Cloud-Based VoIP Systems: Set Up, Benefits and Drawbacks for Businesses

Explore how cloud-based VoIP systems can streamline communication, reduce costs, and boost efficiency.

Gone are the days of bulky phone systems and expensive on-site infrastructure. Traditional phone systems required a dedicated server, often referred to as a Private Branch Exchange (PBX), installed at your business location. This PBX acted as the central hub, managing all incoming and outgoing calls. It necessitated a maze of wires and specialized equipment to connect to your office phones.

Maintaining this complex setup was a constant headache for IT staff. Upgrades were cumbersome and expensive, requiring technicians to physically install new hardware and software. Scaling the system to accommodate a growing team meant additional equipment and configuration – a process that could take days or even weeks.

Cloud-based VoIP phone systems have revolutionized business communication, offering a flexible and scalable solution for companies of all sizes. Here's a deeper dive into how they work and the benefits they bring:

What is a Cloud-Based VoIP Phone System?

A cloud-based VoIP phone system is a modern business telephone platform hosted by a third-party provider. Unlike traditional phone systems, it is accessible over a cloud-based IP network and managed completely off-site, eliminating the need for upfront investments in telecommunications infrastructure.

Cloud-based VoIP, short for Voice over Internet Protocol, isn't entirely new. Its roots trace back to the 1970s with early experiments on ARPANET, the precursor to the internet. However, the technology we recognize today emerged in the 1990s with companies like VocalTec offering the first internet-based VoIP applications.

Initially, limitations in internet speed and reliability hampered widespread adoption. But as internet infrastructure matured, so did VoIP. The late 2000s saw a surge in popularity, particularly for businesses seeking cost-effective and flexible communication solutions.

Is a VoIP business phone system really cost-effective? Yes, a Voice over Internet Protocol (VoIP) business phone is often cheaper than an analog phone system. In fact, studies have shown that small businesses save up to 45% to 60% on their phone bill each month when they switch to VoIP.

Setting Up a Cloud-Based VoIP System

Considering a Cloud-Based VoIP System? Transitioning to a cloud-based VoIP system can offer significant benefits for businesses, including increased flexibility, improved communication efficiency, and cost savings. Several reputable companies specialize in cloud-based VoIP solutions, and many can assist you with both setup and migration from your existing on-premise phone system.

For example, Distrobird offers complimentary migration assistance to help you seamlessly move to the cloud. They can also provide guidance on system setup and integration with your existing business tools.

It's always recommended to research and compare different providers to find the solution that best suits your specific needs and budget.

Here are some key factors to consider when setting up a cloud-based VoIP provider:

Assessment and Planning

  • Evaluate Requirements: Determine the number of users, necessary features (e.g., voicemail, call forwarding), and integration needs with existing business applications.
  • Check Internet Infrastructure: Ensure your internet connection has sufficient bandwidth and stability to handle VoIP traffic.

Provider Selection

  • Research Providers: Compare different VoIP service providers based on features, pricing, reliability, and customer support.
  • Trial and Feedback: Utilize trial periods offered by providers to test the system and gather feedback from key stakeholders.

Account Setup

  • Sign Up: Register for an account with the chosen VoIP provider.
  • Configuration: Set up user accounts, assign phone numbers, and configure call handling rules (e.g., call forwarding*, voicemail settings*).

Device Configuration

  • Hardware Phones: Connect IP phones to your network. If using traditional phones, connect them via analog telephone adapters (ATAs).
  • Softphones: Install VoIP software on computers and mobile devices, and configure them with user credentials.

Network Optimization

  • Quality of Service (QoS): Configure network settings to prioritize VoIP traffic, ensuring call quality.
  • Firewall and Security: Ensure that your firewall and security settings allow VoIP traffic while protecting against unauthorized access.

User Training

  • Onboarding Sessions: Conduct training sessions for employees to familiarize them with the new system and its features.
  • Support Resources: Provide access to helpdesks, user manuals, and online resources for ongoing support.

How Does Cloud-Based VoIP Work?

  • Signal Conversion: When you dial a phone number, the VoIP system converts your voice signals into digital data packets.
  • Data Transmission: These data packets are transmitted over your internet connection to the VoIP service provider's servers.
  • Routing: The service provider routes the call to the recipient's phone number, converting the data packets back into voice signals for the recipient.
  • Call Management: The VoIP system manages call features such as call forwarding*, voicemail*, and conferencing through the provider's cloud infrastructure.

