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What Is Cloud Telephony And How It Works | The Ultimate Guide

cloud telephony solution for businesses

The Private sector has been going through a massive digital transformation since the outbreak of the COVID-19. Businesses are switching to new technologies that help them exist in this highly competitive market. One such technology is cloud telephony which is becoming increasingly popular among companies these days.

An effective communication system determines half of the business success and automating it becomes more important, with thousands of calls to be made and answered every day. Cloud telephony helps in doing this effectively by streamlining and improving the business communication process. 

It is one such technology that suits and serves the needs of every type of business, whether it is a startup, a small and medium enterprise or a big multinational company. Its main focus is to replace conventional business telephones.

 A Times of India survey found out that more than sixty per cent of the businesses are already using cloud telephony to streamline their communication process.

Table of contents

  1. What is Cloud Telephony?
  2. How does it work?
  3. What are its features?
  4. Cloud telephony vs Traditional landline setup: What’s the difference?
  5. Advantages of Cloud Telephony
  6. Disadvantages of Cloud Telephony 

What is Cloud Telephony?

Cloud telephony is a kind of communications technology where a third-party service provider hosts a business’ entire communication process. It does not require the installation of any expensive on-site hardware or traditional landlines, and it can be web or applications based. It is also known as VoIP, SIP Trunking, Cloud PBX and Hosted Voice. 

Businesses can avail the service by paying an affordable subscription amount to the service provider who will take care of most of the implementation. 

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How does Cloud Telephony work?

Cloud telephony works through a VoIP service provider. All the calls are routed through remote servers. These servers are hosted in the service provider’s data center and not in the office premises. The entire telephony system, which includes SIP (Session Initiation Protocol) Trunking and PRI (Primary Rate Interface) lines, routing and switching the systems, is handled in the cloud.

It saves the business from having to spend on the installation and maintenance of the system. These servers can be accessed via the internet, just like other types of cloud services. The calls can be initiated using a virtual number instead of the personal mobile number of the staff. 

When a customer calls, the call gets routed according to the predetermined flow. The callers can be routed to a staff member on his device, or a pre-recorded message etc., based on their requirements. Cloud telephony system makes it easy for businesses to scale, manage the calls efficiently and offer extra services.

What are the features of Cloud Telephony?

Cloud-based phones offer a wide variety of features that can be easily updated, and new features can be added as per the business requirements. These are some of the features: 


It allows the call to get answered automatically and lets the caller choose where the call will be routed, without the intervention of an operator/receptionist. If a user is not available, the digital receptionist directs the caller to the user’s voicemail to leave their message. 

It replaces the need for having a human operator and automates & simplifies the incoming call procedure. Thus, an auto-attendant is a very useful and cost-effective feature for a business. 

Interactive Voice Response (IVR)

Interactive Voice Response (IVR) is a phone system technology that uses a pre-recorded message and call menu to connect the caller to the appropriate department or agent based on their response. The caller can record their answer using the dial pad or by speaking.

It uses NLP ( Natural Language Processing) and DTMF (Dual Tone Multi-Frequency) tones to trigger the intelligent call routing. IVR offers complete independence and high-level self-service to the customers. It helps them get their queries solved as quickly as possible.

This feature of cloud telephony helps in saving the time of both the agent and the customer. It allows the agents to focus on other high-value tasks that require personalized attention.  

Call forwarding

The staff member can forward the call to any other phone if they are busy. This feature avoids missing out on any caller and thus leads to a good caller experience. It makes the caller feel valued and builds their trust in the company, hence increasing its credibility.     

Virtual number or a Toll-free number

The calls are made using a virtual number. The staff members can initiate calls using this number and not their mobile number, keeping their personal and professional life separate. This way, the company does not lose any customer’s contact details even if any staff member quits the organization. 

It does not matter where a company’s actual geographic location is; buying various virtual phone numbers establishes a local presence in every region they target. These local virtual numbers are easier to remember. Callers can also use them to contact the business. 

Prospects are more likely to answer calls from a local number than a number with an unknown code. Business phone numbers make your company look more professional.

Call recording and Call analytics

Cloud-based telephony system provides a feature of recording calls and maintaining daily call analytics. The calls made using cloud technology have an applaudable quality, which benefits teams working remotely. These call analytics provide useful insights into the agent’s productivity and help identify the strongest agents and those who require more training.

