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What Type of Phone System Is Right for Your Business?

This article was updated on May 30, 2024

There are several different phone systems used by small businesses — key service utility systems (KSU), private branch exchange (PBX), and voice over internet protocol (VoIP). But only VoIP offers advanced functionality with the ability to answer calls from anywhere with internet access. This cloud-based solution offers cheaper, more accessible access to your employees for all types of communication. The versatility and scalability of VoIP prepares your small business for greater customer service and operations.

Illustration of a hand holding a cell phone. Emanating from the top of the phone are wave icons representing internet-based phone calls.

Which Is Best for Your Business?

KSU, PBX, and VoIP are all options for small-business phone systems. But what system is best for your business? When deciding between different types of phone systems for business, it makes sense to go with the most versatile and modernized type. In this blog, we’ll explore all three and weigh which is best-suited for small businesses. But first, let’s break down what the systems are and how they work.

Different Types of Telephone Systems

The three types of telephone systems — key service utility, private branch exchange, and voice over internet protocol — are all used by small businesses to make and receive calls. While for the most part, technology has moved beyond antiquated KSU and PBX systems, many businesses are still using basic phone hardware and a landline connection. This ties employees and managers to their desks, without the ability to speak with customers while in other places or situations. Below, we discuss the three types of phone systems for businesses and what they offer.

Key Service Utility System (KSU)

A key telephone system is the simplest phone system available. It’s landline-based and can only handle a limited number of phone lines. KSU systems include several basic features, like call hold, speakerphones, intercoms, and paging.

While KSU phones can be less expensive overall than systems like PBX, their functionality lacks advanced features and the ability to scale with growth. Plus, initial setup and continued maintenance can be costly.

Private Branch Exchange (PBX)

On-premises private branch exchange (PBX) phone systems offer more advanced functionality than a KSU. They often include features like conferencing, auto attendant, music on hold, and dial-by-name directories. Unlike a KSU system, you can install a single PBX system to cover numerous business locations or regulate more lines than a KSU can manage. Along with the ability to make and receive phone calls, typical PBX features include call routing, call queuing, conference calling, auto attendants, and hold music capabilities.

On-premises PBX has higher up-front costs than KSU with installation of physical hardware, but should be lower over the life of the system overall, especially because your IT department is in control of maintenance responsibilities. But despite the advancements, PBX system technology is a relatively outdated phone system for businesses to invest in.

Voice over Internet Protocol (VoIP)

Voice over internet protocol systems — also known as hosted or cloud-based PBX — use a recurring, subscription-based payment plan for phone service and any necessary maintenance and troubleshooting. Additional cloud-based PBX benefits like ease of use, improved privacy, and automated routing, are included with VoIP systems as a less-expensive, modernized option.

However, the main addition with VoIP is the ability to take calls anywhere in the world, as the calls are routed through the internet and not connected to a landline. With VoIP, voice is converted into a digital signal, which is then compressed and sent over the internet. This means any device with an internet connection can pick up a call.

A virtual phone system is a subscription-based service, and the phone service, plus any necessary maintenance and troubleshooting, are covered by these monthly charges.

What Is the Best Telephone System for a Small Business?

VoIP provides the best features and price for small businesses looking for a business phone solution. Here are six reasons why VoIP is the best phone system for a small business:

  1. Costs for hardware and equipment are lower because VoIP can be implemented via equipment like smartphones and desktop computers.

  2. Flexibility is increased due to the ability to use any internet-connected device, such as laptops, tablets, smartphones, and desktops.

  3. Mobility is expanded because VoIP systems aren’t tied to on-premises equipment configurations and employees can use the system from anywhere with internet service.

  4. Versatility in ways to communicate, like text, chat, email, instant messaging, and click-to-call functionality, make it easier for customers to connect with your company and for team members to communicate with each other in an instant.

  5. Features go beyond basics like voicemail or caller identification, with options like call history, transcription, integrations with third-party applications, and more.

  6. Scalability is essential for growing businesses, and adding devices with VoIP is easy and affordable.

What Are the Different Features of VoIP?

Voice over internet protocol phone systems offer several more features than on-premises PBX systems. This phone system features checklist shows what services should be included in a VoIP service:

  • Call history and analytics

  • Call holding and automatic callback

  • Call recording and transcription

  • Configurable interactive voice response (IVR) menus for inbound calls

  • Customizable call routing and call forwarding

  • Integrations with third-party software, such as a customer relationship management (CRM) platform

  • Mobile applications and softphone calling

  • Visual voicemail

Is VoIP Worth It for a Small Business?

At Vonage, we recognize that communications have profoundly changed the way society connects. That’s why we’re bringing the best VoIP services to small businesses. We’re making our cloud communications platform the most flexible, intelligent, and personal in the world! We focus on working with small businesses, so we can help you understand the products and services we offer without the technical jargon. If you’re interested in maximizing efficiency and availability with pristine, high-quality communications, visit our website today to explore the features and see plans and pricing.

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