Comparison with Traditional Hardware-Based Phone Systems

FeatureTraditional SystemsCloud-Based VoIP
InfrastructureRequires PBX hardware, phone lines, and ongoing maintenance.Hosted by the provider, requiring only internet access and compatible devices.
CostHigh upfront costs for hardware and installation, plus maintenance expenses.Lower initial costs, with predictable monthly fees and minimal maintenance.
ScalabilityScaling up involves purchasing additional hardware and potentially complex installation processes.Easily scalable by adjusting service plans, with new users added or removed through the provider's dashboard.
FeaturesLimited features unless expensive add-ons are purchased.Rich feature sets included, such as voicemail-to-email*, video conferencing, and integration with business applications.
Maintenance and UpdatesRequires on-site IT staff for maintenance and updates.Managed by the provider, with automatic updates and professional support.

Cloud-based VoIP systems offer a modern, flexible, and cost-effective solution for business communication needs. They provide advanced features, scalability, and ease of use, making them a superior choice compared to traditional hardware-based phone systems. The shift to VoIP enables businesses to streamline operations, support remote work, and maintain reliable and secure communication channels.

Key Features of a Cloud-Based VoIP System for Small Businesses

Cloud-based VoIP systems revolutionize how small businesses approach communication. Unlike traditional phone systems burdened by bulky hardware and limited functionality, cloud-based solutions offer a suite of features designed to streamline operations, enhance customer service, and empower a mobile workforce – all at a cost-effective price point. Let's delve deeper into some of the key features that make cloud-based VoIP so attractive for small businesses:

  • Freedom from On-Site Hardware: Ditch the bulky PBX servers and complex wiring! Cloud-based VoIP eliminates the need for upfront investment in expensive hardware. The system is hosted by the service provider, so you simply need an internet connection and compatible devices like IP phones, computers, or smartphones to get started. This translates to significant cost savings and faster deployment times.
  • Effortless Scalability: As your business grows, so should your communication capabilities. Cloud-based VoIP offers unmatched scalability. Adding or removing users is a breeze through the provider's online portal. No need for complex hardware upgrades or additional IT resources. Simply adjust your service plan to accommodate your evolving needs, ensuring you only pay for what you use.
  • Advanced Call Management Features: Take control of your communication flow with a robust suite of call management features. An auto-attendant can professionally greet callers, directing them to the appropriate department or extension, even during off-hours. Call routing intelligently distributes calls based on pre-defined rules, ensuring calls reach the right person the first time. Call forwarding ensures you never miss a call, forwarding them to your mobile phone, voicemail, or another designated number. Call recording allows you to capture important conversations for training, quality assurance, or reference purposes. Call analytics provide valuable insights into call volume, duration, and peak calling times, helping you optimize your communication strategy and identify areas for improvement.
  • Seamless Integration with Business Tools: Boost your productivity and streamline workflows by integrating your cloud-based VoIP system with your existing business applications. For instance, integrate with your CRM software to automatically pull up customer information when a call comes in, allowing you to provide a more personalized service experience. Email integration allows you to send voicemail recordings directly to your inbox for easy access and management. Integrations with other business apps like calendars and project management tools further enhance collaboration and efficiency.
  • Mobility with Mobile Apps: Empower your team to stay connected and productive from anywhere. Most cloud-based VoIP systems come with mobile apps that allow you to make and receive calls, access voicemail, manage call settings, and collaborate with colleagues – all from the convenience of your smartphone or tablet. This flexibility is a game-changer for remote teams and geographically dispersed workforces.
  • Additional Features: Many cloud-based VoIP systems offer a range of additional features that can further enhance your communication capabilities. These may include:
    • Video conferencing: Host high-definition video calls for face-to-face meetings and collaboration without the need for additional software or hardware.
    • Instant messaging: Facilitate real-time communication and collaboration between team members with built-in instant messaging functionalities.
    • International calling: Make and receive affordable international calls with competitive rates offered by many VoIP providers.
    • Custom greetings: Create professional greetings for different business hours or departments to personalize the caller experience.
    • Call screening: Identify and screen calls before they reach your voicemail or desk phone, allowing you to prioritize calls and manage your time effectively.

With its robust feature set, scalability, and affordability, cloud-based VoIP is a compelling solution for small businesses looking to take their communication to the next level.

Benefits of Using a Cloud-Based VoIP System for Small Businesses

1. Cost Savings

  • Lower Upfront Costs: Traditional phone systems require significant capital investment in hardware such as PBX servers and desk phones. In contrast, cloud-based VoIP systems eliminate the need for such infrastructure. Small businesses can start with minimal equipment, often just requiring internet-connected devices.
  • Reduced Maintenance Expenses: With no physical infrastructure to maintain, ongoing costs are reduced. The service provider handles all maintenance, updates, and troubleshooting.
  • Affordable Long-Distance Calls: VoIP systems typically offer lower rates for international and long-distance calls compared to traditional phone systems, reducing overall communication expenses.

