- When choosing a business phone system, the first decision you have to make is what kind of system you want (landline, VoIP or virtual) and where you want the equipment hosted (on-premises or in the cloud).
- Today's phone systems offer businesses of all sizes a wide range of valuable calling, collaboration and mobile tools.
- Business phone systems give employees numerous ways to tap into their business phone lines when they are away from the office.
- This article is for business owners seeking guidance on what to look for and consider when choosing a phone system.
If you plan to be in the market for a business phone system in 2020, there are several questions you need to consider first to ensure you get the solution that best fits your needs.
- Do you need a full phone system that includes physical desk telephones, or could your business get by with a virtual phone service that relies on mobile devices?
- If you do need desk telephones, what kind of service do you want? Are you comfortable using a Voice over Internet Protocol (VoIP) system, which runs over the internet and is available from a multitude of providers? Or do you want to use a traditional landline telephone service, which is provided by a local or regional phone company?
- If you choose VoIP, do you want to house the system at your business (on-premises) or have your service provider host it (cloud-based)?
We will help you answer those questions, but if you already know what you need and just want to see our recommendations for the best business phone systems, visit our best picks page.
Editor's note: Looking for information on business phone systems? Use the questionnaire below and our vendor partners will contact you to provide you with the information you need.
If you're not sure yet, read on. We'll fill you in on the pros and cons of these types of phone systems:
- Virtual phone systems
- Cloud and on-premises systems
Virtual Phone Systems
- Virtual phone systems connect those who call a main business phone number to remote workers on their mobile or home phones. [Learn more about virtual phone numbers.]
- These systems work as an extensive call-forwarding solution, transferring calls to an employee's cell or home phone instead of a desk phone when a customer calls the main phone number.
- These systems include a variety of features, such as automated receptionists, voicemail, call forwarding, call screening, toll-free numbers and online faxing.
Pros: This type of service allows businesses with offsite employees to present a professional image at all times. It also gives remote workers access to various phone system features that mobile and home phones don't offer. For more information, see our review of Grasshopper, our top-rated virtual phone system.
Cons: Virtual systems aren't full-fledged phone systems. Your calls are often still processed on your mobile or home phone network. This means you are charged for the call on the virtual system and use up your mobile or home phone minutes. Some virtual services allow you to make calls via internet connection when using the provider's mobile app.
Best for: Small businesses with remote workers or sole proprietorships
Traditional Landline Systems
- Landlines in this instance are traditional phone systems, typically supported by a local or regional phone company.
- Also known as public switched telephone networks (PSTNs), landlines are analog systems that run via the telephone company's traditional copper wiring.
- To run a landline service, you need on-premises PBX (private branch exchange) hardware. This is the hardware that can create multiple extensions and provide phone system features, such as call transferring and call directories.
- Some landline systems today are considered hybrids with VoIP systems. There is a traditional phone line that connects to a business's data network, which it uses to connect each individual phone.
- Many phone system providers are phasing out landline systems, so it might be difficult to find one that still offers this type of service.
Pros: Landline systems are a reliable, time-tested solution that many companies are comfortable using.
Cons: Most phone system providers are moving away from landlines, making them more difficult not only to purchase but to repair. It's only a matter of time before these systems become obsolete.
Best for: Large corporations that have the budget for them and an in-house IT staff to manage and maintain them; necessary for businesses without high-speed internet access
VoIP Phone Systems
- Instead of the copper wires that landlines run on, VoIP phone systems use the same internet connection that a company already uses.
- VoIP systems provide a feature set that previously only large corporations using expensive PBX hardware had access to, such as automated attendants, call queues, and computer integration, which allows voicemails to be sent to email inboxes and computers to be turned into softphones.
- VoIP systems give remote workers access to the business's phone system from their mobile devices.
Pros: VoIP provides a sophisticated phone system with all the bells and whistles. These systems are easy to set up and configure, and they are significantly cheaper than landline systems.
Cons: These systems rely on your internet connection. If you're in a community with spotty internet service, this type of phone system won't work for you.
Best for: Small businesses wanting the functionality of a sophisticated phone system at a reasonable price and businesses that want their remote employees to have access to the phone system See our review of Ooma Office for the best phone system for remote teams.
