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Updated Jan 24, 2024

What Is a Cloud PBX?

This cloud-based communications solution may fit the bill for your business's needs.

Mark Fairlie
Written By: Mark FairlieSenior Analyst & Expert on Business Ownership
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Table of Contents

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Before the internet, if you wanted features like call forwarding, hunt groups, and voicemail for your business, you had to invest in an expensive, bulky, and complex PBX. Plus, you had to pay an IT specialist to operate these features.

Now, many firms use modern cloud PBX phone systems. These systems offer all the same functionality as before – call forwarding, voicemail and more – while allowing you to stay in touch with customers via communication channels like SMS, MMS, WhatsApp and social media messaging. These business phone systems are straightforward, so you don’t need a computer expert to program them.

We’ll explore cloud PBX systems and share what to look for in a cloud PBX provider for your business.

Editor’s note: Looking for the right phone system for your business? Fill out the below questionnaire to have our vendor partners contact you about your needs.

What is a cloud PBX?

Cloud-based private branch exchanges (PBX) offer companies a modern way to communicate and route calls via the internet. Cloud PBX systems often replace costly on-premises PBX hardware that uses traditional telephone equipment and phone service providers to handle voice communications.

The term “cloud PBX” is often used interchangeably with “hosted PBX” because a third party manages the equipment. However, technically, “hosted PBX” is a more general term that can refer to any business telephone system housed outside of your premises.

Cloud-based phone systems are typically implemented for their cost-savings potential and advanced calling features, including auto-attendants, call routing, mobile device support, voicemail to email, free local numbers, call recording and post-call notes.

FYIDid you know
Cloud PBX is a type of business phone system often used interchangeably with terms such as "hosted PBX," "IP PBX" and "virtual PBX."

How does cloud PBX work?

Unlike a traditional telephone system, which uses copper landlines to transmit voice data, a cloud PBX uses your business broadband connection through one of the best internet service providers to route communications. With cloud or hosted systems, voice data from your device is transformed into encrypted data packets sent through your ISP’s network to establish a connection and maintain the call.

Your service provider owns and manages all major equipment in a cloud PBX system. You are responsible for providing an internet-connected device or IP phone to connect to the internet.

Cloud PBX vs. on-premises PBX

For business owners, one of the most significant differences between cloud PBX and on-premises PBX is the hardware’s location. On-premises PBX systems require onsite hardware and IT maintenance, both of which come at a cost. However, several other notable differences exist between these two phone systems. Consider the following comparison:

Cloud PBX

On-premises PBX

Data is stored and managed in the cloud with no onsite hardware required.

You own and manage your onsite telecom hardware and data.

You can use IP phones and internet-connected devices to make and receive calls anywhere.

You use traditional desk phones to make and receive calls from a fixed location.

It integrates with popular business software and tools for unified communications.

It integrates with older analog devices for paging or facility access control.

It’s ideally suited for companies with remote teams.

It’s designed for in-office use only.

There are minimal to no upfront or maintenance costs.

There are significant upfront and maintenance costs.

There are monthly subscription fees in perpetuity for each user.

There’s the potential for lower monthly long-term costs due to owning your equipment.

Virtual PBX vs. cloud PBX

Virtual and cloud PBX systems are similar because neither needs the onsite hardware that on-premises systems require. A virtual PBX is implemented to route incoming calls using interactive voice response (IVR) or auto-attendants.

IVRs greet callers with prerecorded messages, allowing them to choose which team or department they want using their dial pad or voice commands. For example, if you’re calling your internet service provider, you might get the option to speak with either the billing or technical support teams. You can give your callers similar choices with an IVR.

Virtual PBX systems are typically used by small businesses that don’t spend much time on the phone and don’t want to pay for a complete business phone system. Cloud PBX solutions can be found in companies of all sizes and industries where telephone communications and video conferencing calls are essential for conducting business.

TipBottom line
When choosing a business phone system, note that a virtual PBX is a component of a cloud PBX system.

