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How do Business Phone Systems Work?


When starting a business, a primary concern is communicating effectively internally and externally. 

With the array of phone systems in place, it might be hard to choose which is right for your business. Questions you will want to ask yourself are:

  1. How does a business phone system work?

  2. What do they do?

  3. Which one is right for your business’ needs?


    Initially, there are four types of business phone systems that are used or have been used to communicate with customers.

    • Legacy PBX Phone system, which was initially used from the 1980s until the beginning of the 2000s.

    • IP Business Phone Systems that have been popular since 1995.

    • Hosted Business Phone Systems started being used in 2010 and are still being used today.

    • The cloud-based business phone system.

The Legacy PBX Phone Systems

These Legacy systems were the standard for around 20 years, beginning in the 1980s. These systems kick started optimized business communications. 

Industries began to flourish with this change, highlighting the importance of both client and employee communication. More efficient ways to communicate, then, increased in demand. Business followed suit with the rest of the world and became more globalized. And so came the wide variety of ways to communicate within the company and with any external entities such as clients or investors.

 To function properly, the systems require manual installation of both hardware and corresponding software. 

Because this type of system requires a physical hardware box, it is recommended for offices with a minimum of 50 employees. 

The biggest advantage of this type of business phone system is

  1. Simple to operate

    Managing calls is a task anyone can handle. When using this system, normally a secretary or receptionist takes the call and can later transfer it to whomever the caller requires.

  2. It is cost-effective

    Part of the technological revolution was looking for accessible prices for commodities increasing comfort and efficiently tenfold. Business phone services wanted to provide just that: a simpler, effective, more affordable option to improve internal and external communication within any business.

  3. Variety of Elements

    You can enjoy call waiting, call forwarding, multiple line transferring and mailboxes, call recording and voicemail all in one. As a business, these characteristics come in handy to toggle between client conversations and employee discussions.

The main disadvantages of this system are:

  1. Waiting to Solve a Problem

    One drawback fuels the most complaints about the Legacy system: the time it takes to fix technological malfunctions. You must wait for a specialist to go to your office to fix the issue and that can take time, leaving you disconnected.

  2. And last, this system seems to be slowly disappearing

    Other newer, simpler and even more affordable systems are coming out and making the headlines.

IP Based business phone system (1995s – present)

Technology is constantly improving exponentially, and business phone systems are no exception. 

IP stands for Internet Protocol. It came into play when the internet began to take over our communication systems. 

Although presented in 1995, this business phone system is still being used to this day.

How does it work?

The biggest difference between IP PBX and IP network systems is the source. The first uses VOIP technology while the second uses the internet to communicate. 

The main advantages of using an internet-based system are

  1. Less equipment

    With the IP PBX system, you need every user to have their own phone and number to be able to transfer calls and have multiple lines.
    With the IP phone system, you can make multiple calls at once, have many users with no additional equipment required.

  2. More affordable

    As they require less equipment, internet-based systems are consequently also more affordable. You won’t have to spend any extra money to enhance the features of the phone system you currently have in place. 

    Other miscellaneous costs can be avoided like those from long-distance or external calls, since internet systems place almost no extra charge on such circumstances.

  3. It is completely wireless

    When you work with a wireless system, there are many advantages. You avoid the exorbitant cabling costs from both their high price tag and their inevitable damage. Moreover, the workspace tends to look cleaner, more sophisticated and up to date.

On the downside, the main disadvantage of this system is how dependent you are on the internet. And as we all know, the internet is not always 100% reliable.

Any type of weather emergency can affect the entire company’s communication system.

Hosted business phone system (2010 – today)

Once the IP phone system was developed, businesses all over the US were excited. Innovative as it was at the time, the technology was still in its beginning stages and needed certain improvements.

Businesses were still looking to lower the cost of these business phone systems and make them more efficient. 

Many self-made businesses began to offer companies what other business phone services were lacking. Such smaller operations took the initiative and offered the same service for better prices—to large and small businesses alike. 

Both large and small businesses reap benefits from certain important advantages the system offers.

The main one is the efficacy of  your internal team. Now that communication is taken care of by your supplier, employees can handle other tasks that will benefit your organization like sales, promotions, finances and customer care. 

Another huge benefit is the costs involved. Cost-cutting has been and will always be one of the biggest advantages of these new business phone services. Although in the long run it is much cheaper, installation and maintenance will require a larger and more constantly recurring cost that one must take into account. 


Safety is often the main worry of clients. Many ask: Can my phone line get tapped? How can I make sure all my calls are private? How do I know  no one is accessing them? These concerns should be discussed your provider. Do your research, and find reassurance that you are choosing a trustworthy source. 

Let’s move into our last system, the most important and currently the most popular.

Cloud-based business phone system (2015 – today)

The Cloud-based business phone system or VOIP phone system relies on the internet to work, similarly to the IP telephone system. This new system was the solution for a faster, more convenient way to practice business communication. 

All of the data in VOIP systems is stored in a cloud for everyone to have access. Since here’s no need to depend on hardware for information storage, you will save on years worth of hardware costs.

Your most important asset is your internet service provider. Reliable internet is your best friend. 

You can use this service with mobile phones, VoIP phones, landlines or softphones. Think of this as calling someone on skype. You are using your smartphone or monitor to communicate with whomever is on the other side with the same medium of communication, using the internet.

Whatever your business needs, CT can provide your solution. Give your employees and clients what they need to succeed.

We offer you business cloud communications in the Atlanta area. 

Call us today for more information.

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