What is a business phone system?

A business phone system, despite the development of email and social media, is still a critical way for businesses to communicate on a day to day basis with their customers and suppliers, and for employees to interact with each other. This guide will help you compare the different business phone systems available in the UK market and select the best system for your business.

This main photograph for the article What is a business phone system? It shows two employees in an office both wearing softphone headsets.

Despite the enormous rise in email, texting and social media, person to person communication remains a key way for employees to interact with each other and for businesses to engage with their suppliers and customers. Improving customer service, increasing employee productivity and growing sales are just a few ways that a business phone system can benefit your operations.

If you are running an established business you are likely to have a business phone system already in place but may be looking to upgrade it to achieve cost savings and/or add new features and functionality. Alternatively, you may be running a start up or small business and are investigating what business phone system is right for your business at this stage of its development and with a view to your growth aspirations.

One critical issue regarding telephone systems that many UK businesses are unaware of, but should be starting to consider, is BT’s announcement to switch off its Public Switch Telephone Network (PSTN) services by 2025, effectively shutting down analogue and Integrated Service Digital Network (ISDN) telephone lines by that date.

BT has subsequently announced that it will no longer sell ISDN or PSTN services after 2023 in preparation for those changes. This will mean that most UK business (and consumer) telephony post-2025 will need to be carried out over the internet using Voice over Internet Protocol (VoIP) technology. We cover this issue in detail later in this article.

This article will provide an overview of business telephone systems available in the UK market, compare the different systems to each other, and help you decide on the right phone system for your business.

Business telephone systems can be complex and difficult to understand, and the industry is full of acronyms and jargon. To help you through the technicalities we have provided a stand-alone glossary of relevant terms which you can refer to alongside our business phone system articles.

In this article

What is a business phone system?

At its simplest a telephone system consists of a telephone handset and telephone line. Many very small businesses are run out of home offices using residential telephone lines and home handsets or mobile phones. At best, they may have upgraded to a business telephone line often with a more sophisticated business telephone.

That might be sufficient for the early days of a start up but as a business grows and takes on more employees it will face new challenges and opportunities that require a more complicated business phone system.

Modern business telephone systems have developed significantly over the last fifty years and are able to cater for multiple telephone lines, provide a range of features such as call waiting and speed dialling, support video as well as voice calls, operate across numerous locations (both in the UK and overseas), provide mobile connectivity, and offer a wide array of functionality, such as remote working, to aid productivity.

There is still a range of business telephone systems based on analogue or digital technology, which connect a business’s telephone lines into the PSTN, while the most modern telephone systems are based on Voice over Internet Protocol (VoIP) technology and utilise the internet to make and receive telephone calls.

Business phone system options

There are three different types of business telephone systems available in the market:

  • Multi-line (or Key System Unit) business phone systems: Multi-line business phone systems are a step up from a single telephone and business line system. They are based on analogue or digital technology and offer multiple phone lines, basic telephone features and are made in wired (KSU system) and wireless (KSU-less) variants.
  • PBX business phone systems: PBX (Private Branch Exchange) business phone systems are more complex telephone systems and can be analogue or digital systems (often referred to as traditional or conventional PBX systems), VoIP based business phone systems (known as IP-PBX systems) or Hybrid PBX systems where VoIP technology has been added to a conventional PBX system.

We go into more detail on each of these telephone systems below.

Business telephone systems can either be:

  • Located on-premise: The telephony equipment is acquired by a business and installed, configured and maintained at the business’s premises by its own IT/Telecoms team or external contractors.
  • Hosted off-site: All of the business phone system functionality is provided over the internet by a VoIP supplier using the supplier’s own IP-PBX equipment located, operated and maintained off-site at that VoIP supplier’s data centre.

Certain business telephone systems may or must be located on-premise or hosted off-site as shown in the table below.

This table shows whether a business phone system can be installed on-premises or hosted off-site.

The terminology ‘IP-PBX‘ system is sometimes confusingly used by phone system suppliers and commentators interchangeably to mean ‘on-premise IP-PBX’ systems as well as ‘hosted IP-PBX/hosted VoIP’ systems. In our articles we differentiate between on-premise IP-PBX business phone systems and hosted VoIP business phone systems.

Multi-line business phone systems

Multi-line business phone systems are basic telephone systems that allow a business to connect multiple telephone lines into its premises. They can be physically wired into an office (the KSU (Key System Unit) system) or wireless (the KSU-less system). KSU systems tend to be limited to less than 40 handsets with KSU-less systems limited to c.10 handsets.

The core of the KSU system is the KSU itself which can be a separate unit or built into a master phone handset. The KSU is the hardware that enables users to manually select and connect external and internal telephone lines. In the case of KSU-less systems all of the telephony technology is built into the telephone handsets so a KSU is not required.

Multi-line business telephone systems are purchased and maintained by a business with monthly call costs dependant on call volumes and the call plan provided by the business’s telephone line provider.

