The short version
- Teams Phone puts calling inside the app your staff already use, licensed on top of Microsoft 365.
- Numbers can come from Microsoft Calling Plans, an Operator Connect carrier, or your own SIP trunk via Direct Routing.
- A dedicated cloud PBX usually has richer reception, call centre and hardware phone features, and works for people outside Microsoft 365.
- If you're already all-in on Microsoft 365 and mostly need extensions, transfers and a simple auto attendant, Teams Phone is often enough.
What Teams Phone is
Teams Phone is Microsoft's add-on that turns Teams into a business phone system: each user gets a phone number, can call the public network, transfer calls, use voicemail, and answer on the Teams desktop app, mobile app or a certified Teams desk phone. It's included in some Microsoft 365 enterprise plans and available as an add-on licence for others.
The licence gives you the phone system features. You also need a way to connect to the public phone network, and there are three options:
| Connection | How it works | Good for |
|---|---|---|
| Microsoft Calling Plans | Microsoft supplies numbers and call minutes directly. | Small businesses wanting one bill and the simplest setup. |
| Operator Connect | An approved carrier connects to Teams in the cloud; you assign their numbers in the Teams admin centre. | Keeping an existing carrier relationship and better call rates, without running any equipment. |
| Direct Routing | Your own SIP trunk connects to Teams through a certified session border controller (SBC), often hosted by a partner. | Complex setups, existing PBXs, analogue devices, or specific carrier requirements. |
Where Teams Phone shines
- Staff already spend their day in Teams, and calls, chat and meetings live in one place.
- Users, licences and numbers are managed in the same admin centre as the rest of Microsoft 365.
- Presence is accurate, because Teams knows when someone's in a meeting.
- Escalating a call to a video meeting or adding a colleague is natural.
Where a dedicated cloud PBX often wins
- Reception and call centre work. Purpose-built platforms tend to offer richer queue management, wallboards, call recording, reporting and receptionist consoles out of the box.
- Hardware. A wider choice of desk phones, cordless DECT handsets, door phones, paging and analogue adapters (for fax, lift phones or alarms).
- Not everyone is on Microsoft 365. Warehouse, retail or casual staff may not have Microsoft licences, and licensing them just for calling adds up.
- Cost for light users. Pricing per seat can be lower for people who only need a basic extension.
The middle path: integrate, don't choose
Many cloud PBX providers integrate with Teams, either as a Direct Routing or Operator Connect partner, or through an app that shows presence and lets users click to call. That can give reception and the contact centre a specialist system while everyone else answers in Teams.
Questions to settle before you choose
- How many people need a phone number, and how many are already licensed for Microsoft 365?
- Do you have a reception or call centre function that needs queues, wallboards and reporting?
- Do you need physical phones, cordless handsets or analogue devices?
- Are you keeping your current numbers? (You almost always can. Porting works for both options.)
- Do you need call recording for compliance, and where must recordings be stored?
See all the main approaches compared in our setup options guide.