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Choosing a Business Phone System
A Buyer's Guide

A Business News Daily Buyer's Guide

Product and service reviews are conducted independently by our editorial team, but we sometimes make money when you click on links. Learn more.

Choosing the right phone system for your business is a huge undertaking. If this is a task you plan on tackling in 2019, there are a few questions you need to answer first to get yourself on the right track.

  1. 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?
  2. If you do need desk telephones, what kind of service do you want? You need to choose between a traditional landline telephone service, which is provided by a local or regional phone company, and a Voice over Internet Protocol (VoIP) system, which runs over the internet and is available from a multitude of providers.
  3. 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.

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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
  • Landlines
  • VoIP
  • Cloud and on-premises systems
  • Virtual phone systems connect those who call a main business phone number to remote workers on their mobile or home phones.
  • These types of systems work as an extensive call-forwarding solution, wherein calls are transferred to each employee's designated phone (cell or home) when a customer or client calls the main business number.
  • These systems include a variety of features, such as automated receptionists, voicemail, call forwarding, call screening and online faxing.

Pros: This type of service allows businesses with employees working from locations other than the company's office to present a professional face at all times. It also gives remote workers access to a variety of phone system features that mobile and home phones don't offer.

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: Businesses with a large group of remote workers or sole proprietorships.

  • Landlines in this instance are traditional phone systems, typically supported by a local or regional phone company.
  • Landlines, also known as public switched telephone networks (PSTNs), 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's used to 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. The data network within the business is then used to connect each individual phone.
  • Many landline systems are being phased out by phone system providers.

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 should something break. It is only a matter of time before these systems become obsolete.

Best for: Large corporations that have the budget to pay for them and an in-house IT staff to run and maintain them. Necessary for businesses without high-speed internet access.

  • Instead of the copper wires that landlines run on, VoIP phone systems use the same internet connection that a company already uses to get online.
  • VoIP systems provide features 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 a business's phone system from their mobile devices.

Pros: VoIP systems provide a sophisticated phone system complete with all the bells and whistles. These systems are easy to set up and configure, and significantly cheaper than landline systems.

Cons: These systems rely on your internet connection. So, 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.

If you decide that a VoIP system is best for your needs, the next decision to make is how you want it hosted. While all landline systems require you to house the necessary 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 and have the provider host it in the cloud. [See related story: VoIP for Business: Why It Makes Sense]

  • With on-premises systems, all the equipment, which includes 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, 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 are relying on yourself to 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 equipment at all times. Also good for businesses with an in-house IT team that can set up and maintain a VoIP system. Additionally, on-premises systems are better suited for businesses with regulatory or compliance requirements that may be difficult to meet in the cloud.

  • With cloud-hosted 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.
  • 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 that for you. You can set up and configure the system for your business, all 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. Also good for businesses that want quick access to new phone system features or have multiple locations and want their system all on one platform.

Now that you know the basics, you might be ready to make some decisions. If so, check out our best picks for business phone systems.

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?

A: The simple answer is yes. Because so much of a business's success depends on how it presents itself, all businesses benefit from some sort of business phone system.

It is critical for businesses to always present themselves in a professional manner. Having 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 are looking for 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 want to invest in a virtual phone system. Using a virtual phone system allows you to use your mobile device while still presenting a professional image.

Just using 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 you and your employees will find most valuable. This includes 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 service these types of systems, and the parts to keep landline systems up and running, are increasingly difficult to find.

Q: How do I know which phone system and provider are right for my business?

A: The decision really comes down to your available resources. You need to consider your budget, whether you are a growing business, 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're choosing a phone provider, 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.

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. In addition, some providers 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 of using a shared server or paying 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, while large organizations with complex needs likely would prefer a dedicated server that provides the 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 quality of a VoIP system and how it sounds, 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 have to ensure you have enough bandwidth to handle your call volume and that your system 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 features you may find most beneficial:

  • Voicemail
  • 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
  • Interoffice instant messaging
  • 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
  • Integrations with popular programs, such as Microsoft Outlook, Salesforce and Google's services

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, ensuring employees can be reached at all times, regardless of where they are, is critical. You don't want your customers and clients to have to hunt down your employees when they need them or, even 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 in 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 location. This not only allows for 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.

Ready to choose a business phone system? Here's a breakdown of our complete coverage:

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.

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Chad Brooks

Chad Brooks is a Chicago-based writer and editor with nearly 20 years in media. A 1998 journalism graduate of Indiana University, Chad began his career with Business News Daily in 2011 as a freelance writer. In 2014, he joined the staff full time as a senior writer. Before Business News Daily, Chad spent nearly a decade as a staff reporter for the Daily Herald in suburban Chicago, covering a wide array of topics including local and state government, crime, the legal system and education. Chad has also worked on the other side of the media industry, promoting small businesses throughout the United States for two years in a public relations role. His first book, How to Start a Home-Based App Development Business, was published in 2014. He lives with his wife and daughter in the Chicago suburbs.