A hosted PBX system is a VoIP phone system that you can have by rent or on lease on a monthly or yearly basis, removes the need to buy costly devices. Most of the devices are hosted by the service provider, and all communication is routed through that provider to and from your company’s site. Normally, this system has the advantage of being very easy to predict in terms of cost of operation, and it is also easier to install and get up and running than all competing systems. A hosted PBX solution can also be cheaper to operate, but as usage and number of users increases, the cost advantages of hosted PBX systems typically disappear.
PBX is the switching system that manages calls between internal or local users. It also shares a number of lines that connect to the external public phone system and parcels them out as needed to the local users. In addition, enterprise PBX systems have other features that allow them to take incoming calls, send them to the correct extensions, connects calls to answering services and so on.

The PBX was typically a piece of device at the company’s physical location, hidden in a storage cupboard. Connections came in to the PBX from the external phone system and lines ran from it to all the phone extensions in the business. In a hosted PBX system, that model is extended, with the PBX itself stored at a remote location by the service provider. The service provider manages the system and the business just needs phones — usually obtained from the service provider.

Hosted PBX systems run on IP networks, meaning that they use the same circuitry and wiring as your company’s data network. They pass information back and forth via the same ways as any office network or the Internet itself. The advantages of this setup are that your company only needs one set of cabling in its office for all communication needs, data and voice networks can cross-communicate with one another more easily, and you probably only need one person to administer and maintain the voice and data networks.

With a hosted PBX, your company will typically be provided with a special router or switch that attaches to the network and is then connected to the outside world. This switch or router communicates directly with the hosting service that provides the hosted PBX. Sometimes this connection is made over the public Internet using secure protocols, and other services provide a dedicated connection that operates just like the Internet. However, this connection is private and restricted to provide better bandwidth, security and service levels.

When a call is made, the phone connects to the IP network, and then gets switched out to the remote hosted service, which launches what number is being called and creates a connection via VoIP protocols across IP networks or via the traditional phone system. The remote service can also create other connections, interact with the call in other ways and, in general, provide enhanced services.

The benefits of this system are that it is easy for the service provider to upgrade the system and that very little local infrastructure is needed at your office location. The drawbacks are that your company loses some control and that a staff member cannot easily customize the system.

The specific benefits of a hosted PBX solution are:
•    A cleaner and simpler infrastructure
•    Lower operating costs
•    Simplified devices and maintenance
•    Unified communications
•    Improved scalability and growth
•    Improved features for business operations
•    Cost
Hosted PBX systems differ considerably in cost, but prices have been coming down for the past couple of years, due to rapidly increasing competition in the small-business market. Even so, they’re very unlikely below the current lower end of the price range, as that is forthcoming parity with common low-end pricing for the most basic residential phone systems. Prices typically range from about $25 per month, per user to as high as $200 per month, per user for expensive, high-end solutions. There are often additional one-time setup costs, and the lower costs do not always include device. Some vendors give device on hire bases, some include the rental in the monthly fee and others require companies to buy device.
If your business is upgrading from a traditional phone system, it will certainly save money with a hosted PBX solution. If there is any uncertainty in terms of call volume, growth, scalability and usage pattern, your company is likely to be better off with a hosted PBX solution. Hosted PBX solutions are also usually best for small businesses (those with 20 or fewer employees).

Hosted PBX systems come in a number of types. The simplest solutions just require an administrator to plug phones in to the network, add or configure the VoIP router and set the required options via a web-based tool. More complex PBXes provide specialized devices to attach to the network, as well as additional features and services.

Make sure that you know what additional devices and services you choose requires and exactly how much it will cost to buy or lease it. Hosted VoIP providers should be able to furnish you with an exact quote quickly. You should also have a list of telephony features that your company must have and would like to have. The aforementioned resource, The Definitive VoIP-News Guide to Hosted PBX, will  give you an idea of possible features.

In order to get the most from a hosted VoIP system, your business also needs to make sure that its IP network and connection to the Internet has enough bandwidth. You’ll also want to know if you can use existing IP phones, if you have, or whether you must buy or lease proprietary IP phones. Think about the ability of the service to manage multiple locations if your business has remote offices, and find out how easy the system is to install and operate, which will determine whether an on-staff administrator will be necessary. Finally, consider whether the system provides the kinds of tracking, metrics and reporting tools that your company needs.