Managers can also use these analytics to decide if they need to hire or lay off agents. They can also recognize the busy time of the year, discover popular call sources and more.  

Auto-dial, Click-To-Call and Call scheduling

Calling process becomes easier with Auto-dial and Click-To-Call features. These features help the team members handle thousands of calls without much stress. They can put the numbers on auto-dial and save a lot of time, and can make and answer calls with just a click. 

The call scheduling feature allows you to schedule voice or video calls with the prospects and connects you automatically with them at the scheduled time. It also notifies them of any changes in the schedule, thus avoiding confusion and inconvenience. 


Cloud telephony offers seamless integration with your favorite workflow tools. It allows you to merge with different ATS and CRM platforms which simplify your business communication process. Integrations prevent users from having to rotate between numerous applications throughout the day. 

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These also help in improving your overall customer service and ensure that all your contact details and call history are accessible from a single place. 

Apart from the above, you have several other features, such as virtual phone numbers, call routing, conferencing, voicemail, etc.

Cloud Telephony vs Physical telephony setup


Cloud telephony doesn’t require any complex and expensive setup. It only requires a VoIP service provider and a reliable broadband connection. The staff can communicate with the customers and with one another using any internet-connected device. 

On the other hand, a standard landline calling system requires a physical set-up inside the office premises. It interconnects all your phone extensions and links them on a public phone network via PSTN (Public Switched Telephone Network) or ISDN (Integrated Services Digital Network) lines

You need a team to keep up complex hardware and manage the calls and forward the callers to the correct department or agent. Hence, it requires a good amount of investment to start. Its maintenance requires a lot of effort and a really large space to host the system.

Traditional telephone systems also offer features like call forwarding, call conferencing, voicemail and many more, but all these come at extra cost. Together with the hefty maintenance cost, all these additional costs make it highly expensive for the companies. Moreover, traditional PBXs have more downtime, which causes issues in data recovery. 

It does not provide mobility and flexibility because their phone numbers are tied to a telephone set. This robs them of their productivity and focus and thus, affects the company’s productivity. Making long-distance calls using the traditional system is more expensive than the cloud telephony system. 

Advantages of Cloud Telephony

Here are a few reasons why your business should get a cloud telephony service:


The pandemic has forced businesses to adapt to remote working practices, after which cloud telephony systems became even more popular within the private sector. It provides complete freedom to remote workers to work from home or anywhere in the world. They can use a virtual number to initiate the business calls, thus keeping their mobile number private.

This way, they can keep their personal and professional life separate. Cloud telephony makes the working environment flexible. Since the web routes the calls, enterprises can stay in touch with their customers and employees 24/7. 

The cloud-based phone system eliminates the requirement for physical phones to communicate. It offers complete mobility to its users. They can install call automation apps on their mobiles and computers, making the business completely mobile and accessible from anywhere anytime. It helps in enhancing business productivity and helps in managing business communication even from a remote location.


It’s not only beneficial for businesses, but it’s affordable too. Every business wants to incur minimum capital expenditure and overheads. Cloud telephony’s cost-effectiveness is the major motivator for many firms to shift their operations to the cloud. Companies save a lot by moving their business to the cloud instead of maintaining their traditional phone system.

Putting in place a physical infrastructure of interconnected telephone lines requires a large amount of investment and space. In cloud telephony, the service provider takes care of the infrastructure, updates and maintenance of the system. Moreover, switching to cloud service allows your tech staff to focus on more important tasks, thus reducing hiring personnel costs. 

It is typically simpler and easier to administer a cloud service. You can manage it from an online interface and access it from anywhere. The support staff can be quickly trained to use the service. Moreover, the calls made using a virtual number cost much less than those made using traditional business phones.

So by investing in cloud telephony, businesses can save a significant amount on call charges. 

Easy Integration with applications

It provides a feature to easily integrate with different ATS and CRM platforms using customized APIs. These integrations help the business to carry out its operations smoothly. The business needs to stay connected with the customers and serve them better to strengthen long-term relationships with them and build credibility for the brand. 

