It’s easy to forget about voice communication. Modern forms of customer engagement, including web response forms, email, and social media, are the darlings of the news media largely because they’re new and novel.

But according to recent surveys, voice communication remains an essential and often preferred method of customer service and support.

of customers are frustrated by the level of difficulty involved in doing business with a company

of customers complain that the process of connecting with a live representative takes too long

of customers hang up when they can’t connect with a live person

of U.S. customers would readily pay more for better service

of contacts have been attributed to phone support for products and services that rely on emotional branding

Regardless of industry, customers prefer the live support of agents through a business phone system. And as sophistication increases in other areas of communication, they also expect your phone system to keep pace with the latest technological advancements.

Two Main Systems

Business phone systems fall into two main categories: on-premise and hosted. Though they’re both capable of providing the same features and similar levels of service, your individual needs and intended use will have a significant impact on the setup you choose.

On-Premise Phone Systems

Are also known as Private Branch Exchange networks or PBX for short. These phone systems rely on traditional handsets and networking equipment that is hardwired into your facility or provided via the Internet through Voice over Internet Protocol (VoIP). This equipment can be owned or leased and is networked through on-site servers. In this scenario, you are responsible for all maintenance of equipment and software upgrades.

Hosted Phone Systems

Are entirely cloud-based. They rely on an off-site data center, thereby removing the costly burden of maintenance and equipment. Popular among small businesses and companies that support a mobile workforce, hosted solutions can use a full range of integrated communications equipment, with IP phone and related devices that are typically plug-n-play. In addition to cost savings, many buyers cite access as one of the primary benefits of a hosted business phone system – allowing employees to connect to the system from any location in the world. The one disadvantage is the need for an Internet connection to access services.

Buying Checklist


Which features are essential and which can you do without? Start your comparison by analyzing both the standard and advanced features available with each system. Call management, conferencing and collaboration, music on hold, voicemail, and integration are standard features, especially with cloud-based systems. Know what you need the system to do to complement your line of business then move forward from there.

Upfront Costs

Do you have a large facility that requires an elaborate, integrated phone system? Generally speaking, hosted systems tend to be more affordable than on-premise setups, especially for small businesses or those with a limited range of users. Savings is achieved by avoiding the purchase of specialized physical equipment (employees are often able to use standard mobile devices) as well as the cost of wiring a system into your facility.

Total Cost of Ownership (TCO)

What can you afford to spend long-term? Maintenance of equipment and software upgrades add to the cost of an on-premise solution. If you don’t have in-house IT specialists, you’ll have to purchase a service contract or hire a third-party contractor. In contrast, cloud-based phone systems have all necessary system upgrades built into their monthly service fee.

Current Infrastructure

How advanced is your facility? For example, are you pre-wired for connection to VoIP or does the building still rely on a legacy system like the Public Switched Telephone Network (PSTN)? Working with a qualified business phone system dealer is often the easiest way to sort out the most efficient and cost-effective way to move forward for your physical location and business needs.


What’s on the horizon for your business in the coming years? The phone system you choose should be adaptable both in scale and cost to keep pace with your business needs as they change. Regardless of the option you select, make sure it has the broadest possible integration. This will allow you to add or remove components as the need arises through software that ties together all on-site and cloud-based resources.

Phone System Types

Business phone systems are shifting from the costly, antiquated key systems that offer limited capacities to one of a variety of Private Branch Exchange setups. The reason is three-fold, as a PBX is capable of delivering:

  1. A far wider degree of flexibility
  2. Simplified installation, modification, and setup
  3. The most advanced features for voice communication

PBX systems are split into three main configurations that vary in their upfront costs and total cost of ownership (TCO). With options that include hosted, cloud-based solutions, and on-site installations, a highly simplified way of looking at the buying process is to view a hosted phone system as a business expense and an on-site installation as a capital investment.

Your Three Option Include

Physical Phone System (capital investment):

Traditional PBX system that relies on copper wiring yet remains scalable for the addition of lines and features

Virtual Phone System (business expense):

Cloud-based and hosted by a phone system provider with all connections and features managed virtually "in the cloud"

PBX VoIP System (capital investment):

Provides the same features and many of the same cost-cutting operational efficiencies as a cloud-based model yet it’s operated and maintained on-site through your company's server

Physical Phone System
Capital Ivestment

The term physical phone system used to refer to Key systems, a limited setup designed for use by less than 50 employees. And while this type of business phone system is still in place in older buildings, physical phone systems are rapidly being replaced by PBX systems.

