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What is a cloud phone system and how does it work?

Published on December 22, 2021
Last modified on March 19, 2022

The world is witnessing a rapid rise in technology in each and every department, and cloud technology is one such example. Automation and digitalization of each and every aspect of every industry in the world are what humankind is aiming towards. 

The introduction of cloud technology is one example of how we can move towards our goal collectively.

Phone systems are crucial for companies as they act as a link between the customers and themselves, and that is why management of phone systems is important. 

Irrespective of the services offered by a company, phone systems are necessary as they connect the customers with the brand and facilitate proper functioning within an organization by connecting all departments and hierarchies. 

Even in sales calls, Cloud VoIP technology has made it possible to maintain the system without physically managing it at any level and ensuring high levels of connectivity 24×7.

Let’s look at all the concepts and terminologies involved in a cloud phone system.


What Is A Cloud Based VoIP System?

A Cloud Based VoIP System can be defined as a VoIP-based system that allows you to make calls via an internet connection and works virtually on cloud. It can be termed as a cloud based telephone that is used to make calls without the need to host an entire phone system in your organization. 

These systems have numerous benefits over traditional hosted systems, but the most notable of all the benefits is that it is very cost-effective and works on a pay-as-you-use model. 

It is a subscription-based model and how much you pay is directly proportional to how much you use. This helps businesses run smoothly by reducing their costs on hefty bills generated by phone systems and allowing them to cut down the costs on telecommunications infrastructure as these systems are physically managed in data centres hosted by the service providers.

The only piece of hardware companies need to purchase is IP phones required to make calls over a network.


How Does A Cloud Phone System Work?

A cloud phone system works on the principle of VoIP. For those wondering, VoIP stands for Voice over Internet Protocol, and it means voice communication through the internet. To understand this technology more effectively, you need to understand the basic concepts of IP addresses and networks.

A network is a connection between multiple devices through which they communicate. Each system is connected over a network through an IP address. Internet Protocol or IP address is a numeric address representing a system or a device in a network. 

When two computers communicate, they need to establish a connection between them when both computers connect their IP addresses.



One good example to explain an IP address is phone numbers. When a person purchases a phone number, they get an identity to connect to other phone numbers within a network. 

This does not mean that a phone number is an IP address; rather, IP addresses and phone numbers have similar functions. 

Due to advancements in technologies over the last few years, it has become possible to establish a connection and communicate verbally through two devices connected over a network through IP addresses. This is exactly what VoIP means. When you make calls over the internet, you are connecting to a device through its IP address in a network. Internet is the network in this case. 

This was all you need to know about the working principle of a cloud phone system.


Cloud Phone System vs VoIP

Although a cloud phone system works on VoIP technology, it is important to note that they aren’t exactly the same thing in different instances. 

The phenomenon of VoIP vs cloud phone has one major difference, i.e., a business VoIP or a Virtual PBX is a service that can only function as an automated answering machine that can divert calls as and when required. In contrast, a Hosted PBX looks after all the activities carried out using a telephone. 

This difference in the nature of both services affects their functionality significantly. Virtual PBX’s can only be used to handle inbound calls but Hosted PBX’s allow you to manage inbound and outbound calls. 

Virtual PBX’s cannot replace your phone systems as they can only perform one task, but on the other hand, Hosted PBX’s can replace your entire system and every small part of it as they can take care of a wide variety of responsibilities. 

Another aspect of VoIP vs Cloud Phone is that Virtual PBX can be one part of a Hosted PBX, but Virtual PBX does not have the facilities to replace a Hosted PBX.


How To Choose The Best Cloud Phone System For Your Business

Choosing the best solution for your company solely depends on the requirements that need to be taken care of. You can customize your plans as per your needs and get in touch with service providers. 

This approach will not only save money but prove to be beneficial for your business in the long run. You get to choose from many basic and advanced features if you switch to a cloud phone system, and this is the best possible solution available in the market for your telecalling requirements. 

You should also note that you can make changes in your plans at any time and get your subscriptions updated whenever necessary.



Cloud Phone System is just another example of the evolving world and how new inventions are making it better. The wide variety of features it offers while also reducing the burden of system management are some of the characteristics by which a Cloud Phone System is ahead of the curve in every aspect in the Telecommunication Industry. 

This one tool can be very influential for your business as it fulfills all your requirements at no extra cost. This efficient piece of technology can help you maximize your profits in many different ways.

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