Such seamless integrations help the team members to manage the calls better. Integration with CRM platforms allows businesses to serve the customers in a better way. It can help you generate more leads and close the deals faster. This will help in boosting the sales and productivity of the team as well. 

In these unprecedented times, making as many sales as possible is important to survive and get through this situation without incurring heavy losses. The businesses can still scale even in this current situation by making exclusive use of these integrations. They can easily identify and acquire new leads even by operating remotely. 

Call records

Cloud telephony provides various additional features to make the business communication process smooth and effective. It offers you tools to monitor and track your business calls. All incoming and outgoing calls get recorded and logged. Call recording not only helps you check the call quality but can also be referred back in case of doubts or queries.

Since all customer details and call history is logged in one place, the user can tailor the conversation to suit the caller’s needs. They can access this information anytime and answer the queries quickly and resolve them in one go without having to call back the customer.

The managers can also access daily call analytics reports to track all incoming and outgoing calls and messages received/sent by the team. It can help them monitor and measure the team member’s performance and status of the communication processes.


All businesses need to scale up to exist in the market. Sometimes, new employees need to be hired, and at other times, some need to be laid off. Cloud telephony makes scaling-up easier. New users can be added with just a click and trained easily to use the cloud. 

The business operations remain unaffected even if an employee quits or is laid off as the communication process is being taken care of on the cloud. Small-medium businesses and startups can easily switch from physical telephony setup to cloud telephony services without much cost. It makes the growth seamless as it requires minimal investment and overheads. 

Secure and Reliable

Cloud-based solutions are easy to update and seamlessly transition to the latest software. It allows the business to have better access and control over its data. They can be relied upon as they are constantly monitored and managed. Since all the data gets saved on the cloud, the entire call records remain safe and secure; hence, no data gets lost due to downtime, software failure, or any technical disaster. 

Improves customer experience

Cloud telephony helps businesses improve customer responsiveness. It helps them stay connected to their customers 24/7. It makes sure that no call goes unanswered and the customer’s doubts and queries are solved as quickly as possible. Cloud-based calling provides features to track the missed calls and allows the team member to follow up on the missed ones easily. 

Ignoring customer enquiries and failing to meet the deadlines can lead to customer dissatisfaction and make them switch to the competitor’s service. A strong customer support service helps retain the customers and hence increases the growth rate of the business. 

Disadvantages of Cloud Telephony 

Cloud telephony brings many benefits to the business, but there are a few disadvantages that you need to consider before choosing. 

Highly dependent on the internet 

Since Cloud telephony is entirely dependent on the internet, an unstable broadband connection can affect your communication. You need a strong and consistent internet connection to initiate the calls. Power outages or bandwidth contractions will lead to a poor user and caller experience. 

If your business lacks a stable broadband connection, cloud telephony may not be a good solution. Moreover, cloud-based phones are prone to security issues like hacking and malware. So it is important to ensure that the connection is protected. The service provider should outline all the security measures it uses to ensure that your data remains protected.

Issues in Integration

It may happen that the cloud system does not always integrate seamlessly with your workflow tools. So, businesses need to do their homework properly before choosing a service provider. They need to choose a platform that seamlessly integrates with their ATS and CRM platforms and other key applications. 

Investment in some hardware equipment

Although no hardware setup is required to use the cloud-based service, businesses might still have to buy some equipment like the handsets might need to be replaced with those that link to the employees’ computers. 

Migration complexity

Migration to the cloud can be complex for some businesses, especially large scale organizations. For example, in the case of international calling, some countries do not allow call recording while the users might need it. The users at different sites might have other requirements and constraints. 

Therefore, the business should recognize the needs of all the users before choosing a cloud telephony service provider. A detailed planning process is an ultimate requirement for a successful migration. 

Cloud telephony is certainly the future of business communication, making it easier for businesses of all types to manage their communication process. It provides various features to automate the business calls without compromising quality and paves the way for seamless growth. 

Further Reading: How Cloud Telephony can Help Boost your Sales

By moving their operations to the cloud, businesses can focus on more important tasks like improving the customer experience and increasing sales. It empowers the communication process without binding the users to the desk phones and lets them work better with greater flexibility, control and lower cost of operation. 

Move your business to the cloud using a call automation platform like FreJun and get several features to streamline your communication process.


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