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Understanding What is IP PBX and How it Works

Published 01 April 2022
Last updated 25 April 2024
Understanding What is IP PBX and How it Works

The world of business communication is constantly evolving, and traditional PBX systems can’t keep up. That’s where IP PBX comes in.

An IP PBX system is a modern phone system that uses the internet to make and receive calls, providing businesses with various advanced features and benefits.

In this article, we’ll look closely at IP PBX, how it works, and why it’s a game-changer for modern businesses.

What is an IP PBX system?

IP PBX is a phone system that uses the internet to manage and route calls within an organization’s network.

It’s different from traditional phone systems because it uses software and internet connections instead of physical hardware and telephone lines. This makes it more flexible and cost-effective.

IP PBX systems also offer features like voicemail, conference, and video calling and can integrate with other communication technologies like email and fax.

What’s the difference between IP PBX and PBX?

The main difference between IP PBX and PBX is the underlying technology used to make and receive calls.

PBX is a traditional phone system that uses analog or digital lines to connect internal phone extensions to the public switched telephone network (PSTN).

PBX systems are typically hardware-based, with a physical device installed on the business premises.

On the other hand, IP PBX, or Internet Protocol Private Branch Exchange, is a modern phone system that uses the internet to make and receive calls instead of traditional phone lines.

IP PBX systems are typically software-based and can be hosted on-premise or in the cloud.

IP PBX systems offer a range of advanced features and benefits that traditional PBX systems cannot match, including cost savings, scalability, flexibility, and advanced features such as voicemail, call routing, and conference calling.




Traditional, hardware-based Modern, software-based


Analog or digital phone lines

Internet connection


High upfront cost, ongoing maintenance Lower upfront cost, minimal maintenance
Scalability Limited, requires additional hardware

Highly scalable, easy to add new extensions

Features Basic call management features

Advanced features such as call routing, voicemail, and conference calling


Limited, fixed to physical hardware

Flexible can be hosted on-premise or in the cloud

How does IP PBX work?

IP PBX works by receiving and sending incoming and outgoing calls over the internet. Like VoIP, IP PBX converts analog voice signals into data or digital signals to start, connect, or end calls.

The IP PBX system is responsible for routing incoming calls, transferring calls to other extensions, and managing communication features.

IP PBX uses IP phones, SIP trunks, PBX servers, and LAN/WAN to transmit voice and data traffic between communication devices.

The system uses call routing rules to determine how calls should be handled, such as routing to specific extensions or voicemails. It also supports features like voicemail, call forwarding, and conference calling.

What are the Functions of IP PBX?

IP PBX systems offer a variety of functions to help organizations manage their communication needs. These functions include:

1. Call routing

This feature allows incoming calls to be directed to specific extensions or groups of extensions based on predefined rules.

This can help organizations better manage incoming calls and ensure they are required to the right person or department, improving customer satisfaction.

2. Voicemail

When a user cannot answer their phone, the system can record a voicemail message, which can be retrieved from a phone or email.

This feature ensures that important messages are not missed and allows for more flexible communication.

3. Call forwarding

Calls can be forwarded to other extensions or external phone numbers, such as mobile or home office numbers.

This feature ensures that calls can still be answered even when the user is not at their desk or is working remotely.

4. Conference call

The system supports conference calls with multiple participants, allowing users to collaborate and communicate with each other more efficiently.

5. Auto attendant

An automated greeting and menu system can help callers navigate to the appropriate extension or department.

This feature can save time and resources for the organization, as it helps ensure that calls are directed to the right person or department from the outset.

6. Interactive voice response (IVR)

Pre-recorded voice prompts and menus can provide information or direct callers to the correct department or extension.

This feature can improve the overall customer experience by providing callers with the information they need and quickly directing them to the right person or department.

7. Call queuing

Callers can be in a queue and hear music or messages until an agent can take their call. This feature helps ensure that all callers are given attention and reduces the likelihood of dropped calls.

8. Call Recording

Calls can be recorded for quality assurance or compliance purposes. This feature can be helpful for organizations that need to keep records of their communications for legal or regulatory reasons.

9. Integration with other systems

The system can integrate with other technologies like email, instant messaging, fax, omnichannel, and CRM.

