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What Is a Cloud-Based Phone System?
Cloud phone systems use the internet and a VoIP service to transmit audio and data between callers. Learn the pros and cons of cloud phone systems.
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Major telecommunications carriers are phasing out “POTS” — the copper-wire, analog “plain old telephone system” many businesses still use. And with CDC data showing that only about 23 percent of U.S. adults now live in a household with a working landline, it’s clear that traditional phone service is quickly becoming outdated. In its place, carriers are moving to modern digital networks that rely on internet protocol technology as their foundation.
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Simultaneously, businesses are rapidly adopting cloud phone systems because they offer more flexibility, better call quality and support for multiple communication channels compared with traditional private branch exchange (PBX) systems. We’ll explain what cloud-based phone systems are, how they work and what you can expect to pay if you want to switch from a traditional setup.
What is a cloud-based phone system?
A cloud-based phone system is a VoIP-powered business phone service that delivers calls and other communications over the internet instead of traditional phone lines. These systems work on any internet-connected device and typically offer more features than analog phone setups. By contrast, legacy phone systems often require costly on-premises PBX equipment and physical phone lines to operate reliably.
Cloud phone systems are widely used as part of unified communications platforms that support inbound and outbound calling, auto attendants, voicemail, chat, SMS messaging and business faxing. Most providers integrate with many of the best CRM software and email applications, so teams can manage every interaction through one easy-to-use system of record. This makes cloud-based systems a strong fit for established and growing businesses that need flexible, scalable communication tools.
Advanced calling features in cloud-based phone systems include:
- Natural language processing and artificial intelligence to automatically generate meeting transcriptions and action items
- Real-time sentiment analysis during customer conversations
- Live performance dashboards showing metrics like average handle time, first-call resolution rates and agent availability
Cloud phone systems also integrate seamlessly with modern business applications through APIs and webhooks. Your unified communications platform can log customer touchpoints, sync contact information across tools and trigger automated workflows based on call outcomes, giving your team clear visibility into customer journeys and day-to-day productivity.
How does a cloud phone system work?
A cloud phone system — often called a cloud PBX — routes calls and messages over the internet using a VoIP service provider instead of traditional phone lines. All you need is an internet-connected device with a microphone and speaker. This is very different from an on-premises PBX system, which requires costly hardware, ongoing maintenance and a trained technician to make even simple changes.
Most VoIP subscribers use softphone apps rather than traditional desk phones. A softphone app is installed on a mobile phone, tablet or computer and turns the device into a fully functional business phone. For users who prefer a physical handset, many manufacturers offer IP phones that look and feel like traditional desk phones but connect over the internet instead of a landline.
You can also use a VoIP adapter to convert certain traditional desk phones so they work with a cloud-based system.
Pros and cons of cloud phone systems
For most businesses, the advantages of a cloud-based phone system outweigh the drawbacks. The only major requirement is a fast, reliable business broadband connection, which ensures strong call quality and access to advanced features.
Below are the key pros and cons to consider when deciding whether a cloud-based phone system is the right fit for your business’s evolving communication needs.
Cloud phone system pros
- Lets employees make and receive calls from anywhere, which is ideal for remote and hybrid teams.
- Integrates with popular business applications, including CRM platforms and help desk tools, to keep communications organized.
- Gives users the flexibility to work from any internet-connected device, whether they prefer a softphone app or an IP desk phone.
- Eliminates the need for complex or expensive hardware, reducing setup and maintenance costs.
Cloud phone system cons
- Requires a reliable internet connection to maintain strong call quality.
- May not interface with older analog equipment, such as legacy paging systems or facility controls.
- Can experience latency or choppy audio in Wi-Fi dead zones, especially on congested networks.
- Provides limited location data for emergency services, which can affect how 911 calls are routed.
How to choose a cloud phone system
At first glance, it can be hard to distinguish between the offers from different VoIP providers. The right choice comes down to how well each platform supports your workflow, your users and your long-term communication goals.
To choose the best cloud phone system for your business, take the following steps:
- Assess your business needs. Start by identifying the calling features you actually need and how they’ll improve communication with customers. For example, do you want the ability to send and receive texts or WhatsApp messages? Do you need your phone system to integrate with your CRM software? Do you need virtual phone numbers for flexibility and privacy? Make a list of requirements and refer to it throughout the selection process.
- Assess individual user needs. Different teams need different features. Your sales team might rely on call forwarding, voicemail-to-email and analytics, while your administrative staff may only need basic call-handling functions. Knowing who needs what will help you gather accurate quotes.
- Contact suppliers. Visit the websites of cloud phone system providers — including the vendors we recommend below — and review the features offered on each platform. Shortlist the suppliers that match your must-have requirements.
- Contact suppliers’ sales teams. Budget plays a big role in the selection process. Many key features are included in standard plans, but others may be available only as add-ons. Be aware of seat minimums and maximums, and pay close attention to international calling. If your company makes international calls beyond Canada (which is often included with domestic calling), compare the included international minutes and potential overage fees carefully. Share your exact needs with each rep to get the most accurate pricing.
- Take advantage of free trial offers. Most business phone system providers offer 14-day or 30-day trials. Use this time to test the interface, explore essential features and gauge how well the system supports your day-to-day tasks. It’s also a chance to evaluate the vendor’s customer support responsiveness.
- Check out customer reviews. Vendors are often at their best during a trial period. Independent user reviews provide a clearer picture of how each provider handles customer issues, billing questions and long-term support.
- Create a competitive bidding environment. Whenever possible, request at least three quotes and let each rep know you’re evaluating multiple providers. If you’re migrating a large number of employees, you may qualify for discounts.
What do cloud phone systems typically cost?
Cloud phone system pricing depends on the features you need and how many people will be using the system, but most businesses end up in a similar range. In general, providers charge anywhere from $15 to $60 per user per month, with many small and midsize companies falling closer to $25 to $35. A few factors influence where you’ll land:
- Entry-level plans: If you’re upgrading your business phone system from an older on-premises PBX or comparing traditional landlines with VoIP, an entry-level cloud plan will usually cover the core features you need, including unlimited domestic calling, voicemail management and mobile apps.
- Advanced features: Businesses that want advanced features such as automatic post-call notes, unlimited video conferencing or real-time analytics should expect pricing above $30 per user per month for mid- or upper-tier plans.
- Team-specific features: Many vendors also let you mix and match plans across teams. Your sales and support staff may need AI tools, analytics and stronger call-handling capabilities, while in-office teams who make fewer calls can stay on a lower-priced plan. This flexibility helps keep costs under control as your business grows.
- Billing models and discounts: Most providers charge on a per-user, per-month basis, and many offer lower rates if you sign up for a year instead of paying monthly. You may also see extra discounts if you’re buying 50 or more licenses. It’s common for vendors to run promotional pricing for the first few months, too, which can make the transition from an older system a little easier on your budget.
Top cloud phone system providers
We’ve tested and evaluated many of the best business phone systems on the market. After comparing their features, pricing and how they perform for real teams, a handful rose to the top. Here are the providers we think deliver the best mix of performance and value for growing businesses.
Dialpad
Dialpad remains one of the more competitively priced business phone systems on the market. It offers three plans: the Standard plan at $15 per user per month (annual billing), the Pro plan at $25 per user per month (annual billing) and an Enterprise tier with custom pricing based on your deployment size. The Standard plan works well for most small and midsize businesses, while the Pro tier adds more advanced tools for larger teams. Enterprise customers get support for unlimited office locations, custom integrations and dedicated account management.
Dialpad includes a solid set of calling and messaging tools across its plans, with more advanced features available on higher tiers or as add-ons. Core capabilities cover everyday business needs, while upgrades unlock deeper analytics, enhanced security options and expanded integrations.
Most businesses can expect access to key features such as:
- Unlimited calling
- Real-time call, voicemail and meeting transcriptions
- SMS, MMS and team messaging
- Google Workspace integration
- Interactive voice response (IVR)
- Call forwarding, call recording and three-way calling
- Analytics and reporting
- HIPAA compliance and BAA support
Learn more in our comprehensive Dialpad review.
GoTo Connect
GoTo Connect structures its service around three plans — Phone System, Connect CX and Contact Center — all of which require a custom quote. Since pricing isn’t published, businesses need to speak with sales to get an accurate per-user rate based on their size, feature requirements and expected call volume.
Most users can access the following features on any plan, either as included components or optional add-ons:
- Smart call routing
- Unlimited extensions
- Call forwarding
- Auto-attendant service
- Call queues
- Team messaging
- Audio conferencing
Higher-tier plans or add-on packages unlock more advanced tools, such as call recording, real-time analytics and AI-driven features that support sales and customer-service teams.
You can learn more in our full GoTo Connect review.
Nextiva
Nextiva offers three cloud phone system plans — Core, Engage and PowerCX — with pricing that starts at $15 per user per month when billed annually. Costs increase as you add more advanced features, such as deeper analytics, customer-experience tools and broader integrations. Annual commitments and higher seat counts typically qualify for additional discounts.
Most plans include the following features, though some may only be available as add-ons:
- Unlimited calling within the U.S. and Canada
- A free local and toll-free number
- A toll-free minute allotment
- HD voice
- An auto-attendant
- Hold music
- Call groups
- Outlook and Google Contacts integrations
Higher-tier plans unlock added functionality, including voicemail transcription, call recording and advanced CRM integrations. Nextiva connects with popular platforms like Salesforce, HubSpot, Zendesk, Microsoft Teams, Oracle Sales Cloud and ServiceNow, with deeper analytics and customer-experience features available on the PowerCX plan.
Read more in our latest Nextiva review.
Ooma
Ooma offers three business plans — Essentials, Pro and Pro Plus — with pricing that starts at $19.95 per user per month. The Pro plan adds tools like video conferencing, text messaging and call recording, while the Pro Plus tier includes team chat, CRM integrations, hot desking and call queuing. Costs increase as you move into the higher tiers, but the added features can be helpful for sales and support teams that rely heavily on call management.
Many core features are available on most plans, including:
- Unlimited calling to the U.S., Canada, Mexico and Puerto Rico
- An auto-attendant
- Call parking
- Ring groups
- Call forwarding and transfer
- Voicemail
- Music on hold and on transfer
Learn more in our Ooma review.
RingEX (formerly RingCentral MVP)
RingEx offers three plan tiers — Core, Advanced and Ultra — starting at $20 per user per month when billed annually. The Advanced plan adds useful supervisor tools like call whispering, barging and monitoring, which many sales and support managers consider essential. The Ultra tier builds on this with extras like unlimited file storage and device analytics aimed at IT teams, though the day-to-day experience is fairly similar to the Advanced tier.
Many core features are available on most plans, including:
- Unlimited U.S. and Canadian calling
- A toll-free minute allotment
- Voicemail, including transcriptions and voicemail to email
- HD calls
- End-to-end encryption
- Incoming caller ID
- Call queues
- Call recording (availability can vary by plan or region)
Learn more in our RingEx review.
Zoom
Zoom Phone offers three main plans — U.S. & Canada Unlimited, Global Select and Pro-level bundles — with a U.S. & Canada Metered option ($10 per user, per month) available for businesses that prefer pay-as-you-go calling. Most companies choose one of the unlimited tiers. Pricing starts at $15 per user per month for unlimited domestic calling (when billed annually) and $20 per user per month for the Global Select plan, which includes a direct dial number and unlimited calling in one of 48 supported countries.
Many essential features are available on every plan, including:
- HD call quality
- 24/7 live chat and phone support
- Native apps for Windows, macOS, Linux, Android and iOS
- Voicemail with transcription
- Timed routing
- Call distribution
SMS and MMS messaging are available on the Unlimited and Global Select plans.
Read our updated Zoom review for more details.
Vonage
Vonage offers three plan tiers — Mobile, Premium and Advanced — with pricing that varies based on the number of lines you purchase. With annual billing, plans start at $19.99, $29.99 and $39.99 per line per month. Vonage also frequently offers introductory discounts, sometimes reducing pricing by up to 50 percent for the first six months.
Many core features are available on every plan, including:
- Unlimited calling within the United States and Canada
- Desktop and mobile apps
- SMS and MMS messaging
- App integrations
- Virtual receptionist
Additional features depend on which tier you choose. The Premium plan adds unlimited video meetings for up to 100 participants and support for VoIP desk phones, while the Advanced plan includes call groups, voicemail transcription and up to 15 hours per month of on-demand call recording.
Read our comprehensive Vonage review for more details.
8×8
8×8 provides cloud-based phone and contact center solutions with custom pricing based on your team size and feature requirements. Rather than publishing set plan tiers, the company builds quotes around the tools and capabilities each business needs for unified communications or omnichannel support.
Many core features are available across 8×8’s communications offerings, including:
- Unmetered calling to the U.S. and Canada
- Auto-attendant
- Secure HD voice
- Hot desking
- Caller ID, call forwarding, call transfer, call park, hunt groups and ring groups
- Call queues
- Internet fax
- Voicemail with transcription
More advanced capabilities — such as call barging, monitoring and whispering, real-time supervisor dashboards, omnichannel routing, skills-based routing, workforce management tools and post-call surveys — are available in higher-level configurations or contact center packages.
Read our updated review of 8×8 for a closer look at features, performance and integrations.
