What is a Cloud-Based Phone System and how does it work?

Unified Communications Explained

What is Teams Calling and how does it work

What is a Cloud-Based Phone System?

A cloud phone is a phone system for businesses that allows you to make calls over the internet instead of traditional telephone lines.   A cloud phone can be used with a number of devices such as smartphones, VoIP-enabled phones, or a headset.

A cloud-based phone system delivers business-grade call features while removing the requirement to purchase and maintain PBX hardware.  As there is no central hardware in a cloud-based phone system, phones can be connected at any location and unified into a company-wide phone service such as Teams Calling Cloud Telephony.   All you need is adequate internet access and all telephony and data can be delivered to your team anywhere, any time.

Read more about our cloud-based phone system Teams Calling.

How is Cloud-based Phone System Different from Traditional Business Telephone Systems?

Traditional office phone systems involve installing a phone system on-premise that connects all of your phone extensions and links them to a public phone network such as PSTN or ISDN lines. Taking one step further, today’s traditional phone systems can also link to VoIP services, by running a phone line through an internet connection.

A cloud-based phone system does not include telephone lines. Instead, the communication is linked through a hosted internet system. Without depending upon a telephone network, any computer device uses cloud calling for communicating.  With cloud phone systems, you pay for the softphones or headsets and a monthly rental fee for the hosted system.  Cloud-based phone systems are much cheaper than traditional telephony when it comes to initial expense.

Use our Teams Calling Cost Estimator to see how much your cloud-based phone system might cost.

How Do Cloud-Based Office Phones Work?

A cloud phone system works by splitting your voice into small packets that are delivered as data to the call recipient over the internet. The call is routed through a cloud-based PBX.

Cloud-based business phones are accessible via a number of methods, hence making them easily available for anyone who has a reliable internet connection. Cloud-based voice calls can be made in the following ways:

  • A conventional phone system with a VoIP adapter plugged into a telephone outlet or into the router directly.
  • A computer which can be used as a softphone. This can be done by using applications of software programs that allow you to make voice calls over the internet such as Microsoft Teams.
  • A smartphone with voice calling apps such as Microsoft Teams to make calls over the internet.
  • A dedicated VoIP phone. They look like conventional analog phones but instead of a telephone line, they are directly connected to a computer network.

Understand more about the Pros and Cons of Cloud-Based Phone Systems.

Features of Cloud Office Phones

One of the biggest attractions of cloud-based phone systems is the numerous features they offer. Whereas analog phones have limited features, cloud phones add and update more features as they are made available.

Some of the features of cloud office phones that make them stand out from other services are as follows:

  • Consolidated or Unified Communication: A cloud-based telephone solution consolidates your business telephone system, instant messaging, voicemail, fax, file collaboration, and video conferencing. Furthermore, it can also be integrated with web applications, email, social media, and CRM tools.
  • International Calling: Since cloud-based phones are based on the internet, the calls can be made anywhere irrespective of locations without incurring long-distance call charges. Most of the cloud packages include international and long-distance calling as free features.
  • Video Conferencing:  Today’s workplace is increasingly mobile, and small businesses especially need to be able to operate from multiple locations.  Hence, businesses are now looking for easy and reliable video conferencing solutions. Most cloud-based phone services have video conferencing as added features requiring very little hardware and setup costs.
  • Instant Messaging: SMS texts are a thing of the past. With cloud services, you can send instant text messages to anyone in the world. The communication is in real-time and can be accessed via multiple devices such as smartphones and personal computers.  With Teams Calling, you can message, talk, collaborate, and conference all from the one application.
  • Call Forwarding: Call Forwarding is very useful and means you can take a call on one number and redirect it to another number.  Cloud call forwarding works exactly like conventional call forwarding, however, users can redirect calls from anywhere.
  • Artificial Intelligence: Artificial intelligence has gradually become a part of our lives and cloud phones are one of them. These virtual phone systems also use Artificial Intelligence for providing customer service and performing functions such as sentiment analysis and speech-to-text.
  • Auto-Attendant: Just like the traditional business phone systems, cloud phone systems have an auto-attendant feature to direct calls to the right department or individual. It reduces the communication workload of personnel and also helps incorrectly resolving issues while catering to the caller’s needs.
  • Sharing and Collaboration: This feature includes file sharing, project submissions, audio/video conferencing, and other tools that help employees collaborate with each other even from remote locations.
  • Voicemail to Email: With this feature, you can send an audio voicemail file to an email address. This lets the recipient’s access voicemail without having a voice mailbox.  Hence, the emailed file can be accessed from a wide range of devices.   As a result, allows the recipient to recheck their voicemail for as long as they want.

You can review an extensive list of the key features of Cloud-Based phone system Teams Calling.

Questions to ask when considering a cloud-based business phone system

For those who are considering switching from analog to a digital cloud-based phone system, it is critical to ask your vendor how their solution will integrate with your existing office environment.  Here are some questions to ask before making a decision:

1. Cost

Cost is the number one consideration for businesses when considering migrating to a cloud-based phone system.  Some questions to ask are:

  1. What call plans are available and what is the difference between them?
  2. Does a less expensive plan have limitations that will impact our business?
  3. What are the implications of buying vs leasing phones?
  4. Do I need phones or can I save using headsets?

2. Service Integration

The new service ideally needs to mesh with your existing workflow.  The less disruption migrating to a new phone system means the faster it will be adopted and begin increasing productivity.  It is good to ask:

  1. How many concurrent calls can be made from our office?
  2. Can we see if someone is on a call by looking at the phone display or do we need to use our computer?

3. Systems Compatibility

It is rare for a business to upgrade technology at one time, meaning there is often a mix of systems that are working together.  To ensure a critical component doesn’t stop working, ask the vendor:

  1. What is the solution for our office alarm system?
  2. Will your solution require additional network cabling to make it available to all users?
  3. What about paging or intercom systems?  Will they be affected?

4. Technical Support

Exceptional technical support is essential to a smooth transition.  This is the first area that suffers when a vendor is offering lower prices than its competitors.

  1. What IT Support options are available with the cloud-based phone system service?
  2. Are live support staff available?
  3. Where is your Support team located?
  4. What happens if I need to add or delete users and who manages the administration?


Find out more about KMT’s Cloud-Based phone system Teams Calling.

Key Takeaways & next steps

We hope this article has helped you understand more about cloud-based phone systems and how they work.  Investing in the right solution can streamline operations and maximise productivity.

For more business phone and technology content, refer to our Information Centre.


If you would like some advice or assistance on choosing your next business phone system.

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