What Is Cloud Telephony & How Does It Work? (+ 7 Benefits To Your Business)

Want to make your phone system cost less and do more? You’ve likely come across cloud telephony, and you want to know whether it can help your specific use case.

If you’re debating the switch from your existing business phone service to cloud telephony, you’re in the right place. In this guide, we’re covering everything you need to know, including the essentials of cloud telephony, how it works, how it benefits your business, and how to choose your cloud telephony provider.

Let’s jump right in.

What Is Cloud Telephony?

Cloud telephony is a phone system that runs through your internet connection. It’s also known as a VoIP-based hosted PBX solution. It helps you move your business phone service to the cloud.

Cloud telephony streamlines your business communications and grows with your business. Whether you’re opening new offices, hiring remote workers, or expanding your in-house teams, cloud telephony will make the expansion effortless and cost-effective.

Cloud telephony is a type of Unified Communications as a Service (UCaaS). UCaaS is a unified communications model, meaning it brings various communication systems and collaboration tools together. 

With cloud telephony services, you won’t just move your phone calls to the cloud but also connect them with your video meetings, instant messaging, CRM, and business processes across the board.

As part of your UCaaS platform, cloud telephony will better connect your teams and make your employees more focused, engaged, and satisfied in their roles. A study conducted by Cisco concluded that nearly 8 in 10 employees experience improved productivity levels due to remote work capabilities, like team chat and video conferencing.

How Does Cloud Telephony Work?

Cloud telephony works through a VoIP service provider. When you dial the phone number you want to call, your service provider handles the routing. It converts analog voice signals into data packets and transmits them over your internet connection. That’s how it connects your phone to the person you’re calling.

On your end, you would replace individual phone extensions with a VoIP desk phone. Rather than connecting to a landline, you plug your phones into your existing network. You can also use a softphone or an app installed on your computer, tablet, or smartphone. In both cases, you’re calling from a modern, easy-to-use interface and establish a call in a split second.

Because cloud telephony services run in the cloud, you can manage your business phone system through an online dashboard for full control over phone numbers, call forwarding, adding new users, and more.

Cloud Telephony vs. Traditional PBX

For employees, the end-user experience remains similar between cloud telephony and traditional PBX systems. However, the underlying technologies differ significantly.

Cloud telephony offers remarkable flexibility. It eliminates the need for physical equipment, allowing staff to communicate using any internet-connected device from anywhere with Wi-Fi or 5G. Getting started is simple: you only need a VoIP service provider and a reliable broadband connection.

Traditional Private Branch Exchange (PBX), by contrast, presents several challenges.

Setup requires on-premises setup of stationary equipment, with significant upfront costs for both work and hardware. Ongoing maintenance is complex—if equipment breaks or becomes outdated, your team must handle repairs and replacements, which disrupts productivity.

PBX systems and traditional phone systems also limit scalability. They make long-distance calls more expensive, offer limited features, and struggle with business expansion. Phone lines are tied to physical desk phones working on the Public Switched Telephone Network (PSTN) instead of the internet, complicating remote work and travel.

While traditional PBX systems might suit small companies with stable, unchanging needs, businesses seeking growth and flexibility will benefit more from cloud telephony’s adaptable VoIP solutions.

Benefits of Cloud Calling

What does a problem with your phone system mean for your company? You can lose a customer, miss an important deadline, or terminate an employee due to a communication issue.

It’s no surprise. The way we work has become dynamic and diverse, and we need technology to keep up.

If you want to make sure you never lose a customer, an employee, or your peace of mind because of communication problems, here are cloud telephony benefits you’ll want to know.

1) Quick and easy implementation

Cloud telephony implementation requires no on-site infrastructure. This advantage means you can get up and running within a few days, potentially even within a day.

There’s no waiting for a technician, no installation of phone lines, no delays, and no lengthy process of hiring a full-time employee to configure your new telephony system. Your cloud telephony service provider takes care of everything. You’ll instantly get virtual phone numbers and access to a dashboard that allows you to manage the entire cloud phone service.

2) Lower cost of running your business phone system

There are many ways cloud telephony services will save you money. You can save up to 65% of your traditional phone bill. Cloud telephony providers save your business from maintenance contracts, limited calling minutes, restrictive local and toll-free phone numbers, and paying for separate business SMS services.

With cloud telephony, there are no unexpected maintenance costs or bills. And if you’re bootstrapped and want to get started as low cost as possible, you can skip buying VoIP phones and use laptops with headsets through a softphone app.

3) Robust, powerful calling features

We’re not talking just about features that look good on paper. Advanced calling features that come with cloud telephony services allow you to work smart, be effective, and focus on the right tasks at the right time. You can avoid manual, repetitive tasks and step up your team collaboration and customer support.