Pros and cons of cloud PBX

The benefits and cost-saving potential of cloud PBX generally outweigh its disadvantages. However, cloud PBX phone systems are not perfect for every business. The systems’ pros and cons include:


  •  Low upfront costs
  • No equipment to maintain
  • Flexibility for remote workers
  • A wide range of valuable features and tools
  • Typically include voice, video, chat and SMS communications
  • Integrate with other popular business applications, including CRM software


  • Your call quality is only as good as your internet connection
  • Your employees may need training on advanced features
  • Network routers may need fine-tuning to support cloud telephony
  • You’ll need an annual or monthly service plan that’s most likely priced per user

What to look for in a cloud PBX provider

Most cloud PBX providers offer similar monthly and annual pricing structures, advertised uptimes that exceed 99.9 percent, and a wide range of plug-ins to connect your new phone system to other software applications and tools your company uses daily.

With so much similarity between providers, decision-makers should focus on the features they would utilize the most with a cloud-based phone system. Also, they should ensure the move to cloud PBX doesn’t negatively impact how their employees work.

Did You Know?Did you know
A cloud PBX system offers remote workers greater flexibility, which can boost productivity among your remote workforce.

Here are some crucial factors to consider:

  1. Integrations: Many cloud PBX systems integrate directly with other business apps, including CRM software. Your PBX can record the calls your team makes and receives, and your CRM can add the recordings and transcripts to customers’ records. Many PBXs also allow you to connect with customers via SMS, MMS, WhatsApp, social media messaging and more, and record those interactions in your CRM.
  2. Price: Large companies should get quotes from several cloud-based phone service providers and ask about discounted pricing for enterprise plans. Generally, you’ll get a lower rate by committing to an annual service plan instead of a recurring monthly payment. It’s worth noting that fees are typically charged per user.
  3. Flexibility: Team members will need various phone system features. For example, if you’re building a sales teamor using remote customer service agents, higher-priced advanced calling features may be worthwhile. In contrast, in-office support staff may need only the most essential, entry-level calling features. Providers with plan flexibility can help you provide appropriate features to your staff.
  4. Support: Customer support can be critical, depending on your team’s experience with cloud-based software. Many cloud PBX providers offer 24/7 support with every subscription plan. However, some companies may limit support hours with their lower-cost and entry-level plans.
  5. Hardware: Hardware, including IP desk phones, conference phones and headsets, may not be necessary for all cloud PBX users. But if you’re going to purchase a significant number of devices, you may be able to find a better deal through your phone service provider. Companies like Nextiva offer dozens of hardware options with discounted pricing available.
TipBottom line
Existing businesses looking to switch to a cloud PBX phone system should prioritize integrations with the software applications they use daily, including the best CRM software.

Best cloud PBX providers

Our editorial team spent weeks reviewing the industry’s best business phone systems. We considered the most popular providers and identified top options for businesses of all sizes.

For your convenience, we’re highlighting eight of our favorite business phone system providers that offer cloud PBX service. Many of these providers use the terms “VoIP,” “cloud PBX,” “hosted PBX” and “virtual phone systems” interchangeably.

Pricing for this category is typically based on the number of monthly users, with discounts available for longer contract terms and companies with more than 20 users.


Dialpad is an advanced cloud PBX phone system that uses voice intelligence technology to help teams stay connected and transform business conversations into actionable data to increase efficiency and sales. New customers should take advantage of the 14-day free trial to get a better feel for Dialpad’s suite of features and tools.

Here are a few notable Dialpad features available on all service plans:

  • Unlimited calling
  • Ring groups
  • CRM integrations
  • SMS, MMS and team messaging
  • Internal and external SMS
  • Call routing and forwarding
  • Three-way calling
  • Auto attendant

Pricing: Dialpad costs $15 (Standard) to $25 (Pro) per monthly user, with custom pricing for enterprise plans designed to fit a specific business’s needs. Pro users benefit from 24/7 customer support, CRM integrations and global SMS. Enterprise features include 100 percent uptime, priority agent support and unlimited office locations and ring groups.

Read our full Dialpad review for more information on features and pricing.

GoTo Connect

GoTo Connect’s hosted PBX helps businesses migrate from a legacy phone system to a modern communications suite with more control and an expansive set of administration tools.

Notable features on all GoTo Connect plans include:

  • Easy number porting
  • Variety of free business phone number options
  • Smart call routing
  • Hot desking
  • Unlimited auto-attendants, ring groups, extensions, dial plans and music queues
  • Team messaging
  • Call queues
  • Audio conferencing

Pricing: GoTo Connect’s two plans cost $29 per user per month for Basic and $39 per user for Standard. Advanced features on the Standard plan include call analytics, call listening, whispering and barging, and e-fax services.

