What is a cloud based phone system?

What is a cloud based phone system?

A cloud phone system is a Voice over IP (VoIP) based business telephone platform that is hosted by a third-party provider such as OnSIP. Cloud phone systems typically offer advanced security and telephony features such as extension dialling, auto attendants, and conference bridges.

Before the Cloud Phone System, in a Nutshell

Business phone systems have been around for a long time — predating the internet, even. At a minimum, phone systems typically enable a business to have the main phone number with extensions to reach employees. Since phone systems became VoIP-based in the mid-'90s, companies have been able to run their own by installing telephony software on a server and connecting phones to the server over their IP network.

But for a small or medium-sized business, running your own phone system requires IT overhead such as purchasing SIP trunking service or PRIs to connect the phone system to the Public Switched Telephone Network, maintenance, security measures, and custom configuration. (For more information about on-premise phone systems, read our blog on SMB VoIP System Options.)

A "cloud based phone system" is a phone service delivered through the internet.

Other synonymous terms include "internet based phone system" or more commonly "VoIP" (Voice over Internet Protocol). Both of these terms refer to a group of phones that work together, typically in a business setting, to route calls using an internet connection.

The History of Cloud-Based Phone Services

The telephone, the Internet, and Internet Protocol (IP) – without these three inventions, cloud-based phone systems wouldn't exist today.

Invented in the 1870s, the telephone relayed calls with the help of an operator and a switchboard. The digital switching of calls began in the 1900s when AT&T created touch-tone buttons. This eliminated the need for a human operator.

In the mid-1960s, the Advanced Research Projects Agency Network developed the very first version of the internet. It was used mainly for communications between the U.S. Department of Defense and the U.S. Military. It was only brought to public use in the 1980s when the Personal Computer (PC) became more popular. With these computers, people connected to the early internet via telephone lines.

IP, which defines how information travels between two computers, was invented in 1972. Then, in 1989, the Hypertext Transfer Protocol and the Universal Resource Locator were invented. These inventions became the foundations of the internet as we know it today.

Cloud-based phone systems or VoIP began in 1995 with a company called VocalTec, who pioneered what they called the InternetPhone. This was the first widely available Internet phone software. It allowed one Internet user to contact another and communication could be had through speakers and a microphone. It was developed to save money on long-distance and international phone charges.

By 1996, Internet voicemail applications were created. In 1998, VocalTec went on to develop telephone-to-telephone and computer-to-telephone calling capacities for VoIP. Initially, the adoption of cloud-based phone systems was low, and this was mostly because users had to listen to advertisements before, during, and after their calls.

The 1990s was a decade when telephone equipment manufacturers and telecommunication specialists started to utilise the new technology to their advantage. They began adding IP capabilities to their switches. Eventually, they developed software that allowed users to attach a VoIP adaptor to their phones.

VoIP took off in the early 2000s. During this decade, three separate companies introduced VoIP switching software as add-ons for their routing equipment. Due to this accessibility, the number of VoIP calls skyrocketed to 25% of all voice calls. Call quality also improved with the availability of broadband Ethernet.

In 2004, several companies that were full-service VoIP providers began to spring up. For a flat rate, they provided unlimited domestic calling services and free calling for those who were using the same VoIP provider. At this time, companies started taking full advantage of VoIP calling capabilities by creating unified communications bases.

Today, the future of cloud-based phone systems is bright. It has become an integral part of many people's daily lives since they simplify many processes and offer a great degree of flexibility. There are sure to be further technological developments in the near future that will make cloud-based phone systems even more convenient, probably even indispensable.

However, today's systems have the ability to deliver even more functionality for your company. If your communication strategy routes callers to specific departments, Ring Groups and ACD Queues provide loads of options.

What Are the Benefits of a Cloud Phone System?

Low Cost

The primary benefit of choosing a cloud phone system over hosting your own is a reduction in time and money spent on running a phone system. It's a lot like choosing a hosted email service, such as Gmail, instead of creating your own. Not only can you skip purchasing the server(s) to host the phone system (and the SIP trunking or PRI service to connect it), you can skip all the time spent on configuration, upgrades, and security.