Here are some of the most valuable call management features of cloud telephony:

• Auto-attendant, which allows your caller to reach the right team.
• Call forwarding, which directs inbound calls based on predefined criteria.
• Advanced interactive voice response (IVR), a more conversational approach to automated customer service.
• Call forwarding, so that you can forward calls to any desk phone or mobile phone.
• Video conferencing and screen sharing for productive remote meetings.
• Toll-free numbers, which lets customers reach you from landlines without extra toll charges.
• Local numbers, so you can establish a local presence wherever you want.
• Call recording securely and reliably, so you can maintain quality service.
• Contact center, which lets your customer support team resolve questions faster.

Even better, you’ll get these features along with HD audio and video call quality. This is a massive benefit for remote teams. There’s nothing worse in life than a poor-sounding conference call.

4) Increased mobility & flexibility

Companies are increasingly switching to remote working options over the long haul. Hosted phone systems are the perfect answer to this trend.

Your employees can access their company phone lines wherever they are, as long as they have an internet connection. It’s not just about answering phone calls; they can access their voicemail, and set up or change call routing on the go.

Cloud telephony is the ideal solution for companies that embrace remote work, have satellite offices, or have multiple office locations.

5) Simplified work with integrated communications

Cloud communications help you store and access every piece of information on one platform.

When you use separate systems for your calls and meetings, you have notes and important details in too many places. Computer notes, spreadsheets, Post-It notes, notebooks, and the list goes on. Finding past interactions can take ages and throw everyone out of their flow.

Cloud telephony services consolidate everything into a single user interface. Unified communications make it easy to collaborate with colleagues, manage customers, analyze real-time data, collect feedback, and move important projects forward.

You’ll bring your business communication workflow to a single source of truth and move efficiently through your day. No more frustrating interruptions or time wasted on hunting down crucial information.

6) Superior reliability and resilience

Can you afford to be unavailable to your customers? In case something happens to the power grid, what are the consequences for your business? A wiring issue, overheating, or a small storm can wreak havoc on your communication and reputation.

Reputable cloud telephony solutions provide 99.999% uptime, so you can keep working unaffected no matter what happens. It also has built-in redundancy; in case of jitter or similar issues, your calls stay online, and you always have a backup you can use.

7) Powerful reporting and analytics

Powerful call analytics and reporting features provide clear insights into how teams communicate and perform.

With cloud service, you can easily track key call data like:

• Call volume: Track when most calls occur. Make sure your team is ready to handle busy times.
• Call duration: Check how long each call lasts to see if your team is working efficiently and keeping customers engaged.
• Call traffic patterns: Look for patterns in inbound and outbound calls. Use this information to improve your support and sales strategies.
• Missed calls and response times: Find out when calls are missed and how quickly you respond. Fixing these gaps can make customers happier and keep them loyal.

Call center managers can use these insights to spot problems, simplify processes, and boost team productivity. For example, if you miss most calls during certain hours, you can add more staff or use automated systems like IVR to handle calls.

With real-time dashboards and automated reports, you stay updated on your communication system’s performance, allowing you to address issues before they become big problems.

Challenges With Cloud Phone Systems

Like any technology, cloud telephony comes with its own set of challenges. Being aware of these problems and how to solve them helps you use cloud calling effectively.

1) Dependence on a reliable internet connection

Cloud calling needs a good internet connection to work. If the internet is slow or stops working, it can disrupt calls and cause missed opportunities.

How to fix it: Many providers offer solutions like backup connections, failover systems, or offline call management. Businesses can also invest in high-speed and stable internet plans. Having a backup option, like LTE, helps maintain smooth communication

2) Challenges during setup

Switching to cloud telephony might feel overwhelming at first. Integrating it with existing tools, training employees, and changing workflows can take time and effort.

How to fix it: Most providers offer guides, support teams, and easy-to-use platforms to make the transition easier. Start small with phased rollouts and provide clear training sessions so employees feel comfortable using the new system.

3) Managing costs as you grow

Cloud telephony providers are usually affordable, but costs can add up when your business expands or if you start using advanced features.

How to fix it: Providers often have flexible pricing options, so you only pay for what you use. Keep an eye on usage data to avoid surprises, and ask your provider for a full cost breakdown before committing to a plan.

Stay ahead of these challenges and work with a trusted provider like Nextiva to enjoy the benefits of cloud telephony while keeping risks and disruptions to a minimum.

Top Use Cases of Cloud Telephony

Cloud telephony is simple, flexible, and loaded with features that help teams work better, customers feel valued, and businesses grow. Here’s how different groups and industries can benefit:

• Sales teams: Improve sales performance with features like click-to-call, auto-dialing, and CRM integration to increase reach and focus on closing deals.
• Customer support: Increase customer experience and satisfaction with efficient call routing, shorter wait times, and support agents who have the tools and information to resolve issues quickly.
• Remote workforce: Keep remote teams connected and productive with reliable communication tools accessible from anywhere, promoting collaboration and organized workflows.
• Small businesses: Access small business communication tools without expensive costs, showcase a professional image, and scale your system as your business grows.

Cloud Telephony vs. VoIP

Cloud telephony and Voice over Internet Protocol (VoIP) are built for different needs and offer unique benefits.

