The Definitive Guide to Microsoft Teams Direct Routing

With the sudden shift to remote work during the global pandemic, many companies have been scrambling to modernize their working environments. At the forefront of this trend is the need to streamline communication for a globally distributed workforce.

In this guide, we’ll look at how enterprises can modernize their telephony infrastructure using Microsoft Teams Direct Routing. More specifically, we’ll take a closer look at how unified communications works using cloud telephony, Microsoft Teams, and Direct Routing. We’ll also explain how organizations can make the shift to Microsoft Teams Direct Routing themselves.

Let’s get started.

Table of Contents

Why Organizations Need a Modern Approach For Communication

Enterprises with global and remote workforces need a secure and reliable approach for communication and collaboration. This is especially true when working from home could become the new norm, and employees will no longer see each other in person every day.

In the past, traditional business telephony was sufficient, but in today’s fast-paced digital environment, these solutions have limitations. Modern workers often aren’t tied to a specific location, move offices frequently, and travel to meet clients or business partners. These situations make relying on communication infrastructure that’s on-premises a challenge.

Not only do today’s workers need to be able to communicate anywhere, but they also need the option to use any of their devices. That’s because many employees use laptops, phones, tablets, and more throughout the workday. The ability to seamlessly transition between these devices and continue conversations in real-time is critical.

Achieving this modern communication approach requires unified communications, cloud telephony, and other innovative technologies. Let’s take a closer look at some of these terms.

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What is Unified Communications?

Unified communications (UC) refers to an integrated and comprehensive approach to communication and collaboration for digital workforces. More specifically, this includes voice calls, video conferencing, instant messaging (IM), file sharing, and more.

There are a number of platforms that aim to provide a comprehensive UC solution, such as Cisco Webex, RingCentral, and GoToConnect. As we’ll see later on, however, not every UC suite can match the collaboration capabilities of Microsoft Teams, which is a part of the Microsoft 365 cloud productivity suite.

Efficient collaboration—especially amongst a highly distributed workforce—is a key differentiator for enterprises. That’s because when workers can communicate across a wide variety of devices, apps, and media types, they’re often more productive. The ability to not only communicate in real-time using a variety of mediums, but also to share documents from a single interface can transform the employee experience.

An effective UC strategy also offers consistent experiences so that employees can seamlessly connect across multiple channels and locations whenever they want. Consistency ensures that users can quickly and easily get up to speed with collaborative workflows without learning an extensive set of disparate tools. 

From a business perspective, standardized and integrated tools are also much easier to manage. Fragmented systems require a more diverse set of expertise to ensure everything continues to function and to troubleshoot issues that may occur. That’s why consolidating communication capabilities into a single platform can bring enormous efficiencies to IT Teams as well.

A robust UC platform usually leverages an integrated collaboration platform like Microsoft Teams and cloud telephony. That way, enterprises can overcome the inefficiencies of a fragmented and siloed communication technology stack.

What is Cloud Telephony?

Cloud telephony or cloud calling is a method for providing voice communication services through the cloud, rather than using on-premises systems. While employees may not notice the difference, with cloud telephony all data is securely stored on cloud servers that are accessible through the Internet.

This cloud approach differs from the past, where businesses would rely on a physical Private Branch Exchange (PBX) phone system at each of their office locations. The PBX would require physical space like a closet or server room and systems administrators with telecom expertise to maintain the system. This private phone system would also link to public telephone networks or VoIP services for external phone calls, but any changes often required rerouting wires and interruptions to employees. 

With cloud telephony, calls are sent to a PBX hosted off-site, which looks up their destination and routes the calls through a series of switches to establish a connection. These routes can easily be configured in a few minutes rather than dealing with physical wires when changes need to be made.

In addition, cloud telephony makes communication more accessible. In the past, when employees left the office, they’d need to have calls forward to their mobile phone, but cloud telephony allows users to seamlessly send and receive calls from nearly any Internet-enabled device.

Cloud Telephony vs. Traditional PBX Systems

There are a few key differences between traditional and cloud telephony systems that enterprises should be aware of in terms of flexibility, costs, and agility.

Most cloud telephony providers offer on-demand communication services, eliminating the need for their customers to build, operate, and maintain any telephony hardware or software. In the past, organizations would need to estimate the capacity required at each office location and install the appropriate hardware to meet demand. Cloud telephony means organizations can spend less time on managing telephony and refocus their IT staff on other higher-level tasks.

