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A cloud phone system is a business phone service hosted by a provider and delivered over the internet. It gives your team business numbers, extensions, call routing and voicemail without requiring a phone server in your office.
It is also called a hosted phone system, cloud PBX or cloud-based phone system. The phone system’s software runs in the provider’s data centre, while your staff use desk phones, computers, tablets or mobile apps to make and receive calls.
The word “cloud” means the system is accessed over a network instead of being installed entirely on your own premises. This follows the broader NIST definition of cloud computing, which describes on-demand access to shared computing resources over a network.
For an Australian business, a cloud phone system usually includes:
If you first need the broader explanation of how business telephony works, see our guide to business phone systems.
What are cloud phone systems used for?
Cloud phone systems are used to manage business calls across offices, home workers, mobile staff and different locations. They keep the same business number and call rules available wherever an authorised user has an internet connection.
A small business might use one main number that rings a receptionist first, then sends unanswered calls to a sales team. A larger team might use departments, queues, recorded menus, call recording and reporting.
The main difference is where the phone system is managed. With a traditional on-site system, the business generally owns or leases equipment located at the office. With a cloud system, the provider hosts and maintains the core phone platform.
| Cloud phone system | Traditional on-site phone system |
|---|---|
| Core phone software is hosted by a provider | Core phone equipment is located at the business |
| Calls use an internet connection | Calls may rely on local phone hardware and lines |
| Users can often work from desk phones, computers or mobile apps | Users are more closely tied to installed office equipment |
| Changes are made through an online portal or by the provider | Changes may require local configuration or a technician |
| New users can usually be added through software settings | Growth may require extra hardware, ports or licences |
| The provider manages platform updates and maintenance | The business is more responsible for equipment and upkeep |
A cloud phone system is not the same as simply forwarding calls to a mobile. Call forwarding may move calls from one number to another, while a cloud PBX can apply rules for extensions, queues, menus, business hours and user permissions.
How do cloud phone systems work?
A cloud phone system converts voice into data, sends that data over the internet, and uses software in the provider’s cloud platform to control where the call goes. The call can then reach a desk phone, computer app, mobile app or another phone number.
The process usually looks like this:
The same process works for outbound calls. A staff member clicks or dials a number in a phone app or on a desk phone. The cloud platform checks their permissions, presents the business caller ID and connects the call.
In practical terms, the cloud platform acts as the control centre. It stores the settings that determine what happens when someone calls your business, including who answers first, how long the phone rings and where unanswered calls go.
This is why a provider can change call routing without replacing the phones on every desk. The settings sit in software rather than being fixed inside one physical phone system.
Australia’s communications regulator, the ACMA, recognises providers that deliver phone services over the internet as VoIP service providers. VoIP means Voice over Internet Protocol: voice calls carried using internet protocol rather than a traditional dedicated voice circuit.
What equipment do you need for a cloud-based phone?
You need an internet connection, a cloud phone service and a device for each person who needs to make or receive calls. That device could be an IP desk phone, a computer with a softphone app, a mobile app or a combination of these.
A typical setup may include:
An IP desk phone looks similar to a traditional office phone, but it connects to your network. A softphone is an application that turns a computer into a phone. A mobile app lets a staff member use their business identity without giving customers their personal mobile number.
Your team does not always need a physical handset. A small business may use laptops and mobile phones, while a reception area may still benefit from a desk phone with a headset.
The quality of the system depends on more than download speed. Network congestion, Wi-Fi performance, latency, packet loss and local cabling can all affect a live voice call. The setup should be checked before installation, particularly if staff share the connection with large file transfers, video meetings or cloud applications.
Does a cloud phone system work from home or on mobile?
Yes. Staff can generally use the same business number and extension from the office, home, a job site or while travelling, provided their device has a suitable internet connection.
A user may sign in through a desktop app, mobile app or approved desk phone. Calls can follow the user, ring several devices at once or move between devices during a conversation, depending on the system and configuration.
This is useful when:
Remote access does not mean every device should have unrestricted access. User permissions, strong passwords and multi-factor authentication should be configured where available.
The Australian Cyber Security Centre’s small business guidance recommends controls such as multi-factor authentication, restricted administrative access and regular backups for cloud environments. These principles also matter for cloud phone system administrator accounts.
