What are the advantages of a private branch exchange?

I'm not a telecom specialist, but here is what I understand concerning the primary reason to consider having a PBX within your company.

Having a PBX allows an organization to reduce the number of phone lines being provided by the phone company by leveraging a smaller number of phone lines to service a larger phone user base. For instance, a small company with 10 employees may have 10 phone lines directly provided by the phone company. So, you are paying for 10 lines plus typical usage charges. What happens when the company has 50, 100 or 500 employees?

At some point, you realize that you don't need one phone line per person (unless you're a call center type operation which has higher demand), rather it seems that only a small percentage of people are on the phone at any one time. So, you take a look at the cost of a small PBX that can service the number of phones you need while reducing the number of phone lines you are paying for from the phone company. Therefore, once you reach a certain cost point, you will invest in a PBX and pay for it from the savings created by not having as large a number of phone lines dedicated to you company. As demand increases, phone lines can be added to the PBX (until max ports are filled) while a multiple number of phones can be installed at people's desks. You will soon discover a suitable planning ratio like 10:50 or 20:200 that will help you define that you need N phone lines to service M phones. Therefore, the next time you add employees you will know how many additional phone lines will be needed to service the phones for the new employees. A PBX vendor should also be able to help you determine your need.

Secondary reasons may include: call holding, call forwarding, voice mail (will need to add a recording machine into the mix), conferencing, etc.