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What is a Cloud-Based Phone System?

A cloud-based phone system is a modern telephone service that uses the internet to make and receive calls, rather than relying on the traditional copper wires and optical fibres used by analogue phones. Often referred to as a cloud phone system or cloud-based business phone system, this technology is rapidly growing in popularity as more companies transition to online software and digital infrastructure.

Unlike traditional phone lines, everything is hosted in the cloud, meaning your business communications are more flexible, scalable and cost-effective. Whether your team is in the office, working remotely or spread across multiple locations, a cloud-based phone system ensures they can stay connected seamlessly.

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How Does a Cloud-Based Phone System Work?

A cloud-based phone system works by routing calls through your internet connection, with voice data transmitted between both ends of the call in real time. The sound is broken down into small packets of digital data, which are sent via private branch exchanges (PBX) in the cloud. These exchanges are designed to route calls efficiently to the correct receiver, just like a traditional system — but without the physical limitations of old hardware.

Because the service runs online, multiple call access points can be authorised at once, allowing employees to use various devices to make and receive calls. Providers manage the hosting, storage, routing, and call settings on your behalf, making it a fully managed solution that removes the need for costly on-site maintenance.

With the upcoming digital switchover, traditional telephone systems will no longer work, meaning that a digital solution, such as a cloud-based phone system, will be needed for businesses that use phones.

What Devices Can I Use With a Cloud-Based Business Phone System?

With a cloud-based business phone system, you’re not tied to traditional handsets. Businesses can choose from a wide range of devices, including:

• Smartphones and tablets

• VoIP-enabled phones

• Adapted traditional desk phones with an ATA (Analogue Telephone Adapter)

• Desktop and laptop applications with headsets

As long as your company has a stable broadband connection, you’ll be able to use a cloud phone system. Many providers also offer VoIP packages that come bundled with competitively priced features such as call management tools, conferencing options and unified communication integrations.

Read our Business Guide to VoIP.

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Is a Cloud-Based Phone System Right For My Business?

The right phone solution will depend on your business needs. However, if you’re looking to cut costs, improve flexibility, and access advanced features, a cloud-based phone system is very likely the best choice.

Many businesses make the switch when their existing hardware reaches the end of its life or when their traditional system no longer supports modern business demands. Replacing or repairing legacy phone systems can be expensive, while a cloud phone system offers a low-cost, low-maintenance alternative with minimal hardware investment.

Technology continues to evolve quickly. Businesses that want better integrations, scalability and features such as call recording, analytics, and video conferencing often find that a cloud-based business phone system delivers more value than traditional copper-wire setups. The only drawback is that your system depends on a reliable internet connection - but with modern business broadband speeds, this is rarely an issue for most companies.

Main Features of a Cloud-Based Business Phone System

Video conferencing

Connect with colleagues and clients in high-quality video calls without the expense of separate conferencing tools.

Unified communications

Integrate your cloud phone system with voicemails, instant messaging, CRM platforms, social media and email, centralising your communications.

International calls

Make low-cost international calls, far cheaper than traditional landline rates, ideal for global businesses.

Instant messaging

Send real-time messages between team members, keeping collaboration quick and easy.

Artificial intelligence

Use AI-driven features such as voicemail transcription, speech-to-text and intelligent call routing to improve efficiency.

Automated directories

Reduce admin workload with automatic call routing, ensuring customers are quickly connected to the right department or agent.

What are the Pros and Cons of a Cloud-Based Phone System?

Pros

• Cost savings – Calls are made over the internet, so there are no expensive per-minute charges for international or mobile calls. Adding new users or features can usually be done via a simple dashboard without expensive engineering work.

• Reliability – Leading providers host servers in multiple geographic locations. If one server fails, another immediately takes over, keeping your communications running.

• Flexibility – Calls can be routed through any authorised VoIP-enabled device, no matter where the caller is located. This makes cloud systems ideal for businesses with remote teams or multiple office sites.

• Scalability – A cloud-based business phone system can grow as your company grows. Adding users or lines takes minutes rather than weeks.

Take a look at our top 10 VoIP benefits for small businesses.

Cons

• Internet dependence – A stable internet connection is essential. If your connection drops, so does your phone service. Each line typically requires around 100kbps of upload speed, which is minimal but worth checking.

• Emergency services location data – Some providers may struggle to provide precise caller location information to emergency services. This isn’t a dealbreaker for most businesses, but it should be considered if compliance is critical.

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Frequently Asked Questions About Cloud-Based Phone Systems

Is a cloud-based phone system cheaper than a landline?

Yes. A cloud phone system uses your existing internet connection rather than charging per call or requiring multiple costly lines. Most providers offer predictable monthly pricing, which makes budgeting easier for businesses of all sizes.

What is the best small business phone system?

There are many strong options, including BT One Phone, Berry Technologies, 4Com HiHi, 8x8 X Series and RingCentral Office. The best choice depends on your budget, size, and feature requirements. A cloud-based business phone system is often ideal for small businesses because of its low setup cost and flexibility.

What’s the difference between a cloud phone system and VoIP?

The terms are often used interchangeably. Both describe systems that make calls via the internet rather than traditional phone lines. A cloud-based phone system is essentially VoIP technology that is hosted and managed in the cloud by a provider.

Can I convert my existing business landline?

Yes. With an Analogue Telephone Adapter (ATA), your current handsets can be connected to a cloud-based phone system. The adapter converts analogue voice signals into digital packets, allowing them to be transmitted over the internet.

Is a cloud-based business phone system a good fit for small businesses?

Absolutely. Cloud systems are affordable, require minimal hardware, and can scale as your company grows. Small businesses benefit from advanced features like call recording, mobility, centralised communication, and video conferencing without needing to invest heavily upfront.

How secure is a cloud-based phone system?

Security is a top priority for most providers. Calls and data are encrypted, and hosting is managed in secure data centres with redundancy in place. Businesses should choose a provider that complies with industry standards to ensure call privacy and data protection.

Will a cloud phone system work if my internet goes down?

If your primary office internet connection fails, calls can often be rerouted automatically to mobile phones or other locations, minimising disruption. Many providers offer built-in disaster recovery features to keep businesses connected.

Do cloud-based phone systems support hybrid and remote work?

Yes. A significant benefit of a cloud-based business phone system is the ability to connect employees from anywhere with an internet connection. Whether staff are at home, in the office, or travelling, they can access the same phone system features through mobile apps, desktop applications, or VoIP-enabled handsets.