A PBX is the switchboard that connects your company's phones to each other and to the outside world. A cloud PBX is that same thing run as software on servers you do not own, reached over the internet, so there is no hardware in your office and no engineer visit to change a setting. Your desk phones, softphones and mobile apps register to it from anywhere, and your phone numbers point at it rather than at a building.
Karan Sharma · Updated 2026-10-29
Before anything was in the cloud, a PBX — Private Branch Exchange — was a physical unit in a cupboard. Lines from the phone company came in, extension wiring went out to each desk, and the box decided which internal phone rang when a call arrived, let people transfer calls to each other, and made internal calls free because they never left the building.
Everything a phone system does today is still that list. The cloud did not add the features; it moved where they run and changed who maintains them.
Which matters more than it sounds. When the switchboard was a box, every change was a visit: a new starter meant wiring an extension, a changed opening hour meant reprogramming hardware, and a second office meant a second box with a leased line between them. The features were similar. The cost of using them was not.
Most confusing vendor conversations come from these being used loosely. They are not interchangeable, and pricing usually hangs off two of them.
| Term | What it actually is |
|---|---|
| Extension | An internal identity — a person, a desk or a department. 201, 202, reception. Usually what you are billed per. |
| DID | A real phone number from the outside world that points at your system. Also called a virtual number. You may have far fewer DIDs than extensions, or more. |
| Trunk | The connection between your phone system and a carrier, over which calls reach the public network. A SIP trunk is that connection carried over the internet. |
| Channel | One simultaneous call. Thirty staff who are never all on the phone at once might need eight channels, not thirty. |
| Softphone | A phone that is an app rather than a handset, registering to the same system as a desk phone and behaving identically. |
Three things, none of which is "more features":
What did not change: the call still has to reach the public telephone network, and somebody still has to have a commercial relationship with a carrier to make that happen. That relationship is the part buyers most often do not realise is separable — see the guide on bringing your own carrier.
The usual comparison is a sales table where cloud wins every row. The real trade-off is narrower than that, and it is mostly about who carries which risk.
| On-premise | Cloud | |
|---|---|---|
| Up-front cost | Hardware, installation, often a leased line | Little or none |
| Ongoing cost | Maintenance, and someone who understands it | Per extension, monthly |
| Making a change | Often a visit or a specialist | A setting |
| If your internet drops | Internal calls usually keep working | Everything stops |
| If the provider has an outage | Not applicable | Everything stops |
| Where recordings live | Your building | Wherever the provider says |
Read the two "everything stops" rows together, because they are the honest cost of the model. A cloud PBX concentrates your failure modes into connectivity and a supplier. That is usually a good trade — a single well-run provider is more reliable than a cupboard nobody has patched in four years — but it is a trade, and the mitigation is boring and specific: a failover route for your numbers that does not depend on the same system.
Two numbers, and people usually get the second one wrong by a factor of three.
If you have an existing system, it already knows both numbers. Pull a report of simultaneous calls over a month rather than estimating — the estimate is nearly always too high, and you will be quoted against it.
Not the things the brochures address. In rough order of how often they bite:
The third and the fifth separate vendors more than any feature list will. A provider that cannot answer the fifth has not thought about the failure mode that matters most to you.