Hosted PBX Phone Systems

Hosted PBX Phone Systems

Buyer's Guide

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Introduction Basics Benefits Drawbacks Features Weighing Options Choosing a Provider Pricing

Hosted PBX Introduction

When shopping for business phone service solutions, don't overlook the potential of hosted PBX services as a reasonable phone system alternative. For small, fast-growing, and/or highly-distributed businesses, hosted PBX services can in fact be the most cost-effective way to get a full suite of modern phone system features.

With a hosted PBX service there is no need for the bulky customer premise equipment (on-site telephone hardware) traditionally associated with PBX systems. Instead, incoming calls are routed first to a provider's data center then are swiftly sorted and forwarded to the appropriate extension at your office.

Hosted PBX services can go by many names: application service provider (ASP), software as a service (SaaS), virtual PBX, or cloud communications. Whatever the name, though, the idea remains the same: software and the hardware are hosted at your provider's data center and calls are routed to direct extensions using voice over the Internet protocol (VoIP) technology.

This BuyerZone Hosted PBX Buyer's Guide will help you understand the pros and cons of a hosted PBX, what features you should expect, how to compare different offerings and providers, and what you can expect to pay.

Once you know all the facts, we can connect you to hosted PBX providers who will compete for your business.

Learn About Hosted Phone Services

Traditional hardware-based PBX phone systems were once the only real choice for full-featured business phone service. Now, there are several configurations to choose from, including hosted phone services:

  • Traditional PBX systems use dedicated telephone hardware located at your business to provide business phone features and call routing

  • A software PBX works like a standard premise-based PBX, except it runs on a computer server, instead of dedicated telephone hardware

  • A VoIP PBX is a premise-based system that uses VoIP (Voice over Internet Protocol) to connect all the phones in your office, but still needs specific telephone hardware to connect to the external telephone network

  • Hosted PBX services process calls and provide business phone features via central data centers, and deliver calls to your offices using VoIP
How it works

The primary difference between a traditional phone system and a hosted phone service is the location where calls are processed. With hosted service the bulk of the call handling is done at a vendor's data center instead of a telephone closet in your office.

When a caller dials your number, it first rings through to the data center. There, an auto-attendant answers the incoming call with a custom message you record. Callers can leave messages, dial direct extensions, choose from a name directory, or select from a menu of options and recorded messages. Calls only reach your office when a direct extension is dialed.

When calls are routed to your office they are sent to their destination using VoIP technology. VoIP allows calls to be delivered over a broadband Internet connection instead of a traditional analog telephone lines.


There are few special requirements for setting up a hosted phone service. You'll need a reliable broadband Internet connection, as well as phones that are IP capable. In most cases, you'll be able to keep your existing phone numbers and extensions.

Benefits of Hosted PBX Services

Hosted PBX service can be a compelling option in many circumstances. In particular, hosted PBX offers huge advantages for companies with offices in multiple locations:

  • All employees can access the full features of the phone system from any location: satellite offices and home workers with broadband connections are just as connected as the main office

  • Hosted PBX services slash support costs, as there are few differences in setup and administration for any user, no matter what their physical location

  • Costs for interoffice calls decrease dramatically, as VoIP enables no-cost or low-cost calling between extensions

A related benefit is improved support for traveling employees. Salespeople who are on the go have the option of using their laptop and a headset as a "soft phone:" by connecting to a hotel network, they place and receive calls exactly as if they were in the office. Many hosted PBX systems also offer support for cell phones, creating yet another option for employees on the go.

The improved ease of management offered by hosted PBX is an important benefit for many companies. Instead of requiring costly technician visits for every MAC (Move, Add, Change), hosted systems can be easily configured on the fly: web-based control panels let you manage call options, voicemail settings, the auto-attendant, and much more, helping you save money and time as you adjust to changing situations.

Hosted PBX systems offer outstanding reliability, typically in the "five nines:" 99.999% availability. This is due to the carrier-class equipment they operate and heavily redundant systems, including backup power systems and multiple servers.

Financial savings

Many companies find that hosted PBX systems offer a lower total cost of ownership than traditional phone systems. The most obvious reason is that a hosted service doesn't require an initial investment of tens of thousands of dollars for phone equipment - but there are other contributing factors as well.

You're also reducing the risk of getting stuck with obsolete phone system equipment. Instead of having to update your phone hardware every few years to take advantage of new technologies, you'll be passing that responsibility on to the service provider.

