Companies of any size need a worthy phone system. At its heart is something called a private branch exchange, or PBX, that delivers the dial tone, routes incoming telephone calls to the correct extensions, and provides features such as voice mail, call forwarding, conferencing, voice recognition and more.

A PBX isn't cheap--and that puts smaller operations that can't afford one at a significant disadvantage. Enter "hosted" PBX, which aims to let small shops communicate just like their bigger competitors.

The advent of Internet-based telephone services, such as Voice over Internet Protocol, has reduced the cost of single-line services. And the ability to make unlimited long-distance calls over VoIP connections has made it possible for employees working in different locations to keep in touch as often and for as long as necessary. Even so, the features that office-based workers take for granted in their enterprise phone systems may be out of reach for smaller organizations.

A typical PBX consists of a set of external phone lines, a centralized server system, a set of internal phone lines, and a console from which all connections are manually configured. Traditionally, a PBX's nerve center and its thick tangle of cables reside on a patch board in a closet. Not so with hosted PBX.

Now, a single, high-performance PBX can be located anywhere in the world and connect its users across the Internet. This provides greatly increased economies of scale so that thousands of users can share the expenses of a single sophisticated PBX. Beyond the ease of installation and maintenance, most hosted PBX systems come with advanced features, such as connection via a personal computer ("click-to-call"), automatic call recording and even integration with customer management software. And you get all of this for perhaps 25% of the price of hardware-based solutions.

This new breed of hosted PBX services is now able to deliver the same levels of service and features through VoIP connections to organizations as small as two employees. And not only can these systems support small work groups; companies also can add users whenever and wherever they need by simply adding a user account to their virtual PBX and connecting a VoIP telephone to the user's high-speed Internet connection.

Diversity Of Offerings

The other nice thing about these systems: Customers can configure nearly all aspects of their phone services. These functions can include adding users, setting up call routing, establishing call restrictions and permissions and reviewing call logs. Each of these functions would normally be part of an organization's PBX system. The difference here is that the management functions are handled through a Web browser rather than at a console connected directly to the PBX.

Selecting A PBX Service

When shopping around, compare the features offered and determine what is standard and what is optional. Find out how features are added: Can you simply click an option in a Web browser or will you need to change your service offering entirely?

Also check to see whether you will need to install any hardware other than the phones themselves. Some systems require just phones; others allow you to use only the phones supplied by the company. Still others require an additional piece of equipment.

Before you can set up the specifics of your PBX, you need to establish an account with your chosen provider. Your account may include fewer or more features, depending on your contract and the capabilities of the service provider you choose.