What happens if the internet goes down?
If the internet connection at your office fails, phones that depend on that connection may stop working at that location. The effect depends on the provider, the handset or app, and whether calls can be redirected to mobile or another site.
A sensible cloud phone setup plans for this before the system goes live. Options may include:
The cloud platform may remain available even when your office connection fails. That means the provider can often continue receiving calls and apply a backup rule, but the rule must be configured in advance.
Power also matters. Network equipment, Wi-Fi access points, computers and desk phones may stop working during a local power outage unless they are protected by suitable backup power. The ACMA explains that most services connected to the NBN will not work during a power outage, so businesses should have another way to contact Triple Zero (000).
Ask a provider how the system handles:
Are cloud phone systems reliable for Australian businesses?
They can be reliable when the provider, internet service, local network and failover plan are properly matched to the business. Reliability is not created by moving the phone system to the cloud alone.
Before choosing a cloud phone system in Australia, check where support is provided, how outages are communicated and what service commitments apply. Ask whether the platform has separate network paths, monitoring and backup arrangements.
Your own network is part of the service. A poorly configured router, overloaded Wi-Fi network or unsuitable internet connection can create call problems even when the provider’s platform is operating normally.
A basic pre-installation check should review:
For a broader security discussion, keep it separate from this explainer and read are cloud phone systems safe.
What are the main benefits of a cloud phone system?
The main benefits are easier administration, flexible access and a phone system that can change as the business changes. It can reduce the need for on-site phone hardware, but the exact cost and result depend on the service, devices, calling plan and installation work.
A cloud phone system can help your business:
It can also make office moves easier because the phone service is less dependent on one physical location. Staff may be able to sign in at the new site while the network and devices are prepared.
The trade-off is that the business becomes dependent on the provider and its internet connections. A cloud phone system should therefore be selected as an operating service, not just as a list of features.
For teams with limited technical resources, our cloud VoIP phone system service explains how hosted calling can be designed and supported.
How should a small business choose a cloud phone system?
Start with the way your business handles calls today, then identify what needs to change. Do not begin with a long feature list.
Write down:
Keep the first design simple. A small business may only need one main number, extensions, business hours, voicemail and mobile access. Extra features can be added when there is a clear business reason.
If you are comparing options for a smaller team, see our guide to phone systems for small business.
Number migration also needs planning. If you want to keep your current business numbers, ask about VoIP number porting before cancelling the existing service.
What does a Nexgen cloud phone setup look like?
A typical Nexgen design would start by mapping your numbers, users, opening hours and call flows before recommending devices or settings. The result should match how your team actually answers calls, rather than forcing everyone into the same setup.
For example, a business might use one main number, a reception group during business hours, separate sales and service queues, voicemail after hours and a mobile app for staff who work away from the office. The administrator can then manage users and call rules through the cloud platform instead of relying on a phone server in the office.
The important change is not simply replacing old handsets. It is moving call control into a managed cloud service so the business can update routing, support remote users and plan for outages without rebuilding the entire phone system.
The exact setup will depend on your internet service, locations, number of users, existing numbers and call-handling requirements. Ask Nexgen to see how a cloud phone system would work for your team.
Frequently asked questions about cloud phone systems
Is a cloud phone system the same as VoIP?
A cloud phone system normally uses VoIP to carry calls over the internet, but the terms are not identical. VoIP describes the call technology, while a cloud phone system usually includes the hosted PBX software, numbers, users, routing and administration.
Can I keep my existing business number?
In many cases, yes, but the number must be checked and porting must be planned before the old service is cancelled. Your provider can confirm eligibility, required documents and the expected transfer process.
Do cloud phone systems need desk phones?
No. Staff can use IP desk phones, computer apps, mobile apps or a mix of devices. Reception and shared workspaces may suit desk phones, while mobile or hybrid staff may prefer apps.
How much does a cloud phone system cost?
Pricing usually depends on users, numbers, calling requirements, devices, features, support and installation. Ask for the complete monthly and one-off costs rather than comparing the licence price alone.
Talk to Nexgen about your phone system
Get a like-for-like comparison against a managed cloud phone service.