Where to run your telephone system

A telephone system today is nothing other than an application running on a server that needs CPU, RAM, some space on a hard drive and stable network access. The server can be run practically anywhere — but what is the best location?

Web and email servers have gone practically completely hosted. Only few companies still host these services on their own in-house data center any more. Hosted services in the cloud after all have an overwhelming number of advantages compared to services delivered on premises. However the private branch exchange (PBX) service is lagging behind. Why is that so?

A modern router that supports telephony

At first glance, there are a lot of commonalities between the hosted PBX and other hosted services. Hosting IT services has become complex, sometimes very complex with the setup of a large number of involved servers and services. It is getting harder for internal IT staff to keep those services running. Instead of having employees deal with the details, it is easier (and cheaper) to have an external company take care of it.

Sharing resources adds to this. Instead of running a separate server for each tenant, modern VoIP services can share resources among many tenants. Just like this is the case with email and web services. IPv4 addresses are split up on the same port between many domains.

All this applies to PBX services as well. The days when the PBX was a piece of hardware with a port for every handset and analog lines are gone. The modern PBX plugs into email, CRM and many other services. Staff that wants to do a proper PBX integration needs to dive deeply into API and sometimes even code to make the integration happen.

WebRTC is adding to the pressure. While many people are not even aware of it, it works under the hood of messaging services as the technology to deliver voice from one endpoint to another. The browser is on its way to becoming the universal application delivery platform that replaces the operating system. Telephony is becoming a web service.

Obstacles for moving the PBX service into the cloud

Office telephony has critical requirements that are harder to deliver from the cloud than other cloud services. One and probably the most crucial difference to web services is that delay matters a lot. If voice has to travel too far, it makes conversations difficult. While a response time of 500 ms is no problem for web services, it is a show stopper for voice packets. Hosting a PBX service requires locations that are much closer than web services.

But response time is not all. Many offices simply do not have an internet connection which is stable enough to deliver the reliability that can compare with telephone lines. Voice packets must be delivered with higher priority than email packets unless there is a ridiculous oversupply of bandwidth to the office. Many of the early adopters had to learn that being able to send email does not mean that they can make a phone call.

Then there are certain devices that need the local network. Overhead paging is done using multicast, which cannot be sent from hosted services into the LAN. And firewalls easily get confused with voice packets ending up in tricky technical problems that are hard to troubleshoot for people not familiar with the SIP protocol.

The European GDPR added angst to uncertainty. People simply don’t feel comfortable putting a critical service like telephony into the hands of outside operators. The LAN still feels more safe for internal calls than the public internet, although the facts might be different. Although most of those hurdles are solved with a modern hosted PBX, many businesses simply feel more comfortable running their PBX in the LAN.

Next stop: Router

Over the years, the router has become a powerful platform for delivering services in the local network — and it is on its way to becoming the only platform to deliver services in the LAN. This fits well into an environment where services are mostly run in the cloud. Those services that can be reliably run in the cloud will run there, and the rest will run in the router. Exceptions will apply only for large local networks and for networks where special requirements for services and privacy dictate the use of local servers.

Today routers come with a lot of features and services, like WiFi, modem, switch, DHCP, DNS, and an intelligent firewall. It makes a lot of sense to have the PBX service on the router as well. Who cares how much resources lets say a DHCP server needs? Router has become so powerful that running a PBX on the router is not a problem anymore — both from memory and from CPU point of view.

Running the PBX on the router comes with additional benefits. The provisioning of connected devices becomes a lot easier. Pairing a WiFi device can be done by pushing a button, why not pairing a VoIP phone? The PBX can talk directly to the DHCP server to find out what devices are in the LAN and where they should pull their configuration from.

And then there is DECT

Silicon Valley was never in love with DECT. However DECT has silently, swiftly and completely replaced analog cordless telephones at home and in small offices. Thus it makes a lot of sense to include not only the WiFi base station, but also a DECT base station into the router. Like pairing a new WiFi device, DECT handsets can be paired easily with the router. Modern DECT has standards not only for making phone calls. Other features like address book and call transfer are also available.

But DECT can also be used for other things. Low power DECT allows for building cheap battery powered devices that don’t need a new battery for many years. This makes it possible to read meters or light switches that are just glued to the wall without any electrical connection (and many other things). Having a device that can receive the signals and pass it on into the cloud or other devices in the LAN over traditional Ethernet is another function that makes a lot of sense at home and in the office.

At the end of the 1990s, there were very successful products that combined DECT, PBX and ISDN. Customers loved the simplicity of setting up and maintaining a device that took care of their communication needs in the office. It makes a lot of sense to put that into a modern router now.


Putting it all together, it is a surprise to me that business are still installing PBX on PC servers on premises. The time spent on installing and updating the operating system can be used for more productive things. In many cases the lifetime electricity cost for a server alone exceeds the cost for an appliance that does it all.

My prediction is that the number of new PC-based on-premises PBX installations will decline at least by 50 % over the next 3 years. Many will move into the cloud, but many will choose the PBX in the router instead. We will see what the ratio between those two choices will be.



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