Standard, On-Site PBX

oldPBXswitchboardA PBX, or Private Branch Exchange System, serves a private network of telephones in an office, allowing employees to connect with each other as well as customers, vendors, and clients in the outside world. A standard, traditional PBX is a physical, on-site switching system that performs these central functions and hooks up to the public switched telephone system (PSTN), which connects the world’s telephone lines, cellular and satellite communications networks, and others, allowing us to hear a voice on the other end of the line.

The central functions of a PBX system are to route incoming calls to the appropriate extension in an office, and to share phone lines between extensions. Many functions (automated greetings, recorded messages, dialing menus, connections to voicemail, etc) can be added to the basic switching system to better suit the business it serves. However, with the physical limitations of this technology, every change or enhancement comes with it the need for massive reconfigurations to be preformed by a trained telephone technician.

The range of features offered by a PBX system varies and, due to the high level of maintenance required, is typically tethered to a proportional variation in the price of the equipment. Primary functions of PBX phones include:

  • A single business number that gives access to all company employees and departments
  • Call answering with a custom business greeting
  • A menu of options for directing the call, such as connecting to a specific extension or to a department
  • A directory of employee extensions accessible by inputting digits corresponding to employee first or last names
  • Evenly distributed calls to a department among available employees through Automatic Call Distribution (ACD) queues
  • The ability to place callers on hold when they are waiting for an available department employee
  • Music or custom messages whenever callers are waiting on hold
  • Voice messages for any employee extension, department, or for the company in general
  • Transfer of calls between extensions
  • Conferencing multiple incoming calls with employee extensions
  • Detailed records of incoming and outgoing calls

These features are not all provided by all equipment vendors and not all customers need them. Some of the most valuable features to include, however, are real Automatic Call Distribution (ACD) queues. Consequently, this is also one of the most challenging functions for physical switches to provide and, as such, ACD queues are typically unavailable or cost prohibitive from standard PBX providers.


Physical PBX phone systems are mature technologies that offer many benefits for the right type of application. Multiple extensions in a single office can share the cost of incoming phone lines, eliminating the costs of multiple phone lines per extension. Modern physical phone systems are far more robust and easier to manage than they have been in the past, plus their expense can be amortized as capital expenditures to help offset the costs of acquiring and maintaining them. Businesses that can reliably predict their needs can usually find a fixed, cost-effective system, provided that there will not be much need to scale-up the functionality of the system.



Costs are problematic with standard PBX systems in two areas. The up-front cost for getting a system up and running can be very high, running upwards of $2,000 per seat (user), including the cost of the equipment, installation, and wiring. At the lower end of the spectrum, the equipment offers limited features and usually limited scalability. And yet high-priced systems still lack some sophisticated features without special configurations. An additional, often overlooked expense goes towards ongoing maintenance and support. As PBX equipment continues to add functionality, there is an increasing need for highly trained support staff to maintain the hardware and software, roll out system upgrades, and manage system use. Ongoing support and maintenance costs typically run at about 1% of the cost of the equipment each month. For example, a $20,000 PBX switch, which would provide service to 10 to 40 employees, depending on system features, would typically cost an additional $200 per month for maintenance.


Most PBX hardware is limited in its ability to add both internal and external lines and to support more users or features. Low-end systems are especially difficult in this regard, often forcing small businesses to overbuy in order to have enough capacity for the business they hope to grow into. To avoid overspending on the front end, some businesses have to buy slightly improved PBX systems every couple years in order to accommodate their growth. While almost any feature can be purchased, many times important features cannot be added to an existing system, forcing businesses to pay for new systems in order to get relatively uncomplicated feature upgrades.


PBX equipment was originally designed around the idea that employees would be centrally located inside an office. Today’s mobile environment has created problems with this model. Increasingly, businesses want to receive calls on mobile phones when they travel, on alternate phones when they work in a different office, or on home telephones when they telecommute. Basic PBX architecture makes routing calls inside a pre-wired office easy, but is challenged to send calls out of that network to a different phone. Not all companies want to have a completely distributed workforce in order to save office costs, but most do want to have that as an option when it suits them. It is difficult and expensive to make standard PBX equipment work in these instances.


As mentioned on the weaknesses tab, the cost of installation is one of the greatest liabilities of an on-site PBX system. Additional, ongoing costs for these installations include the cost of incoming phone lines, system support and maintenance, and per-minute charges for inbound calls. Typically, inbound calls are delivered at little or no cost for local numbers, and a charge of 4 to 10 cents per minute for incoming toll-free calls. The cost for incoming business telephone lines vary widely, but usually fall between $10 and $20 per month, before taxes and fees. System maintenance and support can be predicted as being about 1% per month of the initial system cost which covers in-house or outsourced personnel to administrate, upgrade, and update the system.

Typical Costs for Standard PBX Systems

5 User System 40 User System
Up-Front Costs (System and Installation) $62,250 $50,000
Per Month Per Year Per Month Per Year
Telephone Lines $30 $360 $150 $1,800
Monthly Hardware Payment $52 $625 $417 $5,000
Monthly Maintenance $63 $750 $500 $6,000
200 Toll-Free Min/User/Month $100 $1,200 $500 $6,000
Total Costs $245 $2,935 $1,567 $18,800

Assumes one incoming phone line per four extensions, rounded up. Uses average per-seat cost between $500 and $2,000, or $1,250 per seat for system and installation.