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What Is a Cloud-Based Phone System?

Updated Jul 31, 2023

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A cloud phone system uses 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, which 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 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, analyze conversations for customer sentiment and provide live customer analytics for communications across a company. 

With so many popular business tools operating from the cloud, it should come as no surprise that modern phone systems have followed suit. Here’s what you need to know about incorporating a cloud phone system into 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.

How does a cloud phone system work?

Cloud phone systems use your internet connection and a third-party VoIP service provider to transmit audio and other forms of data between callers. Unlike traditional on-premises PBX phone systems, which require businesses to purchase and maintain servers, cloud and hosted phone systems require only an internet-connected device with a microphone and speaker. 

>> Learn More: What Is a Cloud PBX?

Most VoIP phone service subscribers utilize “softphones” instead of traditional desk phones. A softphone refers to software installed on internet-connected devices, such as mobile phones, tablets or computers. 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, one area that can be a nonstarter is the dependency on a business broadband connection. Call quality and other advanced features will always require a reliable connection to the internet with any cloud-based phone system.

Cloud phone system prosCloud 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

While VoIP providers may appear similar at first glance, the combinations of features and price points vary substantially across the industry. Before you search for a cloud-based phone system service provider, it’s a good idea to list all the calling features your business will use weekly. 

It’s also a good idea to take inventory of your staff in terms of which teams or individuals need access to advanced calling features and which could work just as efficiently with an entry-level or basic cloud-based phone system.

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

Once you have ascertained the most important features and the number of user accounts, you’ll be able to narrow your search by price. Remember that most providers offer a sliding scale with a relatively broad price range for each plan, depending on your organization’s size and the contract length you’re willing to sign. 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.

Finally, when you’re choosing a business phone system, we highly recommend taking advantage of the free trials and demos offered by nearly all providers. Most cloud phone service providers we reviewed include 14-day and 30-day trials for many of their plans.

While you may not want to take the time to fully integrate a trial phone system with all your company’s data, 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. 

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 utilize many of the advanced calling features, such as 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% for annual commitments and further reductions in the price per seat for larger companies purchasing a significant number of user accounts. Larger businesses should consider calling a sales agent and inquire about discounted pricing near the end of the month or quarter for a better enterprise rate.

Bottom LineBottom line

Most entry-level cloud phone systems are priced below $20 per user per month. However, the most popular mid-tier options with the bulk of advanced features typically cost $30 to $50 per user per month.

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 11 finalists. These are some of those finalists.


We chose Dialpad as the best business phone system for voice intelligence. Business owners searching for an advanced cloud-based phone system with AI-powered productivity tools will want to consider Dialpad’s all-in-one business communications offerings. 

These are some of Dialpad’s features:

  • Unlimited calling
  • Local numbers in 50-plus countries
  • CRM integrations
  • Automatic post-call notes
  • Speech coaching
  • Multilevel auto-attendant
  • Analytics and reporting

Pricing: Dialpad costs $15 to $25 per user per month through two plans. Enterprise-level pricing is available, as is a 14-day free trial.

Learn more in our Dialpad review.

GoToConnect by LogMeIn

We selected GoToConnect as the best business phone system for features and tools. This cloud-hosted phone system delivers a robust and unified communications experience at an affordable price point, with every calling feature a business owner or call center manager would like to see.

These are some of GoToConnect’s features: 

  • Smart call routing
  • Unlimited extensions
  • Hot desking
  • Real-time analytics
  • Agent effectiveness reporting
  • Inbound and outbound call monitoring
  • Voicemail to email

Pricing: GoToConnect costs $24 to $39 per user per month through three plans. A 14-day free trial is available.

Learn more in our GoToConnect review.


We felt that Nextiva was the best business phone system for CRM integration. Companies that want to take their customer relationship management tools to new levels of efficiency and productivity should consider Nextiva’s popular Enterprise plan. 

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

These are some of Nextiva’s features: 

  • Professional setup
  • Unlimited call pop
  • Auto-attendants
  • Free toll-free number
  • Number migration
  • Unlimited video conferencing with 250 participants
  • Customer journey analytics

Pricing: Nextiva costs $17.95 to $52.95 per user per month through four plans. Seven-day free trials and 30-day demos are available for different plans.

Learn more in our Nextiva review.


Ooma separated itself from the competition as the best business phone system for remote teams. Its features and pricing are an especially good fit for small businesses that don’t necessarily need myriad automated tools and integrations from their phone system.  

These are some of Ooma’s features:

  • Unlimited long-distance calls
  • Voicemail transcription
  • SMS messaging
  • Video conferencing
  • Call recording
  • Enhanced call blocking
  • Virtual receptionist

Pricing: Ooma costs $19.95 to $27.95 per user per month through three plans. There’s a 30-day money-back guarantee on Ooma Office hardware.

Learn more in our Ooma review.

Did You Know?Did you know

A cloud-based phone system can boost remote work productivity because it gives remote workers greater flexibility.


RingCentral MVP was our choice as the best phone system for collaboration. Its software integrates with many popular business applications, making it incredibly easy and effective to implement as a unified communications platform for phone, video and messaging.

These are some of RingCentral’s features: 

  • Automatic call recording
  • Video meetings with 200 participants
  • Huge selection of software integrations
  • Advanced call handling
  • Single sign-on
  • Team messaging
  • Document sharing

Pricing: RingCentral costs $19.99 to $42.99 per user per month through four plans. A 30-day free trial is available for most plans.

Learn more in our RingCentral review.

Jeff Hale
Contributing Writer at
Jeff Hale is a writer and editor based in San Diego with a background in business development and marketing. He has identified new market opportunities for Fortune 500 companies and developed communications strategies and digital branding for tech startups and small businesses. Jeff covers emerging technologies and business solutions with a focus on efficiency and growth. He holds a Bachelor’s degree in English from the University of California, Irvine, and an MBA from Chapman University.
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