If you decide that a VoIP system is best for you, your next decision is how you want it hosted. While landline systems require you to house the equipment inside your business, VoIP systems give you the option to buy your equipment outright and self-host or to rent the equipment from your service provider, who hosts it in the cloud. [Read related article: VoIP for Business: Why It Makes Sense]
On-Premises VoIP Systems
- With on-premises systems, all the equipment, including the PBX hardware to keep the phone system running, is housed within your business.
- On-premises systems require a large capital expenditure, as you are purchasing the equipment upfront.
- While you pay one-time fees for all the hardware with a self-hosted system, with an on-premises system, you pay monthly fees for your SIP trunking, or PRI circuit, which is what allows you to make and receive calls.
- Your IT staff is responsible for maintenance, repairs and upgrades of the system.
Pros: You are always in control of your service. You and your IT team ensure it is up and running and configured how you like.
Cons: There is a significant upfront cost, since you have to buy all the equipment. Additionally, you need someone on staff who can service and maintain the system.
Best for: Businesses that don't feel comfortable using the cloud and want total control over their system and access to the equipment at all times; businesses with an in-house IT team that can set up and maintain a VoIP system; businesses with regulatory or compliance requirements that may be difficult to meet in the cloud
Cloud-Based VoIP Systems
- With cloud-based systems, there is no maintenance or hardware other than phones to worry about. The service provider houses, maintains and upgrades all of the PBX technology for you. Check out our review of RingCentral, a robust cloud-hosted VoIP solution.
- The cloud allows growing businesses to easily add new lines and provides quick access to new features.
- Businesses typically pay a monthly fee on a per-user basis.
Pros: There is no PBX hardware or dial-tone service to purchase and maintain. Your provider takes care of all that for you. You can set up and configure the system for your business from your computer.
Cons: You aren't in control of the hardware. If the system goes down, you have to rely on your provider to fix it as quickly as possible.
Best for: Growing businesses on a fixed budget that don't have an IT staff to operate and maintain PBX hardware; businesses that want quick access to new phone system features or have multiple locations and want their system all on one platform.
Business Phone System FAQs
Still not sure if you even need a business phone system, or if VoIP is a fit for you? No problem. Here are some questions and answers that may help you come to a decision.
Q: Do I need a phone system for my business?
A: The simple answer is yes. Because so much of a business's success depends on how it presents itself, all businesses can benefit from some sort of phone system.
It is critical for businesses to always present themselves in a professional manner. Letting customers and clients reach you on a business line that is often answered by an automated attendant is an excellent way to achieve that. Even businesses that don't want to spend money on a full-fledged phone system can still present the image they want by using a virtual system.
Q: Can't my employees and I just use our mobile phones for business purposes?
A: It is definitely possible if you invest in a virtual phone system. This type of system allows you to use your mobile device while still presenting a professional image.
Using just your mobile line, without a virtual system, presents a few issues. First, it doesn't convey a professional image to your customers. Second, mobile lines don't provide the features and tools that small businesses find most valuable, such as voicemail to email, call forwarding, call screening, music on hold and online faxing.
Q: I've always had a traditional landline system. Will I be at a disadvantage if I continue using this type of system in the future?
A: The problem with landline systems isn't their functionality; they still operate at a high level. The biggest issue you will run into with traditional landline phone systems is that new options are no longer being built. This means no new technology is being developed for landline systems.
No new software upgrades are available for landlines either. This means you won't have access to many new features and capabilities.
Finally, finding experts to provide customer service and support for these systems, and the parts to keep landline systems up and running, is increasingly difficult.
At some point, likely in the near future, new features for VoIP systems won't be compatible with landline systems. Depending on the feature, that could very well put your business behind the eight ball.
Q: How do I know which phone system and provider are right for my business?
A: The decision really comes down to your resources. You need to consider your budget, whether your business is growing, whether you have an IT staff capable of running and maintaining an in-house phone system, and whether you have access to a high-speed internet connection.
When you choose a phone provider for your small business, it is important to find a service that not only has the features and tools you want in a phone system but also offers the level of customer support you expect from a vendor partner. Check out our review of 8x8, our top choice for the best phone system for small businesses.