Higher Security

Believe it or not, VoIP hacking is prevalent if you're not careful with your phone system. If they can, VoIP hackers will take control of phone systems to make calls on your dime. Reputable cloud phone system providers are focused on running a secure service, so you don't have to.

Ease of Use

Cloud phone system providers offer administrative portals so that making changes (e.g. adding a phone for a new hire) can be done by any designated team member, with a few clicks. This is much more efficient for businesses than relying on a specific IT resource for complex configurations.

Advanced Features & Integrations

To stay competitive and relevant, cloud phone system providers focus on building calling features that help people communicate in a work environment. For example, a hosted phone system provider might offer a webphone that you can log into from anywhere, integration with your CRM for automated logging, or a click-to-call app so you can initiate calls with a click. Choosing the right cloud phone system for your business can help streamline processes and save the company resources.

Scalability & Remote Working

Finally, a cloud phone system will allow your phone system to scale with your business and support remote workers. Because the service is hosted on the internet, remote employees can register their phones from anywhere. Today, over 4 million people work remotely on a daily basis across the country. Businesses without a hosted phone solution often instead reimburse employee cell phone and home phone bills, which adds up.

What are the pros and cons of cloud-based phone systems?

Cloud-based phone systems are becoming more popular as the business world becomes more digitised and offers internet-based services. Cloud phones offer many benefits, ranging from cost to reliability, but before determining whether they are the best solution for your business, here are some important aspects to consider.

Pros of cloud phones

The main benefit of cloud-based phone systems is their low cost. Calls are conducted entirely via the internet, which means you are only being charged for your internet use, rather than for call minutes or extra phone service. Traditional phone systems can be expensive with multiple lines and add-on features like call transferring or voicemail. Most cloud systems offer the phone service with major features included in the service package, so you only have one monthly cost for all of your communication needs.

Cloud phones are extremely reliable. These systems are hosted in multiple locations, which means that even if one server experiences issues, there is another server that can keep your communications running smoothly. This is called geographic redundancy, and it is a highly effective method for avoiding service issues and downtime.

Flexibility is another major benefit of cloud-based phone systems. The world is moving rapidly toward an expectation of workers being available anytime, anywhere, and a cloud phone allows that functionality with the ability to route calls to your VoIP-enabled phone no matter where you are, as long as you have an internet connection.

If your company is currently experiencing or expects to see major growth, a cloud-based phone system offers an excellent choice for easy and efficient scaling. A cloud management system allows you to add phone lines, extensions and advanced features easily without hiring a professional or paying for more equipment. This also goes for maintenance – all updates can be done in the cloud, saving you time and money.

Cons of cloud phones

Of course, there are some drawbacks to cloud-based phone systems that should be carefully considered.

Cloud-based systems are entirely dependent on the internet and your connection. If you have spotty or unreliable service, a cloud-based phone system may not be the best option for you. A strong, consistent connection is required.

If your business already owns many traditional phones, it may be cost-prohibitive to purchase all the necessary adapters or to purchase new IP phones. Consider the equipment you have and see if it makes sense to adopt that equipment into a cloud-based system.

Cloud phones, being totally dependent on the internet, are susceptible to security issues like hacking and malware. Your connection must be protected. Furthermore, talk to the provider you're considering using and ask them to outline all the security measures they use to make sure your data is protected.

VoIP and cloud-based systems also may not guarantee 911 calling support. Cloud-based phone systems are not tied to a single geographic location like traditional phones are, which makes it difficult to trace a 911 call accurately. An option is to enable Enhanced 911, or E911, in which customers set a physical address that shows up when they dial 911 on their cloud phone. However, not all cloud or VoIP providers offer this service, because to do so, they must cooperate with traditional phone companies (direct competitors) that have had limited access to the 911 network in the past. Ask the VoIP provider you're considering if it offers 911 service automatically, if it must be activated or if it is not supported at all.

What are the factors that affect the quality of calls across cloud-based phone?

In general, calls that run across cloud-based phone systems produce high-quality calling experiences. However, there are still some factors that can impact the quality of these calls.


