Cloud based phone system pros and cons

The cloud based phone system: pros and cons

The cloud based phone system: pros and cons

What are the cloud based phone system pros and cons?

Clients have asked us that question a lot since we started in 2010. We have encountered numerous kinds of phone systems and setups, which makes this job fun. Aside from manufacturers and models, customers have two choices when it comes to VoIP: a cloud based or on premise phone system.

When we say on premise, we refer to the PBX server, not the desk phones, softphones, or mobile phones people can use to make and answer calls. The PBX server usually does most of the heavily lifting. It provides the business with all the extra bells and whistles on top of dial tone and inbound/outbound calling.

Before getting into the cloud based phone system pros and cons, we’ll start with defining a cloud based system. To help businesses out there with their research and buying decisions, we’ll discuss the plusses, then talk about the negatives. Then we’ll give our recommendation.

Spoiler alert: we recommend a cloud based phone system, and here’s why.

What is a cloud based phone system?

A cloud based phone system, also known as a hosted phone system or hosted PBX, sits in a remote location. The system typically resides in a colocation facility or datacenter. The majority of the time, businesses connect to cloud based phone systems through the Internet. For a more expensive option, they can connect with a direct point to point connection.

cloud based phone system pros and cons: a cloud based system resides on the Internet rather on premises.

Since the host sits remotely, the business doesn’t need an on premise server (AKA on premise PBX), just endpoints. The VoIP provider manages the system so all the customer needs to do is connect endpoints to theh system.

Cloud based phone systems can also come in at least a couple of different flavors. We offer multi-tenant cloud based phone systems for small office home office (SOHO) businesses. Multiple SOHOs share one cloud based instance, and we segment so they don’t interfere with each others’ services. For a little extra, medium and enterprise clients get their own cloud instance to ensure they get all the computing power and bandwidth they need.

Customer requirements

The customer needs a high speed Internet connection (if they don’t have the option of a point to point connection through the provider) and endpoints to connect to the cloud based phone system.

Cloud based phone system pros

Having done this for 8 years, we started with installing on premise PBX servers along with desk phones and configuring endpoints. One of our first customers experienced a power outage that outlasted the battery backup. Things were great for them for about 30 minutes until the phones went out. Customers couldn’t reach them, and we all know what that means in business…

Unfortunately, the customer was ready to dump us, until we threw the idea of a cloud based PBX to them like a Hail Mary. We asked them to give us another 2 weeks, and if the PBX setup didn’t work, we would refund 100% of their money. In 2018, they’re still our customer, and we recently upgraded their cloud based PBX to a newer software version.

We learned a big lesson: power and internet outages are on premise PBX’s kryptonite. Interestingly enough, this same customer experienced a major Internet outage in their area, and service was degraded for several hours. Apparently, a car accident severed a fiber optic line.


With our cloud based phone system, customers could at least hear a greeting and leave a message. The customer remotely connected to the system with a mobile phone and changed the message to let their customers know what was going on. We have redundancy built in to cover hardware, Internet, and power failures. We use various hot swappable and auto failover technologies, so we guarantee 100% uptime of our cloud based phone system.

Less expensive

Our clients only buy endpoints and pay for a technician to install and configure the endpoints, which takes about 15-30 minutes. At worst, they may have to run cabling or setup WiFi in the building to make sure all endpoints can connect to the cloud.

With on premise equipment, clients have to find room for the PBX. It works much better in a reasonably private and well-ventilated area, not under the CEO’s desk or next to a mop bucket in the closet. Depending on the size of the PBX server, they may have to rack mount it. Endpoint devices would definitely need a cable or WiFi connection to the on premise PBX. Then there’s the maintenance costs on the equipment to cover things such as replacement parts.

Initial costs for on premise systems can run $1000-$5000 per endpoint connection, and $300-$500 per month in total monthly costs per device. Comparatively speaking, initial costs for cloud based phone systems costs zero to a few hundred dollars per endpoint connection, and $15-$100 per month in ongoing costs per device. This all depends, though, on the provider and business requirements.

Less employee overhead

Then we have labor. The client pays labor to install and configure the on premise PBX. For subsequent configuration changes (e.g., an employee quits, adding extensions, etc.) or upgrades, the client will need an employee on site or an on call technician.


As this OnSIP article attests, with a cloud based phone system, the location of the physical business nor its employees doesn’t matter. As long as the endpoints have an Internet connection, the business has live phones. We have one client based in the US who had an employee setup a virtual office in the UK for a period of time to handle their European clients. The system routed calls to the UK office based on caller ID and time of day. US based calls routed stateside.

If a client relies on an on call technician to handle on premise equipment, they may have to wait longer for any changes. With cloud based phone systems, the VoIP provider either handles configuration changes with a simple request, or they provide an online portal for businesses to make simple changes themselves. Their equipment sits in a data center offsite, so the provider handles maintenance.

Cloud based phone system cons

A cloud based phone system does have its drawbacks. Most notably, sensitive information can potentially sit out on the cloud in the VoIP provider’s hands. The provider has the responsibility, though, to secure the cloud.

Second, a cloud based phone system relies more on the Internet. A solid and wide bandwidth connection must exist between the endpoints and the cloud. We encountered this problem more frequently in 2010 with potential clients who had T1, T3 satellite, and DSL lines.


We only focus on cloud based phone systems because the pros far outweight the cons. Also, we’ve taken significant steps to minimize or eliminate the cons. For one, we use the “bundle of sticks” approach to security. With multiple layers of security on our cloud, our bundle of sticks has more strength than one or two sticks alone. However, businesses must take potential security threats seriously.

Second, with increased bandwidth speeds and the emergence of gigabit Internet, we rarely encounter customers who can’t get high speedn Internet. Slow Internet only remains an issue in outlying areas, but even those areas are catching up. With the significant monthly cost difference between on premise PBX and cloud based phone systems, some of our customers install redundant Internet lines with automatic failover, and longer life battery backups. If the power and/or Internet fails, the automatic failover occurs without a single dropped call.

We hope our explanation of cloud based phone system pros and cons helps businesses make a solid buying decision. Any reputable cloud based phone system provider will use multiple layers of security similar to our bundle of sticks approach, and multiple layers of failover. These mechanisms in place should put any concerns to rest about cloud based phone systems.

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