For more information on Multi-line business phone systems see our Guide to Multi-line business telephone systems article.

PBX business phone systems

PBX business phone systems are more complex business telephone systems that automatically route in-bound and out-bound telephone calls to/from the correct extensions/handsets.

Conventional PBX systems use analogue or digital technology to connect a business’s telephone calls via analogue or ISDN external telephone lines to the PSTN. Today, modern PBX systems tend to be based on VoIP technology. They are known as IP-PBX business telephone systems and allow a business to make and receive telephone calls over the internet.

However, there are still many older conventional PBX systems being used by businesses and these can be upgraded to utilise modern VoIP technology (while retaining their legacy telephone connections) through the introduction of VoIP technology to create Hybrid PBX systems.

PBX systems offer additional features to Multi-line systems such as call analytics, conference calling and custom greetings while IP-PBX and Hybrid PBX business telephone systems offer even more extensive features such as video conferencing, remote working and unified communications.

PBX, Hybrid PBX and IP-PBX business telephone systems need to be installed, configured, maintained and upgraded by a business’s internal IT/Telecoms team, external contractors or sometimes this may be done by the PBX provider. More complex PBX systems can result in high upfront and maintenance costs.

Monthly running costs depend on a business’s contract with its telephone line provider (conventional PBX systems) or its ITSP (Internet Telephony Service Provider in relation to IP-PBX/Hybrid PBX systems).

For more information on PBX business phone systems see our Guide to PBX business phone systems article and for a comparison between on-premise IP-PBX business phone systems and hosted VoIP phone systems read our article Guide to VoIP phone systems.

Hosted VoIP phone systems

Hosted VoIP phone systems are IP-PBX systems provided by a VoIP supplier, located, operated and maintained ‘in the cloud’ at that VoIP supplier’s data centre. VoIP phone systems allow a business to send and receive telephone calls over the internet.

VoIP systems can provide an extensive range of features, such as conference calling, hot desking and softphones, as well as functionality, such as remote working and unified communications. The range of features and functionality varies between VoIP suppliers and the different VoIP packages that they offer.

VoIP systems are connected to a business’s local area network (LAN) by the VoIP supplier while system upgrades and maintenance are carried out by that supplier at their data centre.

A business will have minimal upfront or maintenance costs for a VoIP phone system. It will pay a monthly subscription fee to the VoIP supplier depending on the package of features and functionality that it requires, and possibly extra fees for additional features or calls outside agreed parameters (e.g. international calls).

For more information on hosted VoIP business phone systems see our Guide to VoIP phone systems article.

Business phone systems comparison

There are operational, technical and cost advantages and disadvantages for all of the business phone systems that we have discussed. To help you make your decision we have compared the business telephone systems on the market against the following criteria:

This table compares each business phone system against a range of criteria.
  1. Our detailed articles, Guide to Multi-line business telephone systems, Guide to PBX business phone systems and Guide to VoIP phone systems provide detailed explanations of the above criteria.


  • Start ups and very small businesses that are on a tight budget and do not require sophisticated telephone features may find Multi-line business phone systems a short term, quick and cost effect business telephone system solution. However, they have a limited lifespan given the 2025 PSTN service switch off.
  • Businesses where system security and control are essential and/or which can benefit from investing in their own business phone system, will find on-premise PBX systems attractive solutions:
    • Conventional PBX systems are particularly attractive to businesses that cannot afford any interruptions to their telephone lines. However, these systems will only form a short-term solution as in a few years they will need to be enhanced or replaced by an IP based system.
    • Hybrid VoIP technology is a cost-effective solution to extend the life of legacy conventional PBX systems and provide more features and functionality at lower monthly running costs.
    • IP-PBX systems provide the security and control of a conventional PBX system with extensive and customisable features, significant potential for business system integration, scalability and low monthly running costs. However, upfront and maintenance costs can prove significant with more complex IP-PBX systems, resulting in those systems being better suited to larger business that can benefit from the economies of scale of investing in their own PBX system.
  • Small business and other SMEs that are looking for a business phone system that is easy to install and scale, sophisticated telephone features and extensive functionality, all at a competitive monthly cost are likely to find hosted VoIP business phone systems an attractive option. Increasingly, larger businesses are also finding VoIP suppliers that can provide the VoIP services that suit their business needs at competitive rates.

For more information on each of the specific business telephone systems see the following articles:

Features of a business phone system

Business phone systems offer a range of features depending on their technology and the specific service supplier. As can be seen from the chart below the range of features increases with the complexity and modernity of the business phone system.

This table compares the basic features provided by each business phone system.

Read our article Business telephone system features for descriptions of each of these phone system features.

In the case of IP-PBX and hosted VoIP phone systems although broadly they can offer similar features, the range of hosted VoIP features can vary considerably between VoIP providers and across different subscription packages.

VoIP phone systems can also be limited in how far they can be integrated with other business applications making an IP-PBX business telephone system likely to be the most feature rich and flexible of all the options.

