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Teams Phone vs a dedicated cloud PBX: which suits your business?

If your staff already live in Microsoft Teams, adding calling there is tempting. But a purpose-built cloud phone system still wins for some businesses. Here's how to decide.

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:

ConnectionHow it worksGood for
Microsoft Calling PlansMicrosoft supplies numbers and call minutes directly.Small businesses wanting one bill and the simplest setup.
Operator ConnectAn 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 RoutingYour 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

  1. How many people need a phone number, and how many are already licensed for Microsoft 365?
  2. Do you have a reception or call centre function that needs queues, wallboards and reporting?
  3. Do you need physical phones, cordless handsets or analogue devices?
  4. Are you keeping your current numbers? (You almost always can. Porting works for both options.)
  5. Do you need call recording for compliance, and where must recordings be stored?

See all the main approaches compared in our setup options guide.