Choosing a Business Phone System: Hosted, Teams or Your Own PBX

Why you may be choosing a new phone system now

Many small businesses are replacing their phones because they have to. The traditional telephone network (the PSTN), which carries analogue and ISDN lines, is being retired, and phone services are moving to digital services that run over broadband. This is not the same as removing copper cabling: your broadband may still reach you partly over copper. Openreach's scheduled date for withdrawing its traditional line product (WLR) is 31 January 2027, though individual lines may be moved before then.

If your current system relies on those lines, or your on-site phone box is old and hard to get parts for, now is a sensible time to look at what comes next. Ask your provider which of your lines are affected and what their migration dates are.

There are three main routes. Each can work well, and the right one depends on how you already work, who will look after it and how many people need phones.

The three main options

A hosted or cloud phone system from a provider. The provider manages the phone platform, sometimes on third-party cloud infrastructure. You get desk phones, mobile or computer apps, and a web portal for settings. Pricing is usually a monthly fee per user, sometimes with call bundles and extra charges for add-ons such as call recording. The provider looks after the platform, but you still manage users, call routing, your internet connection and local equipment.

Microsoft Teams Phone. If your staff already use Teams for chat and meetings, they can make and take ordinary phone calls there too. You need suitable Microsoft licences plus a connection to the phone network. That can be a calling plan from Microsoft, Operator Connect, where a telecoms provider supplies numbers and calls through Teams, or Direct Routing, where a provider connects its own service to Teams, often as a managed offering. Ask suppliers to separate the cost of Teams and Teams Phone licensing, the telephone service and any additional features. Microsoft changes its packaging from time to time, so check what each licence includes.

Running your own software phone system. Products such as 3CX are phone systems you license and run yourself, on a cloud server or a machine in your office. You then buy SIP trunks (the lines connecting you to the phone network) from a separate provider. Licences are typically annual and often priced by users or simultaneous calls, with SIP trunks charged per channel or per minute. This gives you more control and can be cost-effective, depending on licensing, hosting and support costs. Someone does have to install updates, keep it secure and fix it when it goes wrong.

Features: work out what you actually need

Before you speak to anyone, write down how calls flow in your business today and how you would like them to flow. That list is what you compare against. Features worth checking include:

• Ring groups and call queues, so calls reach the right team and callers wait in order.
• Out-of-hours rules that send calls to voicemail, a mobile or a message automatically.
• Voicemail to email, so messages are not missed.
• Auto attendants ("press 1 for sales"), a standard feature that does not need AI.
• Call recording, for training or disputes.
• Mobile apps that let staff use the business number on their own phone.
• CRM integration. Check your specific CRM is supported, not just "CRM" in general.
• AI features, such as answering calls in natural speech, transcripts or call summaries. These are changing quickly.

Recording and AI both involve personal data, so UK GDPR applies. You need a lawful basis (consent is not automatically the right one), appropriate privacy information for callers, restricted access and set retention periods. Check the provider's data processing terms, whether data goes overseas and whether recordings or transcripts are used to train AI. The ICO has guidance. Test AI features with controlled calls before real callers use them.

Your situation may be slightly different. ask a question below ↓ and our editorial team will reply with our advice.

The practical things that cause problems

Number porting. Ask the new provider to confirm they can port every number you use. Porting can also end services linked to the old line, including broadband on some older arrangements, so agree dependencies, any downtime and how inbound calls will be diverted before the port. Do not cancel your old service until the move is complete.

Older equipment. Alarms, lift emergency phones, payment terminals and fax machines may rely on old-style lines. Porting a number does not make the equipment compatible. Get confirmation from whoever maintains each device, not just the telecoms provider. An analogue adapter is not a universal fix.

Broadband and call quality. Every option runs over your internet connection. Choppy or one-way audio usually comes from congestion, packet loss, jitter, weak Wi-Fi or firewall settings. Test calls under normal peak load, including from home workers. A backup connection, such as a 4G or 5G router, is worth considering if phones are central to your business.

Power cuts and 999. Old line-powered corded phones could work in a local power cut, though cordless phones and office systems often could not. Digital phones need battery backup covering the router, any fibre box, network switches and phones or on-site system, and even then the provider's network may be affected. Providers must take measures to keep emergency calls available during power cuts. Ofcom's guidance includes at least one hour of backup and a free solution for customers at risk because they depend on their landline. That does not mean every business gets free equipment, so ask what yours provides. Also check 999 calls send the correct address, especially for mobile apps and home workers.

Security. Use multi-factor authentication, apply updates promptly, limit administrator access, block international and premium-rate calls you do not need, set spending alerts and keep backups where relevant. The NCSC's small business guidance is a good starting point. If you suspect toll fraud, contact your provider immediately, then report it through the official fraud-reporting route. GOV.UK explains the current one for your part of the UK.

Costs, contracts and making the decision

Ask for a quote covering the full contract term: setup, handsets and headsets, porting, licences, chargeable call destinations, recording storage, support, price rises and whether prices include VAT. Check the notice period, early exit costs, whether you own or lease handsets, and whether you can take your numbers, recordings and settings with you when you leave. Find out support hours, contact methods and fault fix times.

1. Map how calls should be handled, who needs a phone, which numbers you must keep and what equipment uses your lines.
2. Check your broadband and network, or plan an upgrade.
3. Shortlist two or three providers across the routes that suit you.
4. Trial each with real calls, including from mobiles and home workers.
5. Ask for a reference from a business of similar size and type, and call them.
6. Compare full-term costs, exit terms and support before signing.
7. Agree a porting date and keep the old service running until every number has moved.

If you already work in Teams all day, Teams Phone is worth comparing. If you want the provider to run the platform, a hosted system usually fits. If you have reliable technical help, running your own can make sense. Test outage arrangements, emergency calling and support before committing.