PBX business phone systems integrate hardware and switches that are responsible for handing and routing calls. Controlling all inbound and outgoing calls, a PBX system can be as small as 20 extensions or as large as several hundred. This scalability makes it ideal for a wide range of businesses yet it tends to be primarily used by larger companies that have the in-house IT and technical staff to manage and maintain the equipment and companion software.

Offering a combination of basic and sophisticated features, PBX phone systems are capable of supporting even the most complex implementations, with call features that are easily applied to individual lines or the system as a whole. The architecture of the system is controlled via software, enabling IT staff to instantly add any available features to a designated extension.

Most importantly, a PBX installation is totally programmable and tends to be more reliable than systems based on web connectivity (at least within a single physical location). Employees that require mobile connectivity often have to use their own mobile handset and are connected to the system through an assistant or an operator. This often represents additional costs and inconvenience for companies that have a mobile workforce. Physical phone systems also tend to be somewhat more complex in terms of operation than virtual or VoIP solutions.

Estimated Costs: Physical Phone System

The costs of a PBX business phone system are numerous and may include everything from wiring and equipment to licensing, installation, and training. Estimated costs can be calculated per phone and range from $120 to $220 per extension. Unlike other systems that get cheaper with each additional component you add, the cost of a business phone system increases in tandem with its complexity.

For example, with a small installation of 15 phones, you can expect to pay around $2,000 or about $130 per extension. In contrast, larger systems of 50 phones or more will start around $11,000 or about $220 per extension.

Virtual Phone System
Business Ivestment

Commonly referred to as a "hosted business phone system," virtual setups are operated and managed entirely through the web. Hosted systems provide a range of cost-saving benefits for small and mid-size companies while extending the reach of the system itself throughout the world. This connectivity has become a significant asset to organizations with a large number of mobile employees, as well as those who employee freelance workers within varied geographic locations.

In addition to ease of use and mobile access, the primary benefits of a hosted solution are advanced features and integration with a host of business software. Among buyers, some of the most important features include:

  • System configuration and management via the web
  • Voicemail with limitless storage capacity
  • Multiple business phone numbers
  • No busy signal
  • Call routing that tracks the location of employees to automatically ring calls through to their current location
  • Queue management to expedite callers through the system, quickly and efficiently

In addition to the most advanced calling features, hosted business phone systems provide two critical benefits to modern business: reliability and outsourced maintenance.

  • Reliability. Unlike a standard PDX system that can become overloaded during heavy call volume, hosted platforms are essentially limitless. They provide the same expediency and level of service regardless of call volume and remain up and running during power outages, natural disasters, and similar disruptions.
  • Outsourced maintenance. Hosted phone systems provide their services via web connectivity, requiring no on-site control units or servers. The maintenance of this hardware, and the software that controls the system, is conducted behind the scenes by the provider. This has the potential to save thousands of dollars each year on even the smallest systems, making this type of setup ideal for small to mid-range companies that cannot support in-house IT staff.
Estimated costs: Virtual phone system

Hosted business phone systems have no upfront costs for cloud-based VoIP hosting. The only exception is the purchase of digital phones or mobile handsets as analog phones are not compatible with this type of business phone setup. Services are provided for a monthly subscription fee based on the number of phones (extensions) and the inclusiveness of the features you opt for. The more extensions, the lower the monthly price per extension. It’s also worth noting that discounts may be available for lengthier commitments of one to two years.

Monthly subscription fees range from:
  • $35 to $40/month for 1 to 2 extensions
  • $25 to $30/month for 10 extensions
  • $35 to $40/month for 20 extensions
  • $20 to $30/month for 20 to 100 extensions
  • $19 to $25/month for 100+ extensions

Hosted plans often charge for extras such as toll free services and even voicemail in some cases. Other enterprise or professional plans provide them at a higher monthly rate. Smaller companies will probably benefit from a basic plan that can be supplemented with add-on services. Large organizations or companies with heavy call volume will typically find the inclusiveness of a deluxe package more cost-effective.

VoIP Phone System
Capital Ivestment

Voice over Internet Protocol (VoIP) technology uses a broadband Internet connection and digital IP-enabled telephones to replace the extremely limited Legend systems of the past. By incorporating the advancements of digital communication, VoIP systems can transcribe and send voicemails to email, place and receive calls through a web-enabled computer or mobile device, and create efficiencies throughout your organization due to a system that’s designed to cost-effectively handle dozens to hundreds of concurrent calls.

Similar to a standard on-premise PBX setup, VoIP business phone systems are controlled through an IP PBX. Each unit supports a set number of extensions or concurrent calls, ranging from 50 to more than 500 per unit. PBX units can also be networked to further increase the scale of your voice communication setup.