2. Flexible Pricing

  • Scalable Plans: VoIP providers like Distrobird offer various pricing plans tailored to different business sizes and needs. Small businesses can choose plans that fit their current requirements and scale up as they grow.
  • Pay-as-You-Go Options: Some providers offer pay-as-you-go plans, allowing businesses to pay only for the services and features they use, optimizing budget allocation.

3. Mobility and Remote Work Support

  • Access from Anywhere: Employees can make and receive calls from anywhere with an internet connection, using various devices such as smartphones, tablets, laptops, or desktop computers. This flexibility supports remote work and business travel.
  • Unified Communication: Features like voicemail-to-email and mobile apps ensure that employees can stay connected and access important communications even when they are not in the office.

4. Advanced Call Management

  • Feature-Rich: VoIP systems come with a variety of call management features that enhance business communication, including auto-attendant, call forwarding, call recording, call queues, and voicemail-to-email transcription.
  • Customizable Settings: Businesses can customize call routing and handling rules to fit their operational needs, ensuring efficient call management and customer service.

5. Team Collaboration Features

  • Integrated Communication Tools: Many VoIP systems include tools for video conferencing, instant messaging, and team collaboration, which are crucial for modern business operations.
  • Enhanced Productivity: These tools facilitate real-time communication and collaboration, improving team productivity and efficiency. Teams can hold virtual meetings, share files, and collaborate on projects seamlessly.

6. Third-Party Integrations

  • CRM Integration: VoIP systems can integrate with Customer Relationship Management (CRM) software, enabling businesses to access customer information, call logs, and interaction history during calls. This integration enhances customer service and sales processes.
  • Business Application Integration: VoIP systems can also integrate with other business applications such as email platforms, helpdesk software, and project management tools, streamlining workflows and data management.

7. Enhanced Customer Satisfaction

  • Better Customer Service: Features like call routing, auto-attendant, and CRM integration ensure that customers are quickly connected to the right person or department, reducing wait times and improving service quality.
  • Consistent Communication: With reliable and clear communication channels, businesses can provide consistent and professional interactions with their customers.

8. Business Process Optimization

  • Data and Analytics: VoIP systems provide detailed analytics and reporting on call volumes, durations, and patterns. This data helps businesses make informed decisions, optimize staffing, and improve operational efficiency.
  • Disaster Recovery: Cloud-based VoIP systems often include disaster recovery features, ensuring business continuity in case of local hardware failures or natural disasters. Calls can be rerouted to different locations or devices without significant downtime.

9. Environmental Sustainability

  • Reduced Carbon Footprint: By eliminating the need for extensive on-site hardware and allowing remote work, VoIP systems contribute to a reduced carbon footprint. Businesses can operate more sustainably with less physical infrastructure and reduced commuting.

For small businesses, cloud-based VoIP systems offer a comprehensive, flexible, and cost-effective solution that enhances communication, supports remote work, and integrates seamlessly with other business tools.

Disadvantages of Using a Cloud-Based VoIP Service

Cloud-based VoIP services have revolutionized business communication, offering features and flexibility that traditional phone systems simply can't match. However, it's important to be aware of some potential drawbacks before making the switch. Here's a closer look at some common disadvantages, along with how Distrobird can address them:

1. Reliance on Internet Connectivity:

  • Disrupted Calls: A major drawback of cloud-based VoIP is its dependence on a stable internet connection. If your internet connection drops, so do your calls. This can be a significant issue for businesses that require uninterrupted communication.
  • Distrobird's Advantage: Distrobird offers intelligent call routing with failover options. In case of internet disruptions, calls can be seamlessly rerouted to mobile phones or another designated number, ensuring minimal disruption to your business operations.

2. Data Security Concerns:

  • Vulnerability to Hacks: Since cloud-based VoIP transmits data over the internet, it's inherently more vulnerable to hacking attempts than traditional phone lines. Data breaches can expose sensitive information like call recordings and voicemail messages.
  • Distrobird's Advantage: Distrobird prioritizes data security. We utilize industry-leading encryption protocols (TLS and SRTP) to safeguard your communication data both in transit and at rest. Additionally, we offer multi-factor authentication and role-based access control to further strengthen your security posture.

3. Limited Control and Customization:

  • Vendor Lock-In: With cloud-based VoIP, you're essentially relying on your provider's infrastructure and feature set. Customization options may be limited, and switching providers can be a complex and time-consuming process.
  • Distrobird's Advantage: Distrobird provides a high degree of flexibility and control. Our open APIs allow for seamless integration with existing business tools and CRMs. Additionally, our platform is designed to be scalable and adaptable to your specific needs.