While both use the internet for communication, VoIP is like a simple phone service for making calls online, while cloud telephony is a complete business communication system. 

VoIP technology is just the voice call itself. Cloud telephony is the entire cloud phone system, with features like voicemail, call forwarding, and interactive menus. 

While VoIP is great for basic needs, cloud telephony offers more advanced features, scalability, and integrations with other business tools. It works best for growing businesses with complex communication needs.

Feature	Cloud telephony	VoIP
Purpose	Complete communication system	Internet-based voice communication
Scalability	Designed for large businesses	Basic setup with fewer features
Features	Multi-channel, analytics, CRM tools	Voice and video calls
Hardware need	Fully cloud-based, no hardware required	Minimal hardware or softphones
Cost	Pay-per-use, flexible pricing	Low-cost subscription plans

How To Choose a Cloud Telephony Provider

If you’re moving to a cloud telephony solution, here’s what you need to consider when evaluating your options.

1) Service quality and proven reliability

High uptime and reliability are a must. Your cloud telephony provider must provide redundant service with redundant data centers. Features and attractive pricing are nothing if your phones won’t work and you consistently experience downtime.

What uptime does the provider deliver? Can they ensure you’ll have availability of phone service? Check out your provider’s status page. For Nextiva, you can check status.nextiva.com.

High availability is possible using data centers located strategically across the United States. All of which are equipped with uninterruptible power and have gigabit fiber-optic network connections.

You can also check social media sources like Twitter and Facebook to get an unbiased picture of each provider’s reliability. Searching for the brand on Twitter with the “@” before their name helps you wade through all brand mentions.

On top of that, you’ll want to make sure your provider offers 24/7 network monitoring so that issues can be flagged and solved before they affect your business.

2) Security and industry compliance

The next step is making sure the cloud telephony provider meets industry standards. Here are some certifications to look for:

• HIPAA compliance: Vital voice and fax services for healthcare service providers.
• ISO/IEC 20071: The global standard for security threat responses.
• PCI compliance: Securely handle credit card payments with confidence.
• SOC 2 compliance: Incident response plans to protect your privacy and data integrity.

Another thing to check is whether your provider of choice ensures call encryption. Encrypted calls mean you can use Transport Layer Security (TLS) and Secure Real-time Transport Protocol (SRTP) to establish high-grade security in every call.

3) Features and integrations

What are the business needs you’ll fulfill by adding a cloud phone system to your toolkit? This is where cloud telephone system features and integrations come in.

Do you make lots of outbound calls or receive many inbound calls? Do you have multiple business locations? Are your customers in the U.S. or internationally? These are a few questions to consider when looking at cloud telephony features. Talk to prospective cloud communications providers and learn how they can accommodate your business needs.

You’ll also need to consider how a new phone system will work into your employees’ existing routines and workflows.

Do you need your phone system to integrate with your project management software? What about your CRM? How easy is it to implement and maintain your phone system configuration? Again, these are the questions to think about when looking for a cloud telephony system.

4) The true cost of ownership

Pricing often looks great on paper. Then, when you start using the service, you get an unexpected, uncomfortable bill that doesn’t look anything like what you saw when signing up.

Look for transparent pricing that outlines everything that’s included in rates and anything you’ll need to pay extra for. Confirm pricing specifics such as:

• The number of users you’ll have on your plan.
• Monthly or annual payment plans (and discounts), if available.
• Is there any required equipment for the service to work properly?
• Flexibility to change plans as your needs change.
• Costs for inbound and outbound calls (on local and toll-free numbers).
• Optional features added à la carte.
• Mandatory taxes, surcharges, and other fees.

Make sure that the pricing you review leaves no stone unturned and get full transparency on what is and isn’t included in each phone service option.

5) Fast and efficient customer support

Finally, make sure your provider’s customer service team can help you when you need them.

Look into their support options. Are they available on live chat? Can you call them? Do you need to wait for 24 hours or more until you get an email reply?

Then, consider the answers you get to your questions. Do they take into account your specific situation, or are they generic? Is the support rep taking their time to understand the problem? Is it easy to ask follow-up questions?

You can test a provider’s customer support by taking on a free trial, but you can also get a solid idea by reaching out as a prospect, too. This will give you a solid idea of how your provider can help you grow and improve your entire cloud communications system for many months and years to come.

Move Your Phone System to Nextiva

Switching to cloud telephony means upgrading technology and preparing your business for the future. It helps cut communication costs, simplify daily tasks, and build more substantial operations. But you need a provider that offers dependable, flexible, and innovative services to get these benefits.

Nextiva is that provider.

Nextiva’s cloud phone system starts at just $20 per user per month. You’ll get features like smart call management, easy CRM integration, and detailed analytics. These tools help your team work smarter and get more done.

Thousands of businesses already trust Nextiva’s cloud-based phone system. Known for reliable service, excellent support, and forward-thinking solutions, Nextiva has earned top reviews from companies in many industries.

Whether you want to improve workflows, give better service to customers, or plan for long-term success, Nextiva offers real value.