This expandability, in combination with advanced calling features, has proven beneficial to organizations that include medical offices and hospitals, call centers, insurance agencies, law offices, and a host of professional services that rely on voice communications for effective operation.

In fact, VoIP is quickly becoming the preferred telephony system due to the ease with which it can be integrated with internal customer relationship management (CRM) and medical practice management (MPM) software platforms, among others. It automatically syncs with records and accounting databases to provide increased access and flexibility through smartphone apps and mobile connections. Ideal for organizations that have mobile employees, users simply log into the mobile app and their handset becomes an extension of your business phone system, even displaying the caller ID associated with your company.

The other benefit of a VoIP system is that it minimizes upfront costs, preventing you from expenditures associated with installation and maintenance of hardware and infrastructure. Apart from the phones themselves and the license agreements (assessed per extension), the costs for this type of system are minimal, with features that can be added as your needs change.

Additional benefits of a VoIP setup include:

  • Accessibility with no international or long-distance fees – Connect your phone to the system via the web anywhere in the world.
  • Automatic updates, backup and failover – Any changes to the system happen behind the scenes and are corrected through platform updates. Backup and failover features provide redundancies that ensure continuous uptime and minimal technical issues.

Above a certain threshold, it’s more cost-effective to purchase an on-premise VoIP system than pay a monthly fee. For companies with more than 200 employees, an on-premise PBX is often preferable to cloud-based setups due to its cost-saving potential and system control. The purchase of an IP PBX frees you from ongoing monthly service fees. Organizations of this size also typically employ a full-time IT specialist responsible for maintaining the system and any software updates, further cutting costs associated with post-sale service agreements.

In contrast, hosted VoIP tends to work best for companies and organizations with 5 to 15 employees. Mid-range to large businesses requiring 100 or more extensions also opt for a cloud-based business phone setup due to the mobile access and ease of use it provides.

If you’re unsure which business phone system is best suited to the scale and needs of your organization, start by speaking to a service provider or reseller that specializes in VoIP technology.

Estimated costs: VoIP phone system

Two costs factor into a VoIP phone system: the base, or PBX, and the phones themselves. An IP PBX controls the entire phone system and represents a substantial portion of the upfront capital expenditure. The cost increases as lines and accessories are added. In general, you can expect to pay as little as $350 and as much as $7,500 for a small unit capable of supporting 15 to 30 concurrent calls (which is usually more than adequate for a small business. The inclusion of a built-in server and pre-installed open source operating systems will drive up the cost. Larger models cost an average of $19,000 to $25,000 and support more than 400 concurrent extensions. Easily networked with additional PBX units, these models typically include expansive RAM (up to 4 GB) and internal hard drives (with up to 250 GB of storage) to support built-in voicemail, call routing, and intercom systems.

New digital IP telephones start around $60 but tend to be somewhat limited in the features and sound quality they provide. Look to mid-level handsets that sell for $200 to $400 per unit. These models offer built-in video conferencing, Android operating systems, Bluetooth and Wi-Fi, and stereo sound.

Phone System Features

Business phone systems offer a wide range of features that improve productivity while enhancing the service experience for your customers. The type of service and size of the system you select will determine which features are included and which may be optional with a deluxe package. Basic features are viewed by most buyers as essential components of a business phone system. Advanced features are often more applicable to specialized situations. In either case, phone system features must be easy to access and use, with common functions that are efficient and intuitive. Most employees devote little time to learning a phone system and tend to avoid complex menus and features that slow them down. So when comparing systems and business phone plans, make sure the following are as accessible and self-explanatory as possible.

Basic Features

The most popular features included with a business phone system are:

  • Conferencing
  • Auto-attendant
  • Music-on-hold
  • Dial by name, dial by extension, or dial from directory
  • Display Phones
  • Speakerphones
  • Voicemail
  • Smartphone apps

Also known as a conference bridge, the range of this service varies widely. Some physical phone systems accommodate between four and eight lines on a conference call. Virtual systems often support a call with up to 12 participants or more depending on the system.


This feature is akin to having a receptionist on duty 24 hours a day. Auto-attendants answer your phones and instruct callers how to reach the individual or department they need, or automatically transfer the caller to the appropriate extension. This feature is essential if you routinely receive calls outside business hours, consistently have a heavy call volume, or rely on advanced features such as ‘find me’ or ‘connect anywhere’ to forward calls to a specific location when away from the office.


Music on hold enables you to broadcast your choice of music to callers as they wait to connect with a live representative. But this feature is not used exclusively for music. Many companies now use the opportunity to promote, cross-sell, and advertise products and services through customized messages. Others increase the connection with their brand by featuring facts, figures, and PR highlights.

