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Updated Apr 10, 2024

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.

Mark Fairlie
Mark Fairlie, Senior Analyst & Expert on Business Ownership
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Table of Contents

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Major U.S. companies have begun the process of decommissioning “POTS” – the copper-wire-based analog “plain old telephone system” we’ve used for more than 100 years. They’re replacing it with a modern digital network that uses the internet as its backbone instead.

At the same time, businesses are investing in cloud phone systems. They offer more features, better sound quality and more ways to communicate than traditional switchboards and exchanges. In this article, find out what cloud-based phone systems are, how they work and how much they’ll cost 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-based phone system?

Cloud phone systems use Voice over Internet Protocol (VoIP) technology to deliver voice communications and other data to callers on any internet-connected device. These types of business phone systems typically offer more calling features than traditional analog systems. These legacy systems also often require expensive on-premises PBX equipment connected to the public switched telephone network to operate effectively.

Cloud-based phone systems are widely used as part of a unified communications platform to handle inbound and outbound calls, auto attendants, voicemail, chat, SMS messaging and faxing. Most modern phone systems integrate with email applications and the top CRM software to ensure that all communications can move through one easy-to-use system of record. 

Advanced calling features include:

  • Natural language processing and machine learning to automatically provide post-meeting notes
  • Analysis of conversations to give insights into overall customer sentiment
  • Live customer data analytics so you can see how quickly your phones are answered, how many times your telemarketing reps dial out and so on 

Cloud phone systems also integrate better with popular business tools like email applications and CRM software. Your computer network and cloud system can monitor, record and analyze all customer interactions, giving you better oversight on important issues like revenue generation and team performance.

How does a cloud phone system work?

A cloud phone system uses your internet connection and a third-party VoIP service provider to transmit audio and other forms of data between callers. Cloud and hosted phone systems require only an internet-connected device with a microphone and speaker to work. This is in contrast to traditional on-premises private branch exchange (PBX) phone systems, which are complicated to operate and require companies to purchase and maintain expensive hardware and software.

>> Learn More: What Is a Cloud PBX?

Most VoIP phone service subscribers use “softphones” instead of traditional desk phones. A softphone refers to software installed on an internet-connected device, such as a mobile phone, tablet or computer. For users who prefer the feel and functionality of a traditional analog desk phone handset, many phone manufacturers produce IP phones that look and work like a desk phone. 

You can also convert many traditional business desk phones to work with cloud-based systems through a VoIP adapter.

Pros and cons of cloud phone systems

The advantages provided by a cloud-based phone system will outweigh any potential disadvantages for most businesses today. However, you need a fast and robust business broadband internet connection to get the most from a cloud-based phone system, including the best call quality and access to advanced features.

Cloud phone system pros

Cloud phone system cons

It allows calls to and from anywhere.

It requires an internet connection.

It integrates with popular business applications.

Many don’t interface with older analog equipment for paging or facility controls.

You have the freedom to use any internet-connected device.

There’s the potential for latency and choppy audio in Wi-Fi dead spots.

There’s no complex or expensive hardware to purchase and maintain.

Location data is limited for emergency calls.

FYIDid you know
Many of the best internet service providers offer the speeds you need for cloud phone system implementation, along with data plans, solid customer support and services tailored to your organization’s needs.

How to choose a cloud phone system

At first glance, it can be difficult to distinguish between the varying offers made by different VoIP providers.

To choose the right cloud system for your business, take the following steps:

  • Assess your business needs. Start off by understanding which calling features you actually need and how they would deliver tangible benefits to the way you communicate with customers. For example, do you want the ability to send and receive texts and WhatsApp messages from clients? Do you want your cloud system to integrate with your existing CRM software? Make a list of your requirements, and refer to this during the selection process.
  • Assess individual user needs. Different people within your business will need access to certain features but not others. Your sales team, for example, might require more advanced features, such as call forwarding and voicemail-to-email, whereas your admin staff might only need basic call-handling functionality. Knowing what specific features your staff would use is important for the quote-gathering process.
  • Contact suppliers. Search the internet to find the websites of cloud phone system providers. Most of their websites list the features and functions they have on their system. Shortlist a selection of suppliers whose platforms have the features and functions you need.
  • Contact suppliers’ sales teams. Budget is important when selecting a cloud phone service provider. Many of the features you want will be included in suppliers’ plans, but some will be add-ons. Many plans also include seat minimums and maximums, so be aware of this when comparing providers. If your company makes international calls beyond Canada, which is typically included for free with domestic calling, pay close attention to the number of international minutes included with each plan and if there are overage fees. When dealing with a rep from a cloud-based phone service provider, share your exact requirements to get the best possible quote with them.
  • Take advantage of free trial offers. When you’re choosing a business phone system, take advantage of the 14-day and 30-day trials many suppliers offer on their plans. It’s a good idea to spend at least some time working with the interface and features you find most important in a new phone system before you make a purchase decision. This is also a great opportunity to put their client services teams through their paces to discover how responsive and quick they are.
  • Check out customer reviews. Many companies will be on their best behavior during the trial period. To get a better sense of how a particular supplier handles customer queries and complaints in general, check out independent reviews of their service online.
  • Create a competitive bidding environment. If you can, get three or more quotes, letting the rep you’re dealing with at each supplier know that you’re talking with their competitors. If you’ll be migrating a lot of staff to your new cloud system, you may be able to negotiate a discount, as suppliers often drop their prices to secure your business. A good idea, especially for larger businesses, is to ask for firm quotes at the end of the month when reps are chasing their targets.

>> Learn More: How Does a Virtual Phone Number Work?

What do cloud phone systems typically cost?

For each user, you can find a cloud-based phone system with basic business-class VoIP features for less than $20 per month.

If you’re looking to upgrade from an older on-premises PBX phone system or traditional landlines, you’ll get everything you need and more in terms of calling features with an entry-level cloud-based business phone plan. However, any business that wants to use many of the advanced calling features, like automatic post-call notes, unlimited video conferencing and real-time analytics, should expect to spend more than $30 per monthly user for a mid-tier or top-tier plan.

>> Learn More: Landline vs. VoIP

Some cloud phone systems will let you choose from multiple plans for different employees as you build your sales team, offering advanced capabilities for sales and customer service employees and a lower-priced plan for support staff or in-office teams that don’t use the phone as often. 

Generally speaking, cloud phone system providers structure their pricing per monthly user with discounts of around 25 percent for annual commitments and further reductions in the price per seat for larger companies purchasing a significant number of user accounts.

Bottom LineBottom line
To get the most out of your cloud-based phone system, you need to optimize your network for VoIP. This involves ensuring you have a robust, fast connection, investing in the right kit, creating a VLAN and, if it’s within your budget, backing up your system with a Power over Ethernet switch.

Top cloud phone system providers

Our editorial team spent a great deal of time with the industry’s leading cloud-based phone systems. In our search for the best business phone systems, we examined popular options and selected 13 finalists. These are some of those finalists.


Dialpad’s service is cost-effective. It offers two quoted plans: from $15 per user per month for its Standard package to $25 per user per month for Pro. The Standard package is well featured for SMBs, and its Pro package is best suited for larger businesses. There’s an Enterprise plan with negotiable rates that has no restrictions on office locations or ring groups. The implementation of AI into Dialpad has been impressively handled.

Features standard to all plans include:

  • Unlimited calling
  • Real-time call, voicemail and meeting transcriptions
  • SMS, MMS and team messaging
  • Google Workspace integration
  • Auto attendant (interactive voice response) service
  • Call forwarding, recording and three-way calling
  • Analytics and reporting

Learn more in our comprehensive Dialpad review.

GoToConnect by LogMeIn

GoToConnect has two plans – Basic at $27 per user per month and Standard at $32 per user per month. The range of features offered on both subscription levels is roughly identical, except that Standard offers more – for example, you can invite 150 meeting participants on Basic but 250 on Standard. There are some Standard-only features, like call recording, real-time analytics and Smart Notes.

You can access the following features on both plans:

  • Smart call routing
  • Unlimited extensions
  • Call forwarding
  • Auto attendant service
  • Call queues
  • Team messaging
  • Auto conferencing

Find out more in our in-depth GoToConnect review.


Nextiva offers three subscription levels: Essential, Professional and Enterprise. Prices range from about $23.95 to $37.95 per month for up to four users to $17.95 to $31.95 per month for 100 or more users. Professional has more features, like voicemail-to-SMS notifications and advanced integrations. Enterprise has a more sophisticated set of app integrations and exclusive functionality like call recording and voicemail transcription.

