ITEXPO begins in:   New Coverage :  Asterisk  |  Fax Software  |  SIP Phones  |  Small Cells

The Enterprise PBX is Dead!

By William Boehlke


Long live the enterprise PBX.

Organizations first began installing private branch exchanges (PBXs) to avoid paying their telephone service provider for a call to a colleague down the hall. That has evolved over the years. Today, IP telephony is increasingly sold as unlimited calls for a single monthly rate and the cost avoidance justification no longer applies.

Over the years, a variety of additional services have been added to the definition of an office PBX, and those services have come to define customer expectations. Services will continue to be enhanced, but the ways in which they are delivered will change radically from the closet full of equipment with which we are familiar.

For one thing, much of the equipment will sit in racks in service providers colos (co-location facilities). Unless an organization can take advantage of the productivity payback from integrating telephony into its line of business applications, it will most likely obtain its PBX functionality for free from a telephone service provider, bundled into a flat-rate monthly charge that includes unlimited calling. Small and medium-sized enterprises are the most likely to go the service provider route.

When organizations have a business reason for maintaining their own equipment, itll most likely be because they get major productivity benefits from integrating voice into their business processes. Their PBX functionality will be running as software on just another rack of standard servers in the computer room with the manageability, programmatic interfaces, and support that enterprises demand.

Barring FCC action that changes the playing field, its not a very long journey from where we are today to that vision of the future. And this is seismic change that will impact most of the players in the telephony business. According to the latest Enterprise Telephony report by Infonetics Research (, TDM and IP PBX system revenue totaled $8.1 billion in 2005, a 12 percent increase over 2004 and a trend that is accelerating. As a significant fraction of that spending shifts into new patterns, fortunes will be lost as well as made.

The first part of the change in corporate purchasing behavior will be the collapse of the low-end PBX market as service providers respond to competition by bundling complete PBX replacements into the price of their IP telephone service offerings in order to slow price erosion. Richly functional hosted PBX products based on industry standard hardware and open source software are offered currently for as little as $10 an endpoint. Service providers already spend a lot more than that on free customer premise equipment to acquire a new customer and the low cost of a hosted PBX offering will inevitably make it a standard part of the service portfolio within a few years.

The functions of a hosted PBX are usually a superset of the five to eight year-old hardware PBX systems installed at customer premises. Hosted PBX customers dont have to buy, install, or maintain any PBX equipment. Instead, the PBX equipment is kept by the service provider, who maintains the system and shares access among many users.

This Is Not Our Parents Centrex

Developed in the 1950s, Centrex service is a business telephone service offered by what used to be the local telephone company from a local central switching office. Centrex service offers a very restricted feature set that includes:

Call Forwarding (eight varieties)
Key System Emulation
Call Hold
Call Pick-Up
Call Park
Call Waiting
Voice Mail
Automatic Callback
Automatic Recall
Call Transfer
Conference Calling
Music on Hold
Speed Calling
Message Light

Hosted PBX functions, on the other hand, start with all Centrex features and add:

Auto attendants
Voice mail for groups as well as people
Custom pre-recorded greetings
Multi-level voice menus for directing calls, connecting to them specific extensions, with a user interface for designing custom voice response systems
Enterprise dial-by-name directories
Placing callers on hold
Playing custom music or messages whenever callers are waiting on hold
Transfer of calls between extensions
Conferencing multiple incoming calls with employee extensions
Detailed call records for billing
Individual user options such as e-mail integration with voicemail, call screening and follow me
Multi-language voice prompts
Self-service graphical user interfaces for system management and individual handsets

Expect to see hosted PBX offerings for small business that include all this functionality as well as unlimited calling in the United States for as little as $30 a month per extension later in 2006.

Where the hosted PBX probably does not make sense is in larger enterprises that have economies of scale comparable to small service providers. There, the integration of voice into line of business applications will keep a form of IP PBX in-house, one thats likely to look a lot like a software service running in the data center.

The software development industry is currently in the midst of solving telephonys enterprise integration issues. The most important pre-condition for dramatically reducing the time required to integrate is that services developed for one application should easily be combined and re-purposed for other applications. SIP is the likely vehicle for solving this problem.

SIP, or Session Initiation Protocol, is the application layer signaling protocol defined by the Internet Engineering Task Force (IETF) for initiating, modifying, and terminating communication sessions between endpoints in an IP network. SIP is rapidly becoming the de facto underlying session control protocol among service providers and its current momentum will almost certainly carry it as a standard into the enterprise.

SIP signaling capabilities were once the purview of specialized telephony protocols, such as Signaling System 7 (SS7), running on dedicated hardware. Today, SIP application servers connect to a SIP network via a SIP Proxy Server, enabling calls to SIP functionality from widely used programming languages. For example, SIP has recently been incorporated into the Java language under JSR-116. SIP also has hooks into SNMP-enabled enterprise consoles, like HPs OpenView, potentially addressing enterprise concerns about manageability.

Some examples of the integrated forms of communication that SIP enables include:

Voice instant messaging
Voice-video telephony
Video conferencing
Real-time video sharing
Rich-media enterprise collaboration
Auto-initiated conference calls
Converged call center communication

These new functionalities will be embedded into line of business applications in task-specific ways. Just as contact center agents use very specific calling functions instead of general purpose PBX capabilities, many other business functions will see improved productivity from embedded communications. For example, salespeople will have tight integration with their customer relationship management application so they can organize customer contact based on deals in progress and initiate a call with a simple mouse click. Accounts receivable managers may need to periodically contact all past due customers, where the application presents them with a series of calls and the appropriate information for each call before it happens. Early versions of this type of integration are already deployed in leading edge companies.

Where does the growth of hosting and telephony integration leave the general purpose PBX? Theres an old marketing saying that success is found at the ends of the spectrum. Leaders typically emerge in the low-priced, high-volume segment and the high-priced, high-service segment, but rarely in the middle of a market. The general purpose PBX will increasingly be squeezed between nearly free hosted IP PBX service and highly productive integrated telephony capabilities in line of business applications within the enterprise.

So, can we say that the enterprise PBX is dead? Not really, but its definitely entering old age. The capabilities of the enterprise PBX will live on in other forms. IT

William Boehlke is the CEO of Signate, Inc., a provider of telephony solutions based on industry standard hardware and open source software. For more information, please visit the company online at (news - alerts).

If you are interested in purchasing reprints of this article (in either print or PDF format), please visit Reprint Management Services online at or contact a representative via e-mail at [email protected] or by phone at 800-290-5460.


Today @ TMC
Upcoming Events
ITEXPO West 2012
October 2- 5, 2012
The Austin Convention Center
Austin, Texas
The World's Premier Managed Services and Cloud Computing Event
Click for Dates and Locations
Mobility Tech Conference & Expo
October 3- 5, 2012
The Austin Convention Center
Austin, Texas
Cloud Communications Summit
October 3- 5, 2012
The Austin Convention Center
Austin, Texas