Components of a business phone system

The components of a business phone system will vary according to the nature of the telephone system chosen:

Table comparing the basic components required by each business phone system.
  • New installed hardware: Multi-line and conventional PBX systems include an on-premise unit. An IP-PBX may come as a standalone unit or as IP-PBX software running on a business’s existing server. Hybrid PBX systems will require a new unit, such as a VoIP gateway, which is inserted between the business’s internet router and its conventional PBX. The complexity and cost of additional hardware will depend on the number of external telephone lines (in the case of a conventional PBX system), the number of internal extensions, the range of features and the level of functionality required. Hosted VoIP phone systems require little or no on-premise hardware.
  • New wiring/cabling: Multi-line, and conventional PBX, systems need to be wired into the business’s premises. IP-PBX, Hybrid PBX and hosted VoIP systems connect into a business’s LAN. The complexity and cost of new wiring will depend on the number of internal extensions required and the size and infrastructure of the business’s premises.
  • Phone handsets: IP-PBX, Hybrid PBX and hosted VoIP systems can use VoIP phones or analogue or digital phones converted to VoIP (using ATAs and DTAs (Analogue/Digital Telephone Adapters) or FXS modules added to the IP-PBX/server. Handset costs will vary according to the features provided.
  • Softphone software/VoIP apps: In a VoIP based system, phones can be dispensed with altogether and computers and other devices adapted to make and receive telephone calls with the installation of softphone software/VoIP apps.
  • Internet connection: IP-PBX, Hybrid PBX and hosted VoIP business phone systems all require internet access. A business is already likely to have a business broadband internet connection with an ISP (Internet Service Provider). It is important to ensure that the internet connection has the appropriate speed, connection strength and security measures.
  • Other service providers: Businesses using Multi-line, or conventional PBX, systems will need to sign up with a telephone service provider to provide the required number of telephone lines (analogue or ISDN). IP-PBX and Hybrid PBX systems need the business to sign up with a SIP (Session Initiation Protocol) Trunking provider (e.g. an ITSP) to provide SIP Trunking services. In the case of a hosted VoIP system all of the required IP telephone services will be provided by the VoIP supplier. 
  • Installation & configuration: Multi-line, PBX, IP-PBX and hybrid PBX systems will require installation and configuration by a business’s internal IT and/or Telecoms team or external contractors. A VoIP system will be installed by the business’s VoIP supplier.
This is the second photograph used in the article What is a business phone system? It shows a man putting on a softphone headset in front of his laptop.

Photo by Austin Distel on Unsplash

Determining your business phone system needs

Choosing the right business phone system for your business can be a complicated process and your decision may be influenced by some or all of the following factors:

  • Number of external telephone lines required (in the case of Multi-line and conventional PBX systems).
  • Number of employees requiring extensions/handsets.
  • Number of employees regularly working remotely.
  • Number of other premises, in the UK and overseas.
  • Volume of (local and international) calls regularly made and/or received.
  • Features and functionality required.
  • The business’s growth plans.
  • The logistics of the system installation, configuration and ongoing maintenance – do you have an internal IT/Telecoms team or access to external contractors?
  • What other systems (e.g. CRM) do you need the business phone system to integrate with?
  • What training will your personnel need?
  • Your budget?

Once you have determined your business’s key requirements you can then compare the different business phone system suppliers in the market.

Assessing the right business phone system for your business

We have set out below a set of criteria to help you select the right business phone system supplier for your business:

Features and functionality

  • What features and functionality are provided?

Installation and use

  • How easy is it to install/set up?
  • How easy is it to integrate with your business’s other systems?
  • How user friendly is the system?
  • How scalable is it so that it can expand as your business grows and hires more employees?


  • What upfront installation/set up costs are there?
  • What are the monthly running and/or maintenance costs?
  • How transparent is the charging model?

Business phone system supplier track record

  • What is the level and quality of customer support offered?
  • What employee training is provided?
  • What is phone system supplier’s reputation and credibility in the market? Are there client reviews and/or references that you can review.
  • What are the contractual terms being offered?

Whatever your business’s specific needs are from a business phone system, there will be an option suitable for your business in the market.

BT's 2025 switch off

This infographic shows the logo for the BT business phone system and business phone systems company.

BT, the UK’s national telecommunication provider, has announced that its Openreach division will switch off its PSTN services from 2025. 

This means that it will no longer support analogue or ISDN telephone lines from that date. This decision will impact over 16 million telephone lines in the UK. 

BT has also announced that it will no longer sell analogue or ISDN lines to businesses after 2023.

Other telecoms providers including Virgin Media and KCOM have also indicated that they intend to retire their legacy networks over the same period.

This switch off will affect over 2 million businesses in the UK, predominantly small businesses, with research showing that over 25% of all business managers are still unaware of the switch off decision.

The effect of these changes is that by 2025 the majority of UK businesses (and residential properties) will need to convert their business telephone systems to IP based networks, either on-premise IP-PBX systems or hosted VoIP phone systems.

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