Physical PBX systems often required proprietary phones, which locked businesses into specific vendors going forward. With cloud telephony, however, users can make and receive calls on their office or home line from any suitable device that connects to the Internet. For example, employees could use a desk-phone in the office, a “soft-phone” client on a PC at home, and a mobile phone on the go. This level of compatibility makes the bring your own device (BYOD) trend possible so that employees can access business-critical applications from their personal devices as well.

By moving away from on-premises solutions, businesses eliminate the upfront costs of hardware investments and reduce ongoing maintenance expenses as well. There’s no need for physical PBX boxes, handsets, or a large team of dedicated IT professionals to ensure communication continues functioning. Cloud telephony—which is often charged as a subscription based on usage— also helps organizations pay only for what they use, rather than over-provisioning communication infrastructure to prepare for future spikes.

Along with cost savings, the cloud also has the advantage of making organizations more agile. For example, cloud services can have nearly unlimited scaling ability to meet user demands. Traditional systems, however, often have constraints on the number of outside telephone lines or even the maximum number of internal devices allowed. When offices change locations or expand, cloud telephony makes it much easier for organizations to adapt.

VoIP & UCaaS

When companies look for new telephony systems, they often discover Voice over Internet Protocol (VoIP) or IP telephony solutions as well. While these systems offer similar benefits as cloud telephony by moving away from traditional PBX systems, they’re still not as comprehensive as UC solutions, which offer much more than voice communication. 

In contrast, most cloud telephony systems are part of a UC solution, which includes broader communication and collaboration services like instant messaging (chat), web conferencing, video, document, and application sharing. When these solutions charge based on a subscription model, it’s often referred to as Unified Communications as a Service (UCaaS).

How Microsoft Teams Can Streamline Communication

Many enterprise organizations are already using the Microsoft Teams suite of integrated services such as instant messaging, video conferencing, document and application sharing, to improve workplace collaboration. 

Microsoft Teams is invaluable for many organizations because it closely integrates with other Microsoft products as well. For example, Office365 (Microsoft’s Cloud Office Suite) includes business-critical apps like Word, Excel, PowerPoint, OneNote, SharePoint, and more. That means team members can immediately share documents within MS Teams without switching apps.

In response to the global pandemic, Microsoft has also launched an Advanced Communications add-on for Microsoft Teams. With this new add-on, organizations can host live events for up to 20,000 viewers and interactive meetings with 1,000 participants. There’s also additional customization, monitoring, and analytics features to ensure a positive user experience. These advanced features can help organizations broaden their reach and make the most of the Teams suite.

Microsoft also announced that by 2021 most SIP (Session Initiation Protocol) phones will be compatible with Teams. The SIP protocol is used by most UC platforms and mainstream vendors like Cisco, Yealink, and Polycom. That means businesses may not have to replace their existing phones with more expensive Microsoft-certified SIP phones or Skype for Business (3PIP) phones anymore. 

As Microsoft continues to grow its market share in the enterprise communication space, using its technologies as a comprehensive solution is becoming even more enticing each year. In fact, Microsoft Teams hit 75 million daily active users, up from around 44 million near the start of the pandemic.

Enabling External Communication

In addition to the robust internal capabilities of Microsoft Teams, external voice telephony can also be part of this integrated range of services using Microsoft’s own PBX in the cloud called Phone System.

Microsoft Teams can now be used as a comprehensive business telephony solution, replacing an existing PBX phone system and its associated equipment and costs with a cloud-based system. This solution provides the same internal and external voice calling capabilities as a traditional PBX, but also integrates closely with the full Microsoft Teams suite.

Using Microsoft Teams for Voice allows users to be flexible and more effective in the way they communicate and collaborate. That’s because users can make and receive calls using any Teams-enabled device no matter where they are. Within the Team’s interface, users can also forward, transfer, or record calls as well. Microsoft Teams, therefore, can foster greater productivity across the organization.

From a business perspective, an integrated platform for internal and external communication is much easier to manage. For example, organizations can adopt a standard policy across all locations, which can reduce complexity and lower administrative costs. Phone System administrators can also control calling options, add users, or make changes to user settings from the same dashboard used for managing all aspects of Microsoft Teams.

Before organizations can migrate to Microsoft Teams for external calls, however, they’ll need to connect their implementation to a global public network.

What is Direct Routing for Microsoft Teams?

Direct Routing is a way to provide a PSTN (public switched telephone network) connection to Microsoft Teams users so that they can make and receive external phone calls on any device using Teams.

Traditionally, internal and external business telephone calls have been delivered using a Private Branch Exchange (PBX) phone system, usually located on the business premises.

Microsoft Teams can now be used as a business telephony solution, replacing an existing PBX phone system and its associated equipment and costs with a cloud-based system, to provide full PBX voice calling capabilities inside and outside your organization.

To enable this, you will need the following:

  1. A Microsoft Phone System (formerly known as Cloud PBX). This provides call control and PBX capability in the cloud with Microsoft Teams.
  2. Connection to and from the Microsoft Phone System to the Public Switched Telephone Network (PSTN). There are two ways to achieve this:
    • Microsoft Calling Plans – Internal and external calls are delivered with Microsoft as your PSTN carrier using Microsoft’s price plans for domestic and international calls. These tend to be more popular with smaller organizations.
    • Direct Routing – connects the Microsoft Phone System to the PSTN to deliver calls via an existing or new third party telephony provider, with their associated tariffing and pricing. These appeal to larger enterprises with multiple locations.

Diagram showing how LoopUp uses Direct Routing for cloud communications
LoopUp cloud communications diagram - microsoft teams direct routing

Let’s take a deeper dive into the difference between Microsoft Calling Plans and Direct Routing.

Microsoft Calling plans vs. Direct Routing

While Microsoft Teams is straightforward to use internally, there are a couple of different ways to set up external calling with the PSTN network. The PSTN is a collection of the world’s circuit-switched telephone networks that have been in use since the early days of voice communication.

Microsoft Calling Plans

The first method for connecting Microsoft Teams to the PSTN network is through Microsoft’s own cloud-based calling plans. With this approach, Microsoft is the PSTN carrier for all internal and external calls. Pricing and tariffs for the calling plans depend on whether enterprises choose Domestic Calling Plans or Domestic and International Calling Plans.

While these calling plans are a quick and easy way for smaller firms to connect to the PSTN network, there are some drawbacks in terms of coverage, cost, and support.

For one, international coverage is limited. In fact, there is currently only support for 16 countries. This situation is constantly changing, so it’s worth checking that the countries necessary for your business are included. Besides the lack of countries available, multinational companies would need separate plans for each country they operate in.

Call charges are also a factor to be taken into account depending on business requirements. Each plan offers a fixed bundle of calls, which can be expensive and have limited flexibility to meet an organization’s needs. Calling Plans with international calls start at $20 per user per month. More details on call charges can be found here: Calling Plans.

Finally, there’s limited ongoing customer support available, so if you lack internal resources to manage your telephony, this could be an issue. This is especially true for large organizations with complex communication requirements.

Direct Routing for Microsoft Teams

Direct Routing is another way to connect Microsoft’s Phone System to the PSTN via an existing or new third-party telephony provider. The provider offers the necessary cloud infrastructure to route incoming and outgoing external calls to Microsoft Teams. 

MS Direct Routing has some advantages over Microsoft Calling Plans, especially for larger organizations. In fact, industry analysts predict that by 2022, as many as 90% of large enterprises using Teams for telephony will use Direct Routing for PSTN connectivity. That’s because Direct Routing offers greater flexibility, broader geographic coverage, lower rates, and increased levels of support than calling plans.

Direct Routing is more flexible because organizations can choose their own provider. This differs greatly from Microsoft’s Calling Plans, which has strict limitations on carriers and locations. With Calling Plans, for example, there are certain bundles available while many providers can create a tailored solution that meets specific business requirements.

Download our whitepaper “Explained – Cloud Telephony with Microsoft Teams”

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As mentioned before, Calling Plans are only available within limited territories, so multinational enterprises may not be able to use Microsoft Teams for every region they operate in. Many managed service providers, however, have global networks with worldwide coverage so that businesses can implement a unified communications system throughout their entire organization.

In most cases, organizations will have lower rates with a third-party provider than with Microsoft’s Calling Plans. That’s because having one contract rather than separate contracts for each regional carrier allows organizations to achieve economies of scale. Using one global provider with a centralized pool of call minutes allows enterprises to eliminate wasted minutes or avoid topping up maxed out individual accounts.

calling plans vs direct routing loopup diagram

Finally, a managed service provider can offer additional support and expertise to plan the migration and get employees up-to-speed with Microsoft Teams. While Microsoft has resources for implementing its Calling Plans, it’s very much a do-it-yourself solution. That’s why Direct Routing, though it may sound more complicated, is often easier to implement with support from a trusted provider. Let’s take a closer look at how implementation works.

How Do You Implement Microsoft Teams Direct Routing?

Whether an organization is already using Microsoft Teams internally or migrating from another communication system altogether, implementing Direct Routing can be stress-free. The way Direct Routing works, however, can vary depending on the managed provider.

  1. Roll Out Microsoft Teams Internally
  2. First, companies should implement Microsoft Teams for internal communication. For those organizations still considering the move to MS Teams, see Microsoft’s guide here. As we’ve mentioned before, moving to Microsoft Teams internally will already bring enormous benefits in terms of communication, collaboration, and productivity.

    Even if organizations are using another UC platform like Skype for Business, both solutions can operate together in the short term. This makes migration to Microsoft Teams Direct Connect easier for many organizations.

  3. Obtain Proper Licenses & Choose a Provider
  4. If the organization has already rolled out Teams internally, they will then need to ensure their licenses include Microsoft’s Audio Calls and Phone System features for each individual user. See the next section for more information on Microsoft licensing requirements.

    Enterprises will also need a sufficient plan with a third-party managed provider. When making the move to direct connect, however, it’s crucial to look for a reliable managed service provider with a proven track record of previous implementations. The right Microsoft certified partner can ensure a successful implementation of Direct Routing for Microsoft Teams by offering system architecture design, system integration, migration, training, support, and more.

  5. Configure SBC, SIP, and Media Bypass
  6. Most Direct Routing implementations work using a Session Border Controller (SBC), which is also referred to as a PSTN Gateway. SBCs are deployed at the border between networks to ensure data is securely transferred between the private network and the public Internet. A cloud-based SBC will need to be configured to properly route calls between Microsoft Phone System and the service provider’s network.

    Outgoing calls from MS Teams will then be sent through the Internet to Microsoft Phone System, which will send the calls to the SBC. The SBC will then route the calls—usually through a Session Initiation Protocol (SIP) trunk—to the provider’s PSTN network. The SBC also routes incoming calls to Microsoft Phone System, and subsequently to any Teams-enabled device. Many SBCs are able to monitor traffic and optimise the routing of calls to data transfer speed and quality of service.

    In some situations, providers may implement media bypass to reduce traffic to Microsoft data centers and improve call quality. Media bypass works by sending data from users directly to the SBC rather than Microsoft Phone System. This shortens the path for media traffic and the number of hops required to improve system performance, while also having the option to fall back on non media-bypass when necessary.

    While Direct Routing sounds complicated, a managed service provider should be able to offer guidance during the configuration phase.

  7. Port Existing Numbers
  8. During the transition, it’s essential to impact employees as little as possible. That means porting their DID/DDI number—the individual extensions on the legacy PBX—for all countries where it’s possible so that users can retain their existing phone numbers.

    If a country doesn’t permit number porting or the organization simply wants to get new numbers, the managed provider should be able to do so. After the migration, it’s also straightforward to add new users from the centralised interface.

  9. Train Employees
  10. Once the transition is complete, organizations should train their employees to make the most out of Microsoft Teams. In many cases, there are a number of new capabilities that a traditional PBX system lacks such as Office 365 integrations, location-based call routing, simultaneous ringing, queues, auto-attendant, and more.

    Once employees adopt these new features, many organizations could see a substantial improvement in productivity. That’s why it’s critical to choose a managed provider that offers user training along with implementation guidance.

Microsoft Teams Direct Routing Licensing Requirements

Since there are several components involved when setting up MS Teams Direct Routing, there are a number of licenses required. In general, enterprises will need to hold licenses for Microsoft Teams, Audio Calls and Phone System respectively to enable Microsoft Teams to be used for telephony.

Each individual user will need a base license for Microsoft or Office 365, which can be purchased here. You can add separate licenses to your existing set of licenses as well.

Microsoft’s E3 license bundle includes basic Teams collaboration functionality, but excludes Audio calls and Phone System, which can be added separately. This license is $32, but would require additional fees for Direct Routing.

The E5 license includes Teams functionality, Audio Calls and Phone System all bundled in. That means organizations using this bundle have all the Microsoft licenses necessary to get started for $57 per month.

The F3 license, which was formerly the F1 license, is the cheapest option available at $10 per month. That said, most organizations will want more than just the bare-bones Microsoft features, so this option is only suitable for the most budget-constrained companies.

Microsoft also offers numerous add-on licenses for more advanced features. Here are a few relevant options to consider:

  1. Audio Conferencing — enables attendees to join a Teams meeting by dialing a number from a “traditional” telephone.
  2. Toll free numbers — toll-free numbers for Audio Conferencing, auto attendants, or call queues.
  3. Advanced Communications — host large-scale live events and interactive meetings.

It may prove more cost-effective for a large organization to buy a bundle of software in a Microsoft 365 Enterprise plan. That’s because when you buy several add-on licenses individually instead of as part of a plan, you may end up with a higher combined cost. 

Before purchasing any licenses, it’s best to consult a Microsoft certified partner to learn an optimal solution for the business. Also, remember that the managed service provider will require a license or subscription fee as well.

The Key Benefits of Microsoft Teams Direct Routing

Most digital transformation initiatives aim to shift IT software and processes towards a more integrated and consistent approach, yet telephony often gets overlooked. In fact, many businesses continue to use a fragmented set of PBX hardware distributed across their offices worldwide. 

Shifting to Microsoft Teams Direct Routing, however, is an efficient way to achieve unified communications. Here are some of the key benefits organizations can expect.


Moving to Microsoft Teams with Direct Routing standardizes communication throughout the organization. That means companies can leverage a single telephony solution to streamline compliance, centralize IT support, and simplify employee training because the same user experience can be replicated in all locations globally.


MS Teams Direct Routing also reduces the number of vendor relationships necessary by replacing multiple local carriers with a single managed provider service. In addition, existing numbers can be ported to the cloud telephony solution and used globally across the organization. This greatly reduces the complexity of the organization’s communication technology stack.


With a cloud-based solution, there’s no need to manage on-premises PBX equipment across offices. That means it’s straightforward to add, modify, or remove Microsoft Teams users as the workforce adapts to today’s rapidly changing business environment. Innovative business models like hot-desking, mobile working, and working from home also become viable options when location no longer matters.


By using the same Microsoft Teams user interface for internal and external communication, companies can deliver a consistent employee experience. Nearly every collaboration tool from video conferencing and file sharing is accessible from the same platform as external phone calls. This can enable a more productive work environment that’s tightly integrated with other business applications or Microsoft products as well.


A centralized telephony solution is easier for IT teams to control and monitor. For example, global data on usage can help pinpoint issues and reroute calls to better manage capacity. This is especially true for managed providers that offer regional carrier redundancy with failover in case there are issues with a single carrier. Since the system is tied to Microsoft’s security and access solutions, enterprises can also have more peace of mind that their communications will continue working as expected.

Cost Reduction

On-premises telephony hardware is expensive and time-consuming to install and maintain. Moving to the cloud frees up time and ensures organizations only pay for the resources they actually use. Direct Routing also creates economies of scale by consolidated regional carriers into a single global plan. For most enterprises—where communication technology isn’t a core competency—migrating fully to MS Teams can reduce costs and enable a shift in focus towards other digital initiatives.

Do you want to learn more about Direct Routing? Ben Lee, LoopUp’s Microsoft Technology Lead for Consulting, joins Kevin Kieller – Co-Founder at enableUC, and Shawn Cooke – Senior UCaaS Product Specialist at Masergy in the closing panel discussion at the Microsoft Teams Direct Routing virtual summit with Enterprise Connect – watch below.

Wrapping It Up

Remote work may have been on the rise for a while now, but the global pandemic has greatly accelerated the shift. As organizations adapt to remote workforces by adopting more agile business processes, closing underutilized offices, and undertaking other digital initiatives, they should consider a more modern communication strategy.

LoopUp is a managed service provider and certified Microsoft Gold Partner that enables organizations to use Microsoft Teams with Direct Routing on our own global voice network. With 13 carefully-selected tier-1 carriers, LoopUp’s private global network offers regional carrier redundancy and 99.995% uptime availability. This ensures LoopUp is a reliable solution for unified communications.

As a provider for over 5,000 enterprises around the world, LoopUp is prepared to help enterprises quickly modernize their communication and collaboration efforts. With 15 offices worldwide and 24/7 multilingual support, the company has become a trusted provider for communication solutions and remote work initiatives. 

Consider Microsoft Team Direct Routing to adopt a modern approach to communication. That way, your organization can remain competitive during the global pandemic and long after it passes.

Want to know more about Direct Routing for Microsoft Teams? Contact LoopUp to discuss how we can support your cloud communication journey.

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