Types of Virtual Phone Systems

3 Types of Virtual Phone Systems & What to Look Out For

Thinking about making the switch to a virtual phone system? You’re not alone. Due to a few important factors, such as cost, simplicity, and the ability to run your business from anywhere, many businesses, no matter how large or small, are moving away from conventional systems and on to greener pastures–and it is greener on the other side.

A virtual system is less expensive, more versatile, easier to control and manage, and free of constraints imposed by the traditional systems to which we’re all accustomed. Now that there is a greater demand for them, there is no shortage of virtual service providers.

This post, while not intended to go too far in-depth, will give you a crash-course in the 3 main types of virtual phone systems and provide a few cautionary points to help prepare you in your search for the virtual system that best fits your business.

Not All Virtual Phone Systems are Created Equal

It’s helpful to educate yourself about these systems before you choose one. There is still a lot of misconception and lack of knowledge surrounding virtual phone service. A lot of business owners either don’t even know that they exist, or they know very little about them.

Many people assume that there is only one kind of virtual phone system, and that’s definitely false. First of all, a quality virtual system can completely replace your existing system, with the right configuration. So, the first thing to understand is that there are more than one type.

We’re going to go into the 3 primary types that you’ll find on the market today. There is the cloud-hosted PBX system, VoIP or VoIP/cloud hybrid system, and app-based systems. Let’