Read our full GoTo Connect review for more information.


Nextiva is a reliable and modern business phone service that connects billions of conversations yearly with reported uptimes of 99.999 percent.

Notably, all Nextiva Business Communication plans provide 24/7 live customer support and advanced VoIP features, including the following:

  • Unlimited U.S. and Canada calling
  • Free local and toll-free number
  • Voicemail to email
  • Microsoft Outlook and Google Contacts integrations
  • Unlimited internet fax
  • IVR functionality
  • 24/7 live customer support

Pricing: Nextiva costs $17.95 to $37.95 per monthly user when paid annually. Seat charges decrease when you move to the next user level (1-4, 5-19, 20-99 and 100+). The basic tier is Essential, followed by Professional and Enterprise.

Professional clients benefit from unlimited conference calling, mobile and desktop SMS, and Salesforce and HubSpot integrations. Enterprise clients also receive call recording, voicemail transcription and integration with Microsoft Teams and Enterprise.

You’ll find seven-day trials and free demos for each of Nextiva’s Business Communication plans. You can also purchase or lease VoIP devices and save with manufacturer rebates and discounts.

Read our full Nextiva review for additional details.


RingCentral was one of the early cloud PBX innovators, helping to lower costs, increase ROI, connect remote workers and provide the flexibility to help businesses scale as needed. 

These are some of the standard features the company offers across all service tiers:

  • Unlimited U.S. and Canadian calls
  • Voicemail (including transcription)
  • IVR functionality
  • HD sound
  • Call encryption
  • Incoming caller ID
  • Heads-up display for receptionists and administrators

Add-ons include high-volume SMS, room licenses, and additional toll-free, international, and vanity numbers.

Pricing: RingCentral costs $20 to $35 per monthly user for midsize companies when paid annually (a savings of up to 33 percent). Discounts are available for companies with 50 or more users on request.

The company offers three subscription tiers: Core, Advanced and Ultra. Advanced users get more toll-free minutes and SMS messages, call whispering, barging and monitoring, hot desking, and unlimited internet fax. Ultra users also benefit from increased call and text allocations and unlimited file storage.

Read our RingCentral review for more on tier-specific features and available add-ons.


Ooma offers commercial and residential VoIP and cloud phone services. Although not the cheapest, the company scores well in user reviews and often ranks first in third-party client satisfaction surveys.

All Ooma subscribers benefit from the following:

  • Unlimited U.S., Canada, Mexico and Puerto Rico calls
  • Free number transfers
  • Free toll-free number with 500 inclusive inbound minutes each month
  • Virtual fax
  • Auto-attendant
  • Music on hold and on transfer
  • Call logging
  • Call forwarding and transfers

Pricing: Ooma bills monthly, requires no long-term contract and offers a 30-day money-back guarantee. It has three subscription levels: Essentials at $19.95 per user per month, Pro at $24.95 per user and Pro Plus per user at $29.95.

Pro users receive text messaging, video conferencing for up to 25 users, call blocking, analytics, voicemail transcription, and integrations to Office 365 and Google Workspace. Pro Plus users also get CRM integrations, up to 100 participants on video conferences, call queues, advanced text messaging, hot desking, call screening and advanced call management.

Learn more by reading our comprehensive Ooma review.


Vonage, now part of multinational telecom equipment maker Ericsson, serves 100,000 businesses in multiple worldwide markets.

All subscribers to Vonage’s service receive the following:

  • Desktop and mobile apps
  • SMS and MMS messaging
  • Unlimited domestic calling

Pricing: Vonage has three subscription levels: Mobile at $19.99, Premium at $29.99 and Advanced at $39.99. Keep an eye out for Vonage’s regular sales promotions, which can lock in a 30 percent monthly discount for the life of your agreement. (You must sign a one-year minimum contract to take advantage of such promotions.)

Premium subscribers also receive support for VoIP desk phones, analytics and reporting, integration with business apps, an auto-attendant facility, and unlimited video meetings (up to 200 guests). Advanced users benefit from call groups, on-demand call recording for up to 15 hours a month and voicemail transcription.

Read our comprehensive review of Vonage for more details.


Based in California, 8×8 originally designed circuit boards. However, following market and leadership changes, the company pivoted into video calling and VoIP service provision.

All 8×8 subscribers benefit from the following:

  • Unmetered calling to the U.S, Canada and a selection of other countries
  • Auto attendant services
  • Secure HD voice
  • Call queues
  • Team messaging
  • Microsoft Teams add-in

Pricing: 8×8 has five options: the X2 at $28 per user per month, the X4 at $57, the X6 at $85, the X7 at $110 and the X8 at $140. The X6, X7 and X8 tiers are annual subscriptions only. The higher the service level, the more you equip your business to handle incoming and outgoing omnichannel communications.

X4 subscribers can access call barging, whispering and monitoring, and supervisor and call activity analytics. X6 and above users can access much more, including skills-based routing, post-call surveys, omnichannel routing and agent workspaces.

Read our updated review of 8×8 for a full breakdown of features and functionality.


Zoom is perhaps best known as one of the world’s leading video conferencing software providers. However, the company is also a very well-established cloud PBX provider.

As a Zoom subscriber, you’ll receive the following:

  • HD call quality
  • iOS, Android, Windows, Linux and macOS apps
  • Voicemail with transcription
  • Auto attendant service
  • Call barging, monitoring, whispering and takeover
  • Three-way calling
  • Call blocking

Pricing: All subscribers have access to essentially the same features. There are three choices. The US & Canada Metered plan provides a connection and chargeable outbound calls for $10 a month. The US & Canada Unlimited plan ($15 a month) offers unlimited calls to the U.S. and Canada. The Global Select plan ($25 a month) offers unlimited calls to 48 countries and a direct dial number.

Read our updated Zoom review to learn more about Zoom’s PBX offerings.

Cloud PBX FAQs

Cloud PBX systems typically cost $20 to $60 per monthly user, depending on your needed features and services. Many hosted PBX providers offer discounts based on user numbers and contract length. Because these phone systems run on most internet-connected devices, there's often no need to purchase anything other than inexpensive headsets to take calls. However, companies that prefer traditional telephones can purchase IP phones that look and function like desk phones, but they're connected via Ethernet cable instead of a phone line.
Cloud PBX systems use Voice over Internet Protocol (VoIP) technology to make voice, chat and video communication possible. The terms "cloud" and "hosted" simply let consumers know that the service provider owns and maintains all the hardware required to transfer digital data packets containing communications between callers.
A cloud PBX system is an affordable way to provide advanced telephone features to in-office and remote employees. It can improve organizational communication and track interactions to provide a great customer experience. It can also help increase performance with real-time call analysis, post-call summaries, and detailed caller identification to help provide personalized and professional service over the phone.
A cloud PBX is an internet-based phone system. The provider remotely manages and updates the hardware and software you need to make and receive calls. All equipment is stored on the provider's premises. In contrast, a traditional telco will install a local PBX at your business location; your IT team is responsible for updating the hardware and software. Although some local PBXs may offer greater theoretical control over your communication system, cloud PBXs benefit from much lower upfront costs and much greater scalability.
SIP stands for Session Initiation Protocol. It's a type of signal that internet networks use to start, maintain and terminate video, voice or text messaging sessions. SIPs are a core part of current VoIP technology; your cloud PBX will likely use SIPs to manage live telephony sessions. Your cloud PBX will use other technologies to handle tasks like call routing, voicemail transcription and more to provide its full range of features.

Jeff Hale contributed to this article.

Mark Fairlie
Written By: Mark FairlieSenior Analyst & Expert on Business Ownership
Mark Fairlie brings decades of expertise in telecommunications and telemarketing to the forefront as the former business owner of a direct marketing company. Also well-versed in a variety of other B2B topics, such as taxation, investments and cybersecurity, he now advises fellow entrepreneurs on the best business practices. With a background in advertising and sales, Fairlie made his mark as the former co-owner of Meridian Delta, which saw a successful transition of ownership in 2015. Through this journey, Fairlie gained invaluable hands-on experience in everything from founding a business to expanding and selling it. Since then, Fairlie has embarked on new ventures, launching a second marketing company and establishing a thriving sole proprietorship.
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