Dial by name, dial by extension, or dial from directory

As indicated by the statistics in the introduction to this guide, callers demand simplified ways to connect with your company. This feature provides an auditory directory that can be navigated by selecting the desired name or department through the phone’s keypad. Systems that support voice activated navigation further simplify the process, enabling callers to simply speak the name of the person or department they’re calling for.

Display Phones

Designed to simplify your internal communication, display phones list caller information including the name and extension of the internal caller as well as duration of the call. When the phone is not in use, many displays include the time of day and the names or extensions of any programmable functional buttons. Two types of displays exist, standard black and white LCD screens (about 3 inches in width), and color LCD screens (about 4 inches in width) that allow the user to personalize the background with a custom digital image.

Speaker Phones

Speakerphones provide hands-free communication for workers and representatives. There are two main types. The first, known as half-duplex, allows only one person to speak and be heard at a time. The other, full-duplex, enables both parties to talk and be heard simultaneously. Full-duplex models are often the preferred option as they provide a more natural feel to the conversation. A third option also exists for those who routinely participate in conference calls or have to hold for long periods of time. This function is known as "listen only" mode. It enables you to monitor the call while blocking any conversation or noise in your office or surrounding environment.


Where would we be without voicemail? This critical tool is one of the most basic features of any modern phone system. But again, the type and size of the system you select has a bearing on the overall functionality of this feature. The main consideration to be aware of is voice storage. Voice messages are digitized and stored on a server similar to your computer hard drive. Physical systems may house internal hard drives that offer up to 24 ports with 1,000 hours of voice storage. In comparison, many cloud-based phone systems often provide unlimited voicemail storage. However, these web-based services often limit retention, saving messages only up to 90 days. They also tend to limit message length to six minutes or less. One way to process voicemail is through a companion service that converts each voicemail into a text message or email, automatically delivering it to the intended recipient. This provides a written record of the call and greatly simplifies the processing of long or detailed messages. Determine your needs by factoring in the number of individuals who will be using the system, the volume of calls you receive, and the frequency with which callers leave voicemail. If you maintain a separate voicemail system on your in-house servers, be sure to have your new phone system vendor confirm its compatibility with the system you intend to implement.

Smartphone Apps

These are typically standard with most cloud-based services. They’re designed to allow the user to connect with your business phone system from anywhere in the world, simply by starting the app. Ideal for small businesses or those with employees who work remotely or on the go, they transform any smartphone into a mobile business line.

Advanced Features

Many business phone systems also offer advanced features that provide significant benefits to companies mid-size and larger, as well as operations that rely on voice communication as a central component to their business.

Within these situations, many buyers cite the following features, often available through enterprise or deluxe packages, as critical to the services they provide. These include:

  • Call Forwarding
  • Call Convergence
  • Computer Technology Integration (CTI)
  • Automatic Call Distrubution

Call Forwading

This feature offers advantages to your employees as well as your callers. Call forwarding routes incoming calls to wherever your employees are, sending the call to a remote extension, call group, or direct to voicemail. Ideal for companies with employees on the road, at a remote location, or telecommuting, call forwarding ensures your callers will always reach the person they need. Greatly simplifying the process for your customers, call forwarding saves them from having to call additional numbers and also prevents unnecessary voicemail.

Call Convergence

Call convergence turns your business phone system into a complete communication center by converging voice, video, and data. It incorporates every possible channel of communication your employees and customers may use, unifying it all into a central system. These channels include phone calls, voicemail, email, text messages, live chat, social media, video conferences, and faxes. It also integrates all communication conducted on fixed-line and mobile technologies.

Computer Technology Integration (CTI)

Connect your computers with your business phone system to simplify outbound calls and customer service. Often found in call centers and companies that maintain a large in-house service center, representatives use contact management applications that automatically place calls, saving the time and effort required to manually dial the number. CTI applications are also popular for their ability to efficiently process incoming calls, identifying the caller and retrieving their history by connecting to your customer relation management (CRM) system. This enables your business phone system to display a caller’s account information and order history to representatives before they answer the call, expediting service while enabling the rep to provide a customized greeting or conversation. It’s worth noting that most CTI applications are sold as separate software solutions. While they are compatible with physical phone systems and on-premise VoIP solutions (which are typically CTI-ready), they’re not as common with hosted or cloud-based phone services. This may be due to the wide range of proprietary business information often shared between the two systems, not to mention compatibility issues associated with your existing CRM platform. Nevertheless, they are a must-have for many call centers and phone sales companies. So if you’re interested in this feature, speak to your business phone system vendor about CTI options, as this will definitely impact the system you choose.