There are also cost savings around administering remote workers, as mentioned above, and the reduction in local and long-distance phone charges. While the single monthly bill from a hosted PBX provider may be more than you're used to paying for traditional phone service, comparing a hosted PBX service bill to a combined phone system and phone service bill will usually result in a net savings.

Drawbacks of Hosted Phone Systems

While the benefits of hosted PBX services are substantial, they have some drawbacks, as well. Here are some considerations you should look into before deciding if hosted phone systems are right for you.

Internet connection

One potentially significant problem with hosted phone systems is that they are completely dependent on your data connection. If your Internet service goes down for any reason, you'll also lose your ability to make phone calls.

This is true for all types of VoIP services. The advantage of a hosted PBX service, however, is that, unlike a site-based IP PBX, it will still be able to answer calls even if your connection is down. The initial greeting, menus, and voicemail will continue to function normally because they are run off-site at your provider's data center.

A hosted PBX phone system also lets you react quickly when problems do occur. If your connection is going to be down for a significant length of time, you can reconfigure the system to send calls to other locations that are still online, such as cell phones, home offices, or satellite offices.


Just being online isn't enough to guarantee good results from hosted phone systems: the quality and speed of your Internet service is another important factor. In some circumstances any broadband Internet connection will suffice, but some providers could require a T1 connection which is more reliable than cable or DSL.

Larger companies may consider using a private circuit (MPLS T1) to connect directly to the hosted PBX provider. These connections provide optimal call performance, but are often too pricey for smaller businesses.

You can test the speed of your existing Internet connection using this free online tool. While it's not a guarantee, it will give you sense of how well your connection will support VoIP. The providers you speak with should be able to evaluate your current bandwidth situation and your calling volumes to determine if you need to upgrade your connection.

Robust call center features

Most hosted PBX services are not appropriate for large call centers. Advanced calling features like automatic call distribution and detailed reporting are essential for call center applications and commonly available from hosted PBX services. However, they generally aren't as robust as they would be in a dedicated call center solution: while adequate for 5 to 10 agents, they may not have the capacity to handle larger call centers.

Advanced calling features like automatic call distribution and detailed reporting are essential for call center applications and commonly available from hosted PBX services. However, they may not be as robust as they would be in a dedicated call center solution. Before choosing a hosted PBX provider for your call center carefully consider you needs and available options. Read our Call Center Software Buyer's Guide for more.

Hosted IP PBX Features

Many business phone features come standard with any hosted IP PBX. You can expect all of these features and more:

  • Call waiting
  • Call forwarding
  • Call transfers
  • Caller ID
  • Redial
  • User directories
  • Activity reporting
  • Three-way calling
  • Hunt groups
  • Voice mail
  • Extension dialing
  • Call accept/reject
  • Follow-me ringing
  • Music/messages on hold

Beyond these standards, there are many other features commonly included in hosted PBX services. Some providers include them in a standard package, while others may charge additional monthly fees:

  • Auto-attendants that greet incoming calls and help route callers to their destination.

  • Simultaneous ringing, sometimes called "call blast," is a popular feature that rings multiple phones at the same time: an employee's desk and cell phone, for example. This contrasts with follow-me ringing, which tries several numbers one after another.

  • Real time reporting is typically a call center-style feature that lets managers check on call queues and activity as it happens. Not all hosted PBX providers offer this feature- you may have to turn to call center solution providers instead.

  • Outlook integration allows users to dial directly from their address books or change basic phone settings without logging in to the control panel.

  • Unified messaging brings e-mail, voice, and fax communications into the same system: voice mail messages and faxes can be delivered to users' e-mail inboxes; e-mails can be sent to cell phones.

  • Conference calling features are often included, but may be limited to small groups unless you pay an additional fee

  • Automatic call distribution (ACD) is another call center feature. Where hunt groups simply go through a static list of extensions to find one that's not busy, ACD factors in the volume of calls your agents have handled and how long they've been off the phone to more evenly distribute the workload.

  • Browser-based administration lets users change their own availability and number preferences, as well as simplifying MACs, hunt groups, or ACD management, and other administration work.

If support for mobile users is important to you, make sure to ask about features like transferring calls from cell phones back to other extensions, including cell phones in hunt groups and call queues, and using laptops as soft phones.


If you need to buy new phones, make sure you get a demo so you can compare the layout and interface on each set. For many employees who do little more than check their voicemail and occasionally forward a call, complicated phones can be overkill. Instead, keep an eye on a few key phone features when choosing a hosted IP PBX service:

  • Phones with LCD screens allow you to better take advantage of features like caller ID and can make setup and operation easier.