All three plans offer:

  • Unlimited U.S. and Canada calling
  • Free local and toll-free numbers
  • An allocation of toll-free minutes
  • HD voice
  • Auto attendant service
  • Hold music
  • Call groups
  • Outlook and Google calendar integrations

Available Nextiva integrations include Salesforce CRM, Salesforce Service Cloud, HubSpot, Zendesk, Microsoft Teams, Oracle Sales Cloud, ServiceNow, Outlook and Google Contacts, as well as advanced integrations with many CRMs.

Read more in our latest Nextiva review.

TipBottom line
To find out more about the CRM systems you can integrate Nextiva with, please read our review of Salesforce CRM, HubSpot review, review of Zendesk and Salesforce Service Cloud review.


Ooma’s pricing ranges from $19.95 per person per month with its Essential plan to $29.95 for its Pro Plus plan. For video conferencing, text messaging and call recording, you need to select the Pro plan at $24.95 per person per month. For team chats, CRM integration, hot desking and call queuing, you need the Pro Plus Plan.

Standard features across all three plans include:

  • Unlimited calling to the U.S., Canada, Mexico and Puerto Rico
  • Auto attendant
  • Call parking
  • Ring groups
  • Call forwarding and transfer
  • Voicemail
  • Music on hold and on transfer

Learn more in our Ooma review.

Did You Know?Did you know
A cloud-based phone system is one of the tools you can use to track your remote workers’ productivity.


RingCentral offers three subscription levels: Core at $20 per user per month, Advanced at $25 per user per month and Ultra at $35 per user per month. If you have telesales or customer service managers looking after a team, you’ll probably need, at the very least, the Advanced option, which has call whispering, barging and monitoring. There isn’t a vast difference between the Advanced and Ultra plans, except Ultra users get unlimited file storage and device analytics (primarily for IT admin use). 

Core features across all RingCentral options include:

  • Unlimited U.S. and Canadian domestic calling
  • Toll-free minute allocation
  • Voicemail, including transcripts and voicemail to email
  • HD calls
  • End-to-end call encryption
  • Incoming caller ID
  • Call queues
  • Call recording

Learn more in our RingCentral review.


Zoom’s plans are based more on calling destinations than access to functionality. For $10 per user per month, subscribers get access to the Zoom network with metered U.S. and Canada calls. For $15 and $25 per month, you get unlimited outbound calling.

All subscribers receive:

  • HD call quality
  • 24/7 live chat and phone support
  • Native apps for Windows, Linux, macOS, Android and iOS
  • Voicemail with transcription
  • Call distribution
  • Timed call diversions

To access SMS and MMS messaging, you must be on either the $15 or $25 monthly tier.

Read our updated Zoom review.


Like Nextiva, Vonage offers three plans whose price depends on the number of subscribers within your company. The Mobile plan is $19.99, the Premium plan is $29.99 and the Advanced plan is $39.99. Vonage occasionally offers sales for new accounts.

On the Mobile plan, users benefit from unlimited domestic calling, desktop and mobile apps, and SMS and MMS messaging.

Premium subscribers receive unlimited video conferencing for up to 100 guests, support for VoIP desk phones, app integrations and auto attendant services. Advanced subscribers get call groups, voicemail transcription and up to 15 hours per month of on-demand call recording.

Read our comprehensive review of Vonage.


8×8’s cloud phone system has two iterations: Unified Communications with two plans (X2 and X4) and Contact Center with three plans (X6, X7 and X8). The more expensive subscriptions include extra features, making those plans more suitable for omnichannel contact centers.

Each of the five subscription levels offers the following features:

  • Unmetered calling to the U.S. and Canada (plus 10 other countries with X2 and 46 with X3; X6/7/8 customers can choose a metering system if they prefer)
  • Auto attendant
  • Secure HD voice
  • Hot desking
  • Caller ID, forwarding, transfer, park, hunt groups and ring groups
  • Call queues
  • Internet fax
  • Voicemail with transcription

X4 customers benefit from call barging, monitoring and whispering, as well as supervisor and caller activity analytics. X6/7/8 clients receive agent workspaces, omnichannel routing, skills-based routing, post-call surveys and more. There is also a range of additional chargeable extra for all clients.

Read our updated review of 8×8.

Jeff Hale contributed to this article.

Mark Fairlie
Mark Fairlie, Senior 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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