By Dan Baker

The importance of setting up the phone system for your small business or startup is something that is often overlooked, but it is a significant decision that could impact how your business operates. But with so many different options, and so many acronyms, in the business communications industry where do you begin?

This handy guide presents the different options available to you so you can make the right choice for your business.

Traditional On-Site or Advanced Cloud-Based

Your initial choice comes from the two forms of infrastructure that connects your handsets with the public phone system. You have a choice between a traditional on-site phone system or a more advanced cloud-based system.

There are some pretty significant differences between these two systems and the best one isn’t an obvious solution. It depends on what you need your business phone system to do, as well as your existing infrastructure, internet speed and personal feelings about the cloud.

On-site systems

This is the historic and well-tested hone system. For a long time, this was the only option that was available to you. On-site systems rely on physical copper phone lines, such as ISDN or PSTN lines, to connect all of your phones to the public phone network. This type of on-site phone system is known as a PBX phone system, or private branch exchange.

On-site phone systems usually require a single, upfront payment that includes the installation of all of the required equipment, including phone lines and the PBX box.

Cloud-based systems

A cloud-based phone system, also known as a hosted phone system, makes use of your existing internet connection to connect you and your phone extensions with the public phone network. This has the benefit of not requiring any actual hardware on-site, except the phones themselves.

Unlike on-site systems, there aren’t any upfront costs required with cloud-based systems, aside from the handsets. Instead, you are required to pay a monthly fee that is based upon the number of extensions.

Modern cloud-based systems are popular with businesses because of their flexibility, ease of set up and lack of physical hardware that requires maintenance.

There is also a third, hybrid option that combines the two systems to some extent. It is possible to link a VoIP, or Voice over IP, phone service with your existing on-site hardware. This provides the combined benefits of the low call costs that come with VoIP but also having the reliability of a physical phone system. This is an excellent option if you already have an ISDN system in place but are looking to benefit from low-cost internet calling without removing the existing infrastructure.

The Different Usability and Features of These Systems

There are some significant differences between these two phone systems that result in a range of pros and cons for both.


Cost can be a big decision maker for businesses, especially smaller businesses. The costs for the two systems vary depending on your requirements. On-site phone systems come with a a higher setup fee that is coupled with maintenance costs of the hardware.

On the other hand, hosted systems have a much smaller start-up cost and the only hardware you will need to purchase is the handsets themselves. The monthly rental fee can, however, become expensive depending on the number of users and extensions you will require.


Cloud-based systems have a clear advantage over their on-site counterparts. They can be upgraded remotely and easily and additional SIP trunks (digital phone lines) can easily be added if you experience growth or seasonal trade.

On-site systems, on the other hand, would require an engineer to visit on-site to upgrade the hardware or to add more phone lines if you needed to grow your business.

Call quality

In regards to call quality, both systems are mostly equal. The concerns over the quality of calls being placed over the internet were unfounded and call quality is as good as you would have experienced with a traditional phone line.

In fact, if you have access to a particularly strong internet signal, you will be able to benefit from high definition clarity.

Future-proofing your business

There is one issue that needs to be addressed regarding on-site phone systems. BT have announced that they will stop taking additional orders for ISDN lines in 2020, with the aim of switching off the network in 2025.

This still offers you 6 years of use out of your on-site phone system. It does, however, mean that if you are after a business phone system that you will be able to make use of for a long period of time, you might want to pick the more future proof cloud-based system.

So Which Phone System Is Best?

Which system is best for you largely depends on what your requirements are. Each system has positives and negatives and you will need to weigh up which system best satisfies your business requirements, your expectations and your internet connection strength.

For smaller businesses that don’t require a lot of extensions, a hosted system would most likely be more affordable. A cloud-based system also has a greater deal of scalability which would be useful if you experienced growth or seasonal demand. Set up is also much easier with a cloud-based system which would be useful if you are potentially going to move offices.

Despite these positives, you might be concerned over the security and reliability of a new technology and are hesitant about making use of the cloud. In this case, it might be better to remain with a more traditional on-site phone solution such as ISDN lines. This is also the better option if your internet connection isn’t strong enough to handle a hosted telephone system.

If you still have questions regarding which phone system is best for your business then you should contact your business communications provider for an in-depth discussion of your different options. This ensures you are making the best decision to meet your needs.

Featured photo credit: Depositphotos