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Updated Oct 12, 2023

Should You Get A Cloud-Based Business Phone System?

Is a cloud-based phone system worthwhile for your business?

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Kiely Kuligowski, Business Strategy Insider and Senior Writer
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Editor Reviewed
This guide was reviewed by a Business News Daily editor to ensure it provides comprehensive and accurate information to aid your buying decision.

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An effective and reliable method of communication is a cornerstone of any successful business. Cloud-based phone systems, also known as internet calling or Voice over Internet Protocol (VoIP), have become extremely popular with the increased ubiquity of cloud storage across all aspects of business, but they may not be right for everyone. Read on to see if it’s right for you.

What is a cloud phone?

A cloud-based phone system, or cloud phone, is a phone service that allows you to make calls over the internet rather than over a traditional analog phone line that uses copper wires or optical fibers to make a connection. Cloud phones are hosted in one or more off-site secure data centers.

These phone systems can be used with a variety of devices, including traditional phones with adapters, smartphone apps, computer software or VoIP-enabled phones. Rather than maintaining software via a server, such as a private branch exchange (PBX) on the premises, all information and data are stored in the cloud. This helps you save on costly maintenance and updates since everything can be easily updated in the cloud. [Read related article: Should Your Business Switch to Cloud PBX?

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

Cloud phone system vs. a traditional phone system

Traditional telephones work by connecting phone systems to the public network. These networks use an Integrated Services Digital Network (ISDN) or a public switched telephone network (PSTN) to place calls. In more modern setups, traditional phones can work through VoIP, which runs the phone lines through internet connections.

Cloud phone systems take the concept further. The phones are not routed through traditional networks at all. Instead, voice communication is routed through a third-party-hosted internet system. Traditional phone technology can be used, but it isn’t necessary. Instead, any computer device can use cloud calling for voice communication. 

Typically, cloud-based voice is less expensive than traditional phone lines or VoIP because it can be bundled with additional cloud services. Cloud calling is an inexpensive resource for providers.

cloud phone features

How do you know if your business needs a cloud-based phone system?

Cloud-based phone systems are lightweight and relatively inexpensive compared to more equipment-heavy traditional phone systems, but they might not be right for every business. Consider the following factors to determine if you should buy a cloud-based business phone system.

  • Equipment: If you’re starting from scratch and want to keep equipment to a minimum, cloud phone systems are a great option. Cloud phones operate fully on a desktop computer or mobile device, making additional hardware optional. However, if you already have a lot of traditional phone system equipment that you don’t want to waste, check to be sure it’s compatible with modern cloud systems before signing up with a provider.
  • Costs: Cloud phone systems eliminate installation and maintenance costs that are unavoidable with many traditional phone systems. However, some cloud-based phone systems offer access to a wide range of features, like video conferencing and AI sentiment analysis. However, you will pay for these extra bells and whistles, so consider carefully whether you need these features before buying. Some cloud phone providers offer scaled-down versions that may be more suitable for a company in need of basic phone services.
  • Reliability: Cloud-based phone services rely on a stable and consistent internet connection. If your internet is unreliable, a cloud phone system might not be useful for you unless you upgrade your internet package first.
  • Data management: With a cloud service provider of any kind, data is stored and managed by a third-party rather than on local servers. This can be a benefit to small businesses without dedicated IT resources, but for those that want full control over their data, it may be a drawback. Consider how your business uses its data and the security practices of any provider you choose to work with.

cloud phone

When choosing a phone system provider, there are lots of top options to consider, including Dialpad, 8×8 and Ooma. Learn more in our Dialpad review, 8×8 review and our review of Ooma.

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

Cloud-based phone systems are becoming increasingly popular as businesses adapt to using digital and internet-based services, but it’s still important to assess all aspects of cloud-based phone systems before deciding if one is right for your company.

Pros of cloud-based phone systems

  • Cost-effective: As with many cloud services, the main benefit of cloud-based phone systems is their low cost. Because all your calls are conducted through the internet, you are responsible only for the cost of your internet connection rather than for call minutes or phone service, as you would be with a traditional phone system. Traditional systems also charge extra for features like voicemail or auto attendant, whereas most cloud-based systems include these features with your phone service so you have only one monthly cost for your communication needs.
  • Reliable: Another main draw of cloud-based phone systems is their reliability. Because most businesses depend on communicating with customers and other outside parties to conduct operations, a reliable phone line is vital. Cloud-based phone systems are hosted in multiple locations, which means you and your data are protected even if a server fails. This is known as geographic redundancy, and it’s highly effective in helping businesses avoid service issues and downtime.
  • Flexible: Additionally, cloud-based phone systems provide almost unlimited flexibility, making them an attractive option for businesses with remote workers or frequent travelers. A cloud-based system can route calls to your VoIP-enabled device no matter where you are, as long as you have an internet connection.
  • Scalable: If your company is growing, cloud-based phone systems also offer flexibility in scaling. A cloud management system allows you to easily add phone lines, extensions and advanced features as needed without having to pay for professional installation or purchase additional equipment. Updates and maintenance are also carried out directly in the cloud, which saves you time and money and helps avoid communication downtime.

Cons of cloud-based phone systems

  • Dependent on connectivity: Because cloud phone systems are internet based, they are susceptible to internet connectivity issues and outages. If you have spotty or unreliable internet service that frequently drops or fails, a cloud-based system may not be right for you. A strong, consistent internet signal is critical to a functional cloud-based phone system.
  • Security: Since cloud services are managed by third parties, you should clearly understand their security practices. Without the proper precautions and safeguards, cloud-based systems are susceptible to malware and hacking. Be sure your internet connection is protected and your cloud system provider has security measures in place to further protect your data.
  • Sunk costs: If your business already has significant traditional telephone equipment, purchasing adaptors to turn them into cloud-enabled phones or buying all new VoIP phones can be costly. Consider the equipment you already have and see if it makes better financial sense to pay to convert your existing system or to purchase a whole new service.

Choose cloud phones for affordability and usability

Businesses that need effective phone capabilities for an inexpensive price and without the clutter of traditional hardware could benefit from a cloud-based phone system. All you need to make the most of cloud phone technology is a reliable internet connection and one of the best business phone system providers to deliver excellent service. Once your cloud-based phone system is set up, it will be easy to make crystal-clear calls through an easy-to-use software interface that your employees will love.

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Kiely Kuligowski, Business Strategy Insider and Senior Writer
Kiely Kuligowski is an expert in project management and business software. Her project management experience includes establishing project scopes and timelines and monitoring progress and delivery quality on behalf of various clients. Kuligowski also has experience in product marketing and contributing to business fundraising efforts. On the business software side, Kuligowski has evaluated a range of products and developed in-depth guides for making the most of various tools, such as email marketing services, text message marketing solutions and business phone systems. In recent years, she has focused on sustainability software and project management for IBM.
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