If you’ve ever dialed or had an office extension, or if you’ve ever left a message at the beep for a number at a large organization, you’ve probably dealt with a private branch exchange (PBX). Business phone systems like these are essentially phone networks of their own. They can be pretty simple, as is the case for small businesses, or as complex as telcos for multinational corporations.

PBXs used to be very expensive and proprietary solutions, but the rise of VoIP and Asterisk is doing for them what Linux did for servers: democratizing a complex technology and putting it into the hands of anybody with the right technical skill.

What Is a PBX?

PBX stands for "private branch exchange." When you make a call over an ordinary phone or a mobile phone, your call will make its way into a telephone exchange, which connects your line to other local lines and to other exchanges as part of the public switched telephone network (PSTN).

The "private" in PBX means that it’s a private telephone exchange used in a business. In the early days, these were operated manually by switchboard operators. You can see this in one of the early episodes of "Mad Men." Nowadays, they’re fully automated. As PSTN exchanges moved from manual switchboards to electromechanical automatic switching to digital switching, so did PBXs.

Smaller businesses have generally used "key systems" for business phone service. The distinguishing feature between the two is that key systems required that the user manually access an outside line, while PBXs use "dial plans" to route calls both inside and outside the system. One of the most common is using an "escape" number, which is 9 on a lot of North American systems, followed by the number the user intends to call. Some systems are smart enough to distinguish between internal and external numbers automatically.

PBXs have also traditionally supported advanced features like conference calls, automatic dialback, call transferring, call forwarding and other things.

The PBX mediates the connection between a private internal phone network and the PSTN the same way a gateway connects routers. It might be helpful to think of a PBX as a gateway for telephony.

Buying a PBX

If you’re looking to add PBX functionality to your business, there are number of options. You could buy a PBX system and install it on premises, or you could take advantage of some of the open-source projects like Asterisk and build your own system.

Like any other product, you should look at your needs and buy the system that matches them. If you depend on your phone systems heavily in your business, such as running a call center, you’ll want a more complex and full-featured system.

You should measure the amount of phone traffic your company gets, especially during peak hours, and use that to make your decision. It’s a matter of finding the sweet spot between having enough capacity to keep up with the demand while not buying so much capacity that you waste unused capacity. This is really important in a call center, where getting a busy signal or having people wait too long on hold can lead to lost revenue.

There are a couple of solutions other than buying a PBX system. You can also build your own or turn to a newer option: a hosted PBX.

Building a PBX

If you’re technically inclined, you can build your own PBX system. This is a cost-effective option for small businesses. A number of hobbyists have also gotten into building their systems, lured by the prospect of having features previously only available to high-powered corporate phone systems available at home.

A lot of the features would probably be overkill for most ordinary people, where voice mail is the most complicated feature they use. But then again, these people do it because they can.

The advent of Asterisk, an open-source PBX program developed by Digium, has made this possible. Asterisk has done the same thing that Linux has done for Unix-like operating systems: democratize a technology that used to be too expensive for most amateurs. Once you have the hardware, (PC, phones, the various interface cards Digium is happy to sell you), the software is free.

You can use an old computer you have lying around, but some hobbyists have built a super-cheap PBX using the Raspberry Pi board, which only costs $35.

Another interesting enthusiast use of Asterisk is the C*Net (not to be confused with the popular tech news site). A bunch of vintage telephone equipment collectors connected their equipment to Asterisk servers and formed a network, yielding a mix of old and new technology.

Asterisk has also served as the basis for larger, professional PBX systems, with a number of companies springing up to offer turnkey PBX solutions, including Digium’s own Switchvox.

Hosted PBX

The growth of Asterisk has also led to a brand-new PBX market: the hosted PBX solution. Instead of buying a PBX or assembling one to use on-premises, a number of companies are offering PBX systems hosted in a data center. This is possible because modern VoIP equipment can use something called Session Initiation Protocol (SIP). Just like HTTP or SMTP for websites and email, respectively, SIP is a universal standard for VoIP.

These companies are also offering unified communications: voice, video and text messaging. Microsoft Lync is one such offering that’s very popular in corporate environments.

A lot of hosted PBX providers are cloud-based, which means that it’s easy to scale up if you get a lot of sudden demand.

Hosted PBX systems are a good choice for businesses whose core competencies are not customer service. They can spend their money where it’s actually needed instead of installing an on-premise PBX.


With the growth of VoIP, some people have had the bright idea of not keeping Internet and telephony separate, but bringing them together over the same connection. An IP PBX combines Internet access and telephony applications, allowing for an even more unified form of communications. Large businesses can use them to connect different offices using their Intranet instead of the phone system to save on long-distance expenses.

VoIP has changed the business phone market, bringing PBX features out of corporations and into smaller businesses and even homes. If you’re interested in PBX technology, you should take a close look at the options available and buy or build what makes sense for your needs.