  • Check basic features like speakerphone, mute button, and speed dials. Make sure to test each feature with callers on the other end for 2-way features, to make sure the design works for you.

  • You may not have to buy new phones at all: depending on the provider you choose, you may have the option to buy adapters that allow you to continue to use existing analog phones.

  • If buying VoIP phones, make sure they have a pair of Cat 5 outlets, instead of just one. That lets you daisy-chain the Internet connection from the network to the phone to the computer, eliminating the need for two network connections in each office.

  • For the most flexibility, choose a provider that uses the industry-standard SIP protocol for their phones. This open standard lets you continue to use your phones even if you switch providers, where proprietary protocols lock you into a single vendor until you replace all your phones.

Deciding What You Need from a Hosted Phone Service

Before you contact any hosted phone service vendors, start gathering information on your current telecommunications situation:

  • Your total number of current phone lines and their costs, including toll-free numbers
  • Locations and numbers of employees at all offices, including home workers
  • Recent local, long distance and toll-free bills
  • Current broadband Internet specifications and costs (Not just "DSL," but "1.5 Mbps DSL")
  • Conference calling and electronic faxing costs (if applicable)
  • Current equipment costs – lease and maintenance costs for phone system, voice mail, auto attendant, conferencing bridge
  • Call volumes – averages, seasonal or time of day patterns, inbound vs. outbound volumes
  • Contract status for any of these services - time remaining and opt-out requirements

The vendors may not need all of this information, but knowing these answers will help you get a handle on which components of your current infrastructure to evaluate and potentially replace.

All-in-one or just phone service?

A key difference among hosted phone service sellers is which service components they offer. Some pride themselves on supplying a complete solution, one that includes the phone numbers and dial tone service, long distance plans, the Internet connection, and the hosted PBX service. Others take a more specialized approach, allowing you to use your existing Internet connection and phone service.

Each type of seller will tout their approach as being superior. The all-in-one sellers can ensure that all aspects of the setup work together smoothly. Providers who use your existing connections can focus exclusively on providing the hosted phone service, allowing other specialists to handle the Internet connection and dial tone.

Both approaches have their merits, so we recommend considering both. Do make sure you know exactly what you'd be getting from every seller you talk to, so you fairly compare costs later.

How the purchasing process works

After some initial conversation, sellers will want to set up demos to show you how their service works. Some will send you a pre-configured phone that you can simply plug in to your network and use, allowing you evaluate call quality and ease of setup. They should also let you access the administration tool so you can evaluate the management features. Other sellers may just hold phone and/or web conferences to introduce you to their services.

To get specific pricing, most vendors will want to do a site visit so they can check out your existing phones, hardware, and cabling. Once they have all the information, they can create a detailed proposal that includes all the prices and contract terms.

How to Choose a Hosted PBX Provider

While it's important to choose a service that offers all the features you want, it's more critical to choose one that will perform to your expectations. All the features in the world are no good if the provider doesn't keep them up and running and make sure your employees can access them. Here are some aspects to consider when comparing one hosted PBX provider to another.


Hosted PBX services have been rapidly growing in popularity recently and, as a result, some new providers are jumping into the market. Some players have done an excellent job providing either dial tone service or data networks, often for years. However, their experience in managing telephony and data centers doesn't necessarily translate to operating a hosted PBX service.

Look for providers who have proven they can provide voice services to end users, either in traditional PBX or hosted systems, for at least a few years. Customer references are always helpful, too.

Customer service and training

Try to get a good sense of the customer support each potential provider offers: you'll likely be working with them for years to come. Top-notch customer support is essential for resolving problems and getting the most out of your system. Ask how you can get support, and if it's round-the-clock or only during set hours. Also, find out who you'll be contacting: some companies provide dedicated account managers who will become familiar with your account.

Some companies charge per-incident rates for customer support, while others include it in their monthly fees. Make sure you know the pricing structure for each company you're evaluating.

Also ask about user training. Find out what kind of education they offer, both for end users and for administrators, and if there's an additional cost.

Dependability and SLAs

As mentioned earlier, business-class hosted PBX services provide outstanding reliability. Ask to see both scheduled and unscheduled downtime reports for recent months as part of your comparison. You may also want to ask about SLAs -- service level agreements that specify exactly how much downtime is tolerated and describe how the provider will make up any overages.