Often caused by electromagnetic interference, jitter is the interruption in digital signal traffic flow. It can cause audio clicking, monitor flickering, and data loss.


Latency is the time delay of a packet of data reaching its destination. The amount of latency affects the usability of communication devices or interfaces. It is also the wait time for signals to travel across devices that are spread out geographically.

Packet Loss

Packet loss happens when transmitted packets fail to arrive at their destination. Data errors, jitter, and data corruption are its effects. Packet loss can be caused by system noise, inadequate signal strength at the destination, software corruption, hardware failure, or overburdened network nodes.


This score is used in relation to voice testing processes, which range from 1 (worst) to 100 (best). It is based on the percentage of users who are happy with the quality of a test voice signal after it passed through a transmitter to a receiver.

Mean Opinion Score

The Mean Opinion Score measures the call's quality, with scores ranging from 1 (unacceptable) to 5 (excellent). More often than not, VoIP calls are in the 3.5 to 4.2 range.

These areas of performance must be monitored so that the highest level of call quality is ensured and the number of dropped or interrupted calls is reduced.

Why do I consider converting landline to VoIP?

There are a lot of factors to consider when deciding the merits of a landline phone service versus a cloud-based one, especially for a business. Business phone services introduce a variety of needs and limitations that make weighing the differences between these two systems important.

Unlike cloud-based phone systems, which use the internet to transmit your voice as data, traditional telephone lines rely on networks of copper wires, branch exchanges, and switches. This tried and tested system has been in place since the 1800s while the cloud-based phone system has only been in use since the 1990s.

Traditional phone systems come with call forwarding, voicemail, call conferencing, and other features. However, those come at a cost. With cloud-based phone systems, those features are immediately available. Some features, such as voicemail to text, are unique to cloud-based phone systems. You can even integrate your cloud-based phone system with many third-party tools and software. You can't do that with a traditional phone system.

Because a VoIP's service plan is based in the cloud, there is no need for bulky, expensive hardware. Installation is quick and just takes minutes. You only need a broadband Internet connection to start making calls, which makes the cloud-based phone system very portable. Through mobile applications, you can use your mobile phone as an extension of your office phone.

The advantages of a cloud-based phone system:

  • Availability: The flexibility of the multi-device configuration in a cloud phone system will have multiple devices ring simultaneously, making you reachable even if you are out of the office.
  • Flexibility: Cloud PBX apps allow your employees to work from home or elsewhere and still take call transfers as if they were in the office. You can even have reception answer calls externally.
  • Scalability: You can start with a two-handset cloud system and scale accordingly as the business grows. This ensures you are only paying for what you need and can add handsets as needed. You can also reduce the capacity at any time. A cloud-based phone system operates in direct proportion to your monthly spending on telecommunications.
  • Multiple Sites: Cloud phone systems have the most benefits for businesses that operate in multiple sites. They let you break the shackles of geographic locations. Calls can be transferred from Sydney to Melbourne to Perth in a matter of seconds with internal extensions and no charge for the transfer of the call. How great is that? Multi-site offices save cost with free calls between all their sites.
  • Call Routing: Redirecting calls efficiently is an important part of the business. Our wide range of call routing features assures that a call is routed correctly to the right person.
  • Easy Relocation: When moving offices, you don't need to stress about leaving the exchange and losing your main number as you unplug your handsets from the old office and plug into your new office. How cool is that!?

Quick Deployment: The turnaround time for the installation of the system is as quick as you need, eliminating the wait for appointment dates or technicians that sometimes don't even show up.

Cloud based phone systems save money

At first glance, a cloud based system may look like a poor investment. Most service providers charge a monthly fee. However, in-house costs are reduced to a simple hardware purchase. Costs involved with having to dedicate employees, resources, and providers all contribute to savings. 

Traditional landlines are expensive to set up and host. What about internet-based systems hosted in-house? Even if you choose an internet-based business phone system (VoIP), your business costs will include organising to providers. With a cloud based phone system, the service provider will bundle costs into a rate that is determined per user. Budgeting becomes easier and scales with your business.

Looking at an integrated business phone system solution can amplify the return you get from small business internet service providers. You can harness all the power of the cloud without paying for multiple hardware, software, and service components. 