This feature can streamline communication within the organization by allowing users to access and manage their contacts from a single platform, improving efficiency and productivity.

It also allows for better data management and reporting, which can help organizations make informed decisions.

Also Read: What is Omnichannel and Understanding Omnichannel Customer Service

What are the types of IP PBX?

There are four different types of PBX IP systems that businesses or companies can choose from:

1. On-Premises IP PBX

An on-premises IP PBX is a phone system installed and hosted on an organization’s servers or hardware. It uses the existing internet connection and internal network within the office building.

This type of system provides greater control and customization options, allowing organizations to tailor the system to their specific needs.

It also offers more advanced general features than PBX, including routing, convergence, interactive voice response, voicemail to email, conferencing, and video calling features.

2. Hosted IP PBX

A hosted IP PBX system is hosted and maintained by a third-party provider. The provider manages the system and provides support and maintenance, meaning organizations can spend less upfront on hardware or IT resources.

This type of system is more scalable and flexible, and it’s ideal for organizations that adapt quickly to changing business needs.

3. Virtual IP PBX

A virtual IP PBX system is a cloud-based system hosted by a third-party provider and accessed over the internet.

It’s also known as a cloud IP PBX. This type of system is highly scalable and requires no upfront investment in hardware or IT resources, making it ideal for small businesses and remote workers.

It can be accessed from anywhere with an internet connection, providing flexibility and mobility for organizations.

With a virtual IP PBX, organizations can benefit from the intuitive functionality of a PBX system on a larger scale.

The system includes many features, such as voicemail, virtual fax, audio conferencing, call recording, and the ability to manage and add new phone numbers.

4. Hybrid IP PBX

A hybrid IP PBX system combines on-premises hardware with cloud-based services, providing the benefits of both on-premises and cloud-based systems.

This type of system is ideal for organizations that need to customize and control their approach while also leveraging the scalability and flexibility of cloud-based services.

Organizations can keep their existing infrastructure and gradually migrate to cloud-based services, enabling them to adapt to changing business needs without incurring high costs.

What are the benefits of using IP PBX?

There are several benefits of using PBX IP in business, including:

1. Cost savings

One of the main advantages of using an IP PBX system is the potential cost savings for businesses.

IP PBX systems utilize the existing internet connection and internal network, eliminating the need for traditional phone lines and hardware, which can be expensive to install and maintain.

IP PBX systems can also reduce long-distance and international calling costs by using internet connections for voice and data traffic.

2. Scalability

Another benefit of using an IP PBX system is its scalability. The system can be easily scaled up or down to meet the changing needs of an organization.

Additional extensions can be added quickly and easily, and the system can be expanded to support multiple locations.

3. Flexibility

IP PBX systems allow employees to access the system from anywhere with an internet connection, including mobile phones and remote locations. This can help businesses to enable remote work and increase productivity.

Additionally, the system’s flexibility can reduce the cost of business travel and make it easier for employees to communicate with each other.

4. Advanced features

IP PBX systems offer a range of advanced features, including voicemail, call routing, conference calling, and auto-attendant. These features can help businesses to improve customer service and increase efficiency.

For example, call routing can ensure that calls are directed to the right person or department, reducing wait times and improving customer satisfaction.

5. Integration

IP PBX systems can be integrated with other communication technologies such as email, instant messaging, and fax.

This can help businesses to improve collaboration and streamline communication within an organization.

For example, employees can receive voicemail messages and faxes directly in their email inboxes, making managing and responding to these messages easier.

6. Unified communication

IP PBX systems provide a unified communication platform that integrates voice, data, and video into a single system.

This can help businesses to improve communication and collaboration among employees and departments.

Businesses can reduce the complexity and cost of managing multiple communication systems by providing a single platform for all communication needs.


IP PBX is a game-changer for modern businesses, providing advanced features and benefits that traditional PBX systems cannot match.

If you’re ready to upgrade your communication system and experience the benefits of IP PBX, Mekari Qontak can help.

Our call center software offers IP PBX features and much more, enabling your business to deliver exceptional customer service and stay ahead of the competition.

Contact us today to learn more!


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