However, not all providers offer SLAs, since the service is completely dependent on your Internet connection. If you don't get your connection from the same provider as your hosted PBX service, you're unlikely to get an SLA. Also, some companies only offer SLAs on T1 lines or faster connections, not DSL.

For the best peace of mind, do ask about SLAs or performance guarantees - but understand that providers aren't able to put guarantees on services outside their control.

Additional hosted PBX provider considerations

Look for a company that has other customers of your size. Many hosted PBX providers target companies from 10 to 50 employees; others may target 40 to 100 or larger. Choose a vendor that can handle your current size and any expected growth.

Find out who owns the technology. Providers with their own technology have the advantage of being able to make gradual improvements and react quickly to changes, without having to rely on their technology supplier. If they license the software from a third party, ask about their relationship with the original developer and how often they upgrade their platform.

Also make sure you own all your phone numbers - local and toll-free. If you ever need to change service providers, you'll want to make sure you can keep your numbers.

Finally, when you speak with providers, ask if they're using their own service, and take note of how they sound. More than just showing confidence in their product, this will let you evaluate the quality of the call from your end.

Hosted PBX Pricing

Hosted PBX pricing is generally based on a monthly per line fee. That charge will vary according to the features you choose, the number of employees you have, and the type of contract you choose, and doesn't include startup costs such as phones and installation.

In most cases, the provider should be able to give you a general idea of your monthly costs after a couple of phone conversations, but gauging setup and installation costs can require a bit more investigation.

See what other BuyerZone users have paid for hosted PBX services.

If purchased separately, incoming phone lines are usually around $12 to $30 each, paid to the phone company. On top of that, the hosted PBX provider will charge $10 to $20 per line per month for standard business calling features. The more users you have, the lower those per-line fees - larger companies can see those rates drop to around $6 to $8 per employee.

All-in-one hosted PBX pricing is similar in total cost: expect to pay between $25 and $50 or more per line. Adding more advanced features like ACD can push costs towards $70 or more per line for some users. You also may be able to add lower-priced extensions with less functionality, such as voicemail-only lines.

If your current Internet connection isn't sufficient for voice applications, you'll need to upgrade. Business-grade DSL can cost $70 to $150 per month, and T1 connections typically cost between $300 and $500 per month.

Startup fees can range considerably. If you use your existing networking hardware and phones, startup costs may be as little as $0 to $80. More often, though, you'll need to invest in new phones, at a cost of $100 to $300 per employee. You may also need a new router and network switch, adding another $900 to $1,200 to your costs. Unlike traditional hardware PBXs, though, that hardware investment is a one-time cost: since all the features and service come from the provider, you'll rarely need to pay for new equipment, even as new features and services are made available.

Some virtual PBX services with extremely low prices - $5 to $10 per month - only seem like a bargain. These services don't replace your primary phone system. Instead, they add VoIP features to your existing phone system, without requiring a complete changeover. They can be an inexpensive way to get some new features, but they don't provide most of the benefits of a true hosted PBX system.

Contracts vary quite a bit among providers. Some will offer month-to-month contracts, with no long-term commitment required. Others will ask for a 12-, 36-, or 60-month contract, and may offer price breaks if you commit to a longer deal.

Comparing hosted PBX pricing

The cost savings over traditional customer premise equipment are fairly apparent. If you consider the monthly lease costs or amortized ownership costs of a full-featured traditional PBX system, including maintenance contracts, phone service, long distance, and Internet access charges, you'll almost always find that hosted PBX services will save you money.

There is a small financial downside to consider: a traditional PBX is a significant asset you can depreciate over time to offset income on your balance sheet. Since hosted PBX pricing is based on monthly fees, there's no comparable write-off.

When deciding between hosted providers, cost comparisons can get complicated. We can't overemphasize the importance of making sure you're comparing apples to apples once you get bids from multiple providers. For each price quote you get, factor in all of these costs, whether they all come from the same provider or from multiple sources:

  • Dial tone service
  • Internet service
  • Local, long distance, and international usage
  • Interoffice calling
  • Incoming toll-free numbers
  • 411, 911 access
  • Voicemail, auto-attendant, faxing
  • Web/teleconferencing
  • Customer support
  • Hardware: phones, routers, supporting equipment

As is often the case, simply choosing the lowest cost provider is rarely the best approach. You might not get all the features you want or the reliability you need, and the cost savings you thought you'd be getting will never materialize. Be especially wary if you get several price quotes in the same general range and one that's significantly lower: it's likely the lowball bid is leaving out an important service or feature.

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