Automatic Call Distribution (ACD)

Automatic call distribution manages your incoming calls and also provides enhanced features that help your representatives process those calls. Designed for larger companies with heavy call volume, common elements of an ACD platform include:

  • Call Recording – Used for training, legal purposes, and individual review, VoIP records both sides of a call and makes the recordings accessible anytime and anywhere you have access to the system.
  • Call Monitoring – This is an essential tool for training purposes and performance monitoring. Live calls are monitored through "whisper" mode, allowing a supervisor to speak to and be heard only the salesperson for coaching purposes. It also enables supervisors to join a call to supplement information or make a correction.
  • Call Cues – "Your call will be answered in the order received." These service-oriented messages let the caller know the estimated wait time and often allow them to leave a call-back number if the wait is too long. This feature is ideal for operations with consistently high call volumes.
  • Call Groups – When more than one representative can help a caller, call groups can ring multiple extensions at once to ensure the quickest possible response. Similar to call handling, this can also be used to track down a single individual in multiple locations.
  • Customer Relation Management (CRM) – When paired with computer telephony integration, this feature routes calls to the correct representative, providing caller ID and account information.

Working with Suppliers

Business phone systems are purchased through service providers or resellers. Each offers varied products and services, so it’s imperative to understand the difference between the two.

  • Service Providers:  are generally less expensive because you buy directly from them. They sell the phones, the monthly service, and offer customer support. They don't necessarily visit your office, nor program the phones. This is a good route to go if your business is the "Do It Yourself" type.
  • Resellers: also known as Value Added Resellers (VAR) are part of a reseller network and earn a commission on each sale. Resellers set up and configure your phones and computers for you, as well as "resell" the service package. They tend to be more expensive, but they visit your office and offer more personal and customized support.

When choosing a service provider or reseller, consider first the number of installations they have completed with your chosen system. Ideally, the brand you choose will be your vendor's best seller. When they are committed to the product line, you can be assured of a long-term availability of service.

If you can, get a demonstration of different office phone systems. A service provider will ask you to come to their office for these demos, while a reseller will visit you. Either is fine, but by visiting your site a vendor can get a better sense of your existing infrastructure and communication needs.

Licensing Sofware

With the move toward connectivity and compatibility, most physical PBX and VoIP systems run on a propriety software platform that requires licenses for each individual on the system, as well as continuous updates.

While this sounds like an additional level of complication, it actually works to your advantage in a number of different ways. Most business phone system manufacturers offer software subscriptions for their on-premise setups. This provides access to the newest software releases, simplified upgrades, and instant delivery on all available patches. More importantly, it allows you to add or remove features based on your current need.

This is one area in which physical VoIP installations have kept pace with hosted solutions, especially within a hybrid system that incorporates aspects of both VoIP and hosted enterprises. You can easily scale the features and number of users through licensing, with hosted platforms offering month-to-month service almost without exception.

Strictly on-premise VoIP installations are a little more complex due to the commitment usually involved with installed equipment. Therefore many of the licensing agreements you’ll find for a physical business phone system include operating expenditures for software maintenance as well as support for troubleshooting and functionality upgrades. Costs vary from provider to provider, but an average estimate is currently around $45 per phone, per year.

Keep in mind: hosted services are typically free of licensing costs. They provide their services for an all-inclusive month-to-month service fee. This practice makes them ideal for small businesses and organizations that want advanced voice communication features at minimal cost.

Warranties and Service Level Agreements
  • Warranty – Manufacturer's guarantee of their hardware (three to five years)
  • Service level agreement (SLA) – Vendor-provided service level agreements (SLAs) offering a range of post-sale support, including maintenance and repairs

Vendors typically provide the following guarantees on the products and services involved with a business phone system:

Warranties are essential for replacing faulty equipment. But they pale in comparison to the post-sale support provided through an SLA. Especially crucial for large companies with extensive physical or VoIP systems, an SLA specifies how quickly the seller will respond to a problem with your business phone system. Four hours is fairly typical for major outages during business hours. If your business needs 24 x 7 coverage or shorter response times, expect to pay extra for these premium service levels.

To compare service providers and resellers, get answers to the following questions:

  • Warranty – Manufacturer's guarantee of their hardware (three to five years)
  • Service level agreement (SLA) – Vendor-provided service level agreements (SLAs) offering a range of post-sale support, including maintenance and repairs
  • Who installs the system – the seller or a subcontractor?
  • Who provide trainings? And what will that training include?
  • What are the costs associated with service and maintenance?
  • Does the seller provide backup during a power failure?
  • Does the seller have remote maintenance capabilities?
  • What changes can we make ourselves to avoid service calls?
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