Cloud based phone systems maintenance

Business phone systems are complex. Modern industry requires access to chat, email, voice calls, video conferencing, screen sharing, and e-meetings. However, integrating those various components across devices and locations can be costly in time and human resources. You want to get the most of your technology investments. Cut down on the number of software and hardware components and the labour that supports them. 

With an in-house system, you have to have dedicated experts in each software and hardware element. This takes training and diverts your IT team's attention. Also, cloud based systems are more comfortable to monitor and maintain. Audits and replacements of entire systems are unnecessary. 

With TPx, the initial costs of setting up your hardware are much lower than purchasing hardware systems, hosting and maintaining. You choose the UCx business phones that best suit your business phone needs. As a service provider, we take care of the management, monitoring, upgrades, and maintenance of your entire communication system. 

Cloud based phone systems upgrading

Upgrading should be done regularly to keep pace with technological advances. Cloud systems are the most comprehensive, cost-effective way of monitoring and upgrading your business phone solutions without downtime or expensive resources.

Comprehensive communications with cloud based systems

Unification Communications, as a Service, means that there is no redundancy or lags lost opportunities. Unlike other systems, cloud based systems optimiser force's ability to work collaboratively from multiple locations, across various devices. With TPx, you don't have to fuss with everyone's remote phone number or sending a confusing list of contacts to be mediated by a facilitator. It can be as easy as an app for end-users.

Integration is more accessible to cloud based systems. As new applications and devices transform business workplaces, connecting them can be a cost-debilitating process in-house. By defraying the cost between clients, dedicated service providers can provide a hosted PBX that will allow maximum collaboration—no costs or downtime in upgrading your technology. Your system stays up-to-date and inclusive of the top communication technology at all times.

Cloud based phone systems data security

Whether it is sensitive communications themselves, the data shared through communication systems, or the access to endpoints security is of the utmost importance. The more we can connect, the more data moves. Having a cloud based system allows for better security. 

Service providers like TPx offer dedicated data management and monitoring. In addition, by using the cloud, data backup is easier and safer. Important information is stored in various locations, so your data is protected against corruptions, loss, and disaster. And, disaster recovery is quicker.

Cloud Phone System: Why you should switch!

Economy: A cloud phone system is so much cheaper than the old phone system. There are no rental line fees, and this can save you a small fortune with you just realised your business has paid for this fee for all your landline numbers, during all years of operations.

So easy to set up: with a cloud-based phone system you do not need expensive equipment. All you need is an internet connection and an IP Phone or softphones. You can get pre-configured IP phones from great brands such as Cisco (we provide you with many options of Cisco IP Phones), and once they have been installed, you are on your way! Then, all you need is an account with us.

Flexible: with this phone system for the business, you have great flexibility. With the cloud-based method of connectivity, you can use your PC or mobile apps to make calls from anywhere, at any time.

Better customer service: the cloud-based phone system offers your customer an excellent caller experience. Because it is so flexible, it reduces the number of missed calls from potential customers drastically, and this means that you do not miss out on sales.

Phone Numbers: You can keep your existing number(s). In addition, you can also get new numbers. It is also possible to obtain international numbers so you can easily develop your business abroad.

Cloud phone systems are suitable for all business in whatever sector. They can help a small business to operate in a manner like their larger competitors. Or if you are an enterprise organisation unify all your communication platform and manage your business telephony with a fully-featured system.

A cloud phone system is a great fit for start-ups as well as we have a pricing strategy called: pay as you grow, depending on the number of users. And it will help your new business to look like an Enterprise.

Frequently Asked Questions

Virtual phone systems convert analog signals into digital and transmit them through the internet. They both provide phone functionality, but in different ways. The key differences between a PBX and virtual phone system are how calls are handled and how it connects to the Public-Switched Telephone Network.

A phone system comprises multiple telephones used in an interconnected fashion that allows for advanced telephony features such as call handling and transferring, conference calling, call metering and accounting, private and shared voice message boxes, and so on.

What are the different types of phone systems? There are three basic types of business telephone systems: KSU, PBX and VoIP.

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