4. Potential for Hidden Costs:

  • Overage Charges: Be wary of hidden fees associated with cloud-based VoIP services. Charges for exceeding call minutes, international calls, or additional features can quickly add up.
  • Distrobird's Advantage: Distrobird offers transparent pricing plans with no hidden fees or surprise charges. Our plans are designed to scale with your business needs, so you only pay for what you use.

5. Customer Service Concerns:

  • Limited Support: Some cloud-based VoIP providers offer limited customer support options, making it difficult to get help when you need it most.
  • Distrobird's Advantage: Distrobird prioritizes exceptional customer service. We offer 24/7 live support from our team of highly trained professionals to ensure you receive prompt and effective assistance whenever needed.

By considering the potential drawbacks and how Distrobird addresses them, you can make a more informed decision about your business communication needs. Distrobird goes beyond simply offering cloud-based VoIP; we provide a robust and secure platform with exceptional customer service, all designed to empower your business communication and keep you connected.

Addressing Data Privacy Concerns

While VoIP offers numerous advantages like cost-effectiveness and scalability, it also raises valid concerns about data privacy. Sensitive information like call content, caller ID, and voicemail messages travel across the internet, making them vulnerable to interception if not properly secured.

Here's a comprehensive approach to addressing data privacy concerns when using cloud-based VoIP services:

1. Encryption is Key:

  • TLS and SRTP: The foundation of secure VoIP communication lies in encryption protocols. Ensure your chosen VoIP provider utilizes Transport Layer Security (TLS) and Secure Real-time Transport Protocol (SRTP). TLS encrypts data in transit, safeguarding it from unauthorized access on public networks. SRTP specifically secures real-time voice data, ensuring your conversations remain confidential.
  • Data Encryption at Rest: Beyond in-transit encryption, consider data encryption at rest. This means even if a hacker gains access to the cloud storage, the data itself remains unreadable due to additional encryption layers.

2. Secure Network Tunneling:

  • VPN Protection: Implement a Virtual Private Network (VPN) for an extra layer of security. A VPN creates a secure tunnel between your devices and the VoIP provider's servers. All data traffic, including VoIP calls and signaling information (SIP messages), travels through this encrypted tunnel, offering an additional barrier against potential breaches.

3. Strong Authentication Protocols:

  • Multi-Factor Authentication (MFA): MFA adds a crucial layer of security beyond simple passwords. By requiring a secondary verification step, like a code sent to your phone or a fingerprint scan, unauthorized access becomes significantly more difficult.
  • Role-Based Access Control (RBAC): Implement RBAC to restrict access to sensitive data within your VoIP system. This ensures only authorized personnel have access to specific features and information based on their designated roles.

4. Provider Scrutiny and Compliance:

  • Security Certifications: Choose a VoIP provider with recognized security certifications, such as SOC 2 or HIPAA compliance. These certifications demonstrate the provider's commitment to robust data security practices and adherence to industry regulations.
  • Data Residency: Understand where your data is stored by your VoIP provider. Data privacy laws and regulations can vary significantly by region. If your business operates in a country with strict data protection laws, ensure your provider stores data within compliant regions.
  • Service Level Agreements (SLAs): Negotiate SLAs with clear provisions regarding data security. These agreements should outline the provider's responsibilities in the event of a data breach, including notification protocols and incident response procedures.

Remember, data privacy is an ongoing process. Regularly review your security measures and stay updated on evolving threats and best practices to maintain a robust defense.


In conclusion, cloud-based VoIP systems have become a game-changer for small businesses. Their affordability, scalability, and feature-rich environment empower businesses to streamline communication, improve customer interactions, and ultimately boost productivity.

However, it's crucial to approach cloud-based VoIP with a clear understanding of its potential drawbacks. The dependence on internet connectivity can be mitigated by choosing a provider like Distrobird, which offers intelligent call routing and failover options.

Data security concerns can be addressed through robust encryption protocols and access control measures, both of which Distrobird prioritizes. Feeling locked into a system can be avoided by opting for a provider with open APIs that allow for seamless integration and customization, a hallmark of the Distrobird platform.

Hidden costs can be eliminated by selecting a transparent pricing plan, something Distrobird offers with its commitment to only charging for what you use.

Finally, any lingering customer service anxieties can be put to rest with a provider like Distrobird, known for its exceptional 24/7 live support.

By acknowledging these potential challenges and seeking out a provider that addresses them effectively, small businesses can unlock the full potential of cloud-based VoIP.

The result? A communication system that is not only reliable and secure, but also adaptable and scalable to your business's unique needs. This will allow you to stay connected with your customers, team members, and partners, ultimately propelling your business forward.

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