If you are considering a cloud-hosted system, one factor you want to give serious thought is uptime. This is how often the system is operational. When the system is down, you won't have access to your telephone services. The best providers have numerous data centers around the world to minimize downtime with the service. When speaking with different providers, ask about their uptime stats and whether they have any guarantees to give you money back should the service be down for longer than the guaranteed time each month.
Q: With cloud systems, is there only a monthly fee, or are there other costs I should be aware of?
A: There are some upfront costs with cloud-hosted phone systems. You most likely will pay for IP phones, which range from $50 to $600 each. Some providers also charge setup and training fees.
Q: With a cloud-hosted system, am I sharing a server with other businesses, or is there a server just for my business?
A: Many cloud phone system providers offer businesses the option to use a shared server or pay extra for a dedicated server. This decision depends on if you want the system solely devoted to you, or if you want to buy it as a service on the same platform the provider offers to everyone else.
Smaller businesses without a lot of special requirements and customizations are typically comfortable using a shared service. Large organizations with complex needs likely prefer a dedicated server that provides the high quality of service and privacy they are looking for.
Q: Is the connection on a VoIP system as good as on a landline?
A: While some users might be concerned about the sound quality of a VoIP system, the technology has come so far that it's virtually impossible to tell the difference between landline and internet-based calls.
To ensure call quality is clear and strong, your business has to be conscientious about how you set up your data network. You need to ensure you have enough bandwidth to handle your call volume and that your network is set up to prioritize voice calls over other types of internet traffic.
Q: What types of features are available in a VoIP phone system?
A: While feature-rich phone systems were previously used only by large corporations, today's VoIP options give small businesses the same benefits. Here are some of the calling and collaboration features you may find most beneficial:
- Voicemail to email
- Voicemail to text
- Voicemail transcription
- Call forwarding
- Call recording
- Call queues
- The option of both local and toll-free numbers
- Interactive voice response (IVR)
- Conference calling
- Automated attendants
- Extension dialing
- Ring groups
- Directory assistance
- Call transferring
- Internet faxing
- Call reports
- Call monitoring
- Missed-call notifications
- Video conferencing
- Online meetings
- Instant messaging
- Text messaging
- Integrations with popular programs, such as Microsoft Outlook, Salesforce and G Suite
- International calls
Q: Can remote employees access a business phone system?
A: VoIP technology gives employees the freedom to take and make business calls from anywhere, without the need for a business-dedicated cell phone. Business VoIP systems offer smartphone applications and mobility features that give employees the full functionality of their desk phones anytime, anywhere.
Q: Why should I care if my employees can access the phone system when they're out of the office?
A: In today's age of remote workers and flexible work arrangements, it's critical that employees can be reached at all times, regardless of where they are. You don't want your customers to have to hunt down your employees when they need them or, worse, not be able to reach them at all.
Mobility ensures that your employees are always reachable. It also gives them the freedom of always being connected without sharing their personal phone numbers.
Q: I keep seeing references to unified communications systems. How are those different from a phone system?
A: Many of today's phone systems are unified communications systems. These systems combine voice calling, messaging, and video or online meetings into one service. They also offer audio conferencing and online faxing. Many of today's phone system providers offer these services on their platforms.
Solutions that aren't unified communications systems are those that only offer voice calling and related features.
Q: If my business has multiple locations, does it matter if I have an on-premises or a cloud-based system?
A: While both on-premises and hosted systems can support organizations with multiple locations, a cloud-hosted solution can simplify things.
Cloud-hosted systems don't require you to install complex PBX equipment inside each of your locations. This not only allows easier setup but can also save you money. These cloud-hosted systems can be managed from one online platform, which also makes using them an easy task.
Q: What options are available for the number of phone lines a small business phone system can offer?
A: That is one of the beauties of today's cloud-hosted VoIP systems – there aren't many limitations to the number of phone lines your business can access. Typically, the more lines you have, the cheaper your per-user cost is. Moreover, adding new lines is a simple process. With on-premises systems, you have to do actual work on your equipment to install new lines. With cloud-hosted systems, you can add a new line in seconds straight from your computer. [Read more about multiline phone systems.]