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A History of Business Phone Systems

The invention of the telephone allowed businesses to communicate unlike ever before, and many companies adopted the telephone quickly. In fact, most of the early phones were connected only to businesses; individuals could subscribe to the switchboard for a monthly fee.


When the telephone network first came out in the late 1800s, all calls were routed through a manual switchboard at the telephone company, which hired switchboard operators to answer phone calls and plug the phone cord into the right jack.

This system worked well enough for a while, but as businesses grew larger, it became challenging to field the calls between multiple departments. In addition, it became fairly expensive as each individual required a separate line.

Thus began the first PBX systems. These early systems were actually called PABX (Private Automated Branch Exchanges) and were implemented in the 1960s to help reduce costs by dedicating a telephone network to a single entity.




By the 1970s, PBX was catching on as a way for businesses to better serve their clients. The phone by this time had become an indispensable tool, and so it was natural for business phone systems to get upgraded and more sophisticated over time.

PBX took a giant leap forward when TDM (Time Division Multiplexers) PBX was introduced. This system was the first type of self-contained server technology to be used on a business phone system, and it allowed companies to add new features to phone systems like dial tone, call transfer, auto-attendants and hold music.


PBX helped bring many businesses into the future and offered many benefits, including giving companies the freedom to run their own network. But it was still complex and expensive to make even a small change to an older PBX system. But that all changed thanks to the invention of the Internet.

By 2008, VoIP (Voice over Internet Protocol) PBX had changed the telephone system for a good chunk of companies. The features of a basic PBX are enhanced by the advantage of Internet/Intranet connectivity including unified messaging, call-recording, voicemail speech-to text and a much improved ease-of-use.

VoIP PBX enables the usage of “soft-phones” – i.e., calls handled through software on a computer –making it easy for businesses to record and use data collected from phone calls to analyze and improve their operations.

Some VoIP systems include visual voicemail, email integration, video chat and instant messaging. VoIP technologies allows for various communications services to be integrated or unified (hence the term – “Unified Communications”), providing seamless communications from any device, anywhere.


Business phone systems from even a decade ago are much different than those available today. Modern phone systems are digital, secure and fast. New technologies like VoIP and the cloud have allowed smaller businesses to have enterprise capabilities, without the cost and tech team needed to manage an onsite phone server.

Business communications today are central to the customer experience. Gone are the days (mostly) of frustrated customers calling into a digital abyss where speaking to a live person is impossible. Newer phone systems are mobile and virtual, allowing employees to work from anywhere and still conduct quality calls or online meetings. Business phone systems of today are flexible while still being professional, allowing even the smallest of businesses to improve customer experiences.

Today’s business phones can be deployed in one of three ways: onsite, cloud phones or hybrid, which is a combination of onsite and cloud technologies.


Obviously, the trend for many businesses is to move everything into the cloud. But there are strategic reasons for why some companies choose to install an onsite phone system with their own locally managed hardware. In short, some companies want local control of their system, and thus, prefer to own and manage their phone solution onsite. Plus, as a capital expenditure (CapEx), with an onsite phone system there are no ongoing costs to finance the solution.


A cloud phone is a phone system hosted in the cloud. This means it is a virtual phone system, where a business isn’t required to have the physical hardware onsite in order to have a professional phone system. Phone systems are hosted by a third-party provider, and allow for a scalable model for small business, all the way up to an enterprise-level company.

With a cloud phone system, a business subscribes to the service on a monthly basis and then pays only what they need and use. With a cloud-based system, businesses can easily add new lines or more data. Like VoIP PBX, call data can be used as a strategic advantage to improve customer communication and engagement. And of course, the cloud allows businesses to be flexible and mobile.


Hybrid phone systems combine onsite and hosted solutions with some elements hosted in the cloud and others onsite, which can provide companies with the best of both worlds. For instance, sometimes a company may want to scale and expand its phone system, but its onsite technology has not fully depreciated. A hybrid system can help to bridge this gap by providing a solution that will work with what you have today, preserving your investment while also giving you the greatest flexibility for the future.

Hybrid systems utilize existing hardware, but add in the hosted cloud phone solution. This is a popular choice for companies with a large corporate office with multiple remote locations. The business may elect to have onsite control at the main headquarters, but support remote locations in the cloud, while providing a consistent user experience for all.

Looking back and reflecting, today’s business phone systems are revolutionary and high-tech, especially when you consider where we came from. At Mitel, we have been innovating the business phone system since our inception in 1973.


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