings can be offered.
The private SIP trunk helps to maintain high voice quality because it provides the characteristics of low latency, jitter, packet loss and congestion, along with quality of service mechanisms that keep data packets from interfering with voice packets. You can also buy Internet based hosted PBX services at lower costs, but the vagaries of the public Internet can introduce distortion and clipping in the conversations.
Do hosted PBX solutions offer a real cost savings for your company? It depends on how many seats you have, what features you want and what your existing system is costing you. If you are close to replacing an aging PBX or one that has run out of capacity, the economics highly favor hosted solutions. To decide for yourself, get competitive pricing on hosted PBX solutions for business. It may come down to whether you want to pay as you go versus investing in your own in-house phone system.