IP PABX cuts or reduces the cost of office communications because by allowing different offices to share in a common phone line, it reduces the number of direct lines which would otherwise be installed per office.

Because a major part of IP PBX functionality is provided in software, it is relatively inexpensive and easy to add additional functionality, such as conferencing, control of live calls, Interactive voice response (IVR), (text to speech/automatic speech recognition),Public switched telephone network (PSTN) interconnection ability supporting both analogue and digital circuits, Voice over IP protocols including SIP, Inter-Asterisk eXchange, H.323, and others.