My first job actually working for a tech company was with ROLM Systems, which built the most advanced PBX (business phone system, it stands for private branch exchange) for its time.  It was so advanced, we felt we could rename it a CBX (the “C” stood for computer-controlled) and we used computer technology to massively advance the art. You can still find ROLM phones around even though they were discontinued for the most part in the late '80s. Some of our more advanced systems could still outperform, in terms of technology convergence, much of what is on the market today.

With the exception of Cisco and its VOIP, phone systems have largely been doing poorly for most of this decade and Nortel, one of the largest builders of this class of product is on life support -- and about to have the plug pulled.

However, we may be at the forefront of the biggest change in telephony with the application of cloud computing to the model, and given how out of date most of the existing hardware is, this cloud move could be more dramatic and faster than in the computing space.

The Birth of the Cloud PBX

Back in the '80s, the biggest problem for PBX sellers was the availability of hosted telephone services by regional telephone companies. These services provide basic services for a monthly fee and didn’t require the capital investment required by a PBX. They had limited capability, but it was good enough for most clients. Even after IBM bought ROLM systems and could buy the ROLM CBX for cost, many of the sites had trouble justifying the switch from hosted services to one of these much more capable systems.

With VOIP, the capabilities of a PBX are shifted to computers and the primary cost/benefit driver for a PBX, which was Least Cost Routing (the process where outbound calls were routed to the least expensive provider) gets a major boost because VOIP calls are routed over existing data networks and off land lines. The resulting cost savings is being effectively used by Cisco and other VOIP phone system providers to justify the cost of their VOIP virtual PBXes.

However, given these are simply sophisticated and purpose-built computer systems just like the related servers, this capability could be provided by the cloud and the related hardware cost shared by a large number of companies. This is the re-emergence of the hosted PBX, but rather than regional phone companies providing the service, it is being initially provided by private firms like RingCentral for small offices.

RingCentral: Cloud Phones

One of the initial problems in using one of these service providers is that the phones didn’t work like a PBX where you could easily transfer calls or have company numbers that would get to all of the firm’s employees.  In addition, the phones tended to either be difficult to set up or you had to use your PC as the phone, which many didn’t particularly like.

RingCentral just took a big step and is now providing not only the capabilities of a virtual PBX, but pre-configuring the phones to be ready to go once they are plugged into a network. No moves, adds and changes. If an employee moves, he or she simply takes the phone, whether it's to another office or even home, and the extension and features on it follow.

Cost is about $99 for four lines with calls to the United States and Canada included in the phone service. Overseas calls are at reduced VOIP rates. You have to buy the phones and RingCentral uses the Cisco VOIP SPA962 four-line phone at the moment and will be adding the newer SPA962 six-line phone before the end of the year.

Wrapping Up: Just the Beginning

This is starting at the low end of the market, but systems like this could easily scale to enterprise levels and pass the PBX responsibilities to managed-service providers. Now that RingCentral has moved from just service to actually configuring phones and eliminating the need for expensive moves, adds and changes,  it is only a matter of time. With systems like this, routing to cell phones or having a traveling VOIP office phone would be relatively trivial. With the prospect of ubiquitous WAN (LTE/WiMax) in three years, the opportunity for a massive market change in business communications is just around the corner.

This may simply be the beginning of the end for office phones as we knew them, and given that I’ve been working toward this since the '80s, all I can say is, “it’s about damn time.” To answer my question, “Could the cloud kill the PBX?” given the PBX is dying anyway, it looks like it not only can but will.  By the end of the next decade, the PBX as we know it will likely be gone.