What Is a Cloud Phone System and How Does It Work?

A cloud phone system (a.k.a. cloud PBX, hosted PBX, and hosted phone system) is a VoIP phone system that is accessible over a cloud-based IP network. It is delivered entirely over the Internet and managed completely off-site, cutting down upfront investments in telecommunications infrastructure. The deployment and setup are quick and easy, freeing companies from IT overheads. Normally, you can purchase the cloud phone service from a service provider and pay on a subscription basis.

The diagram below is a simplified flow of how a cloud phone system works:


Cloud Phone System Diagram


Simply put, with the business phone system hosted in the cloud, you make and receive calls using IP phones, mobile phones, or other devices, and the voice traffic is carried over an Internet connection, which in turn is connected to data centers sitting within the cloud.



What Are the Benefits of a Cloud Phone System?

Savvy businesses are joining the shift to cloud phone systems for lots of reasons.

Cloud Phone System Benefits

Cost Savings  

Every business, especially smaller companies, wants to cut operational costs as much as it can. A cloud phone system is a budget-friendly option as it greatly reduces the upfront investments on equipment and regular occurring maintenance costs. In most cloud phone system installations, the only capital expense is purchasing the IP phones. The cloud phone system usually works on a simple per-user basis so that businesses can scale up the capacity by simply purchasing new licenses. The system is always ready to grow with your business. On the other hand, under such a pricing model, the company has greater predictability of their phone system and better control of their budget.



A big advantage of using this type of business phone system is the ability to scale efficiently. As your business grows, your cloud phone system can scale to match your growth. With traditional phone systems, this requires additional hardware if you wish to scale up. But with cloud-based phone services, it is as simple as adding new users whether they are based at a physical office or working remotely. This makes it one of the best phone services for businesses, especially those experiencing rapid growth.


Limited Maintenance & Administrative Requirements

Hosted off-site, a cloud phone system is centrally managed by phone service providers, requiring little technical expertise and IT personnel from customers to set up and configure the system. The responsibility of keeping the system updated also shifts from the customer to the service provider, and businesses have an always current phone system without dedicating budget and resources to maintain it. The administration of a cloud phone system is also simplified as long as you have an Internet connection, which is highly useful for companies with offices in different locations. IT admin can change the user settings through the web interface at any time, anywhere, with a few clicks.


Mobility & Geographical Flexibility

With a cloud phone system, headquarters, branch offices, and teleworkers can all be unified, enjoying the same features and business continuity. For remote workers, the office is wherever they make it as long as the Internet connection is available. Some cloud phone system service providers offer free softphone apps that allow employees to use not only IP phones, but also desktops and smartphones as office extensions to make and receive calls, enabling employees to work from home, on the go, or as a full-time remote worker. Besides, cloud phone systems make it easy to connect geographically dispersed offices under one phone system, and the administrator can manage it from any location.


Bonus: Unified Communications

The cloud phone system is a perfect enabler of unified communications. Unified communications are all about making a wealth of communications channels and options into a single point of access. Cloud unified communications lead to more consistent and convenient communication with colleges and customers by allowing them to use their preferred channels. For example, when you are on a phone call using your web-based or desktop softphone and have to leave for a while, instead of having to hang up the phone, you can forward the call to your mobile phone and keep on the conversation. Some providers also offer values in enhanced collaboration, such as instant messaging, presence, CRM integration, and more.