Understanding Business Phone Systems

Trying to choose a new telephone system for your business? This overview will help you understand the jargon and types of phone systems you’ll likely encounter as you shop.

How do you choose the right phone system and service for your business?

If you search the Internet for answers, you’ll find there’s a confusing array of choices, and a lot of outdated information. There is no comprehensive directory of providers. There are a few comparison charts, each with affiliate links to a handful of services. There’s also a lot of jargon. Before you go searching, it’s helpful to know the basics.

Traditional telephone service is circuit-switched, meaning there is a dedicated line (circuit) for each call, with a high level of quality we have come to expect. Internet based telephone service, or VoIP (Voice over Internet Protocol,) is packet-switched, sending little packets of information over a broadband Internet connection to be reassembled at the other end. Sometimes packets are lost or delayed. The quality of your calls will be affected not only by the VoIP service itself, but also the quality of your own router, modem and Internet provider.

A circuit-switched business telephone system might be a simple key system (phones with buttons or “keys” that you push to choose a line for your call,) a PBX, or Centrex (a service provided by the local telephone company to simulate a PBX.) Before the introduction of hybrid systems and VoIP, a small business would have a key system, a medium sized business would have Centrex, and a large business would have a PBX.

A PBX (Private Branch Exchange) is a telephone exchange, essentially an automated switchboard, that makes connections between the internal phones of an organization, and also connects it to the outside world via the PSTN, or public switched telephone network. With Centrex, all that switching happens at the phone company’s central office. A Hybrid keyphone system may combine a keyphone with some PBX features such as direct dialing an extension in the company without going though the public network.

A premise-based PBX is hardware that is installed and maintained on the user company’s premises. A PBX offers many advanced calling features, but it is an expensive piece of equipment, and installation and maintenance usually requires technicians specifically trained on that particular system. IP PBX uses software instead of hardware and delivers voice and video with VoIP. A self-hosted system is on the user company’s premises.

A hosted or virtual PBX is likely the best choice for a small business that needs the advanced features of a PBX without the expense. The PBX is installed and maintained on the premises of another company that offers PBX services to many clients using VoIP. Features that were once available only with an expensive PBX system are made affordable for small businesses. Multiple extensions, auto-attendant, voicemail, voicemail by email, conference calls, low cost international calls and internet fax are just some of the many features available.

For more information:

HowStuffWorks has a full explanation of circuit and packet switching.
Advantages of VoIP and Disadvantages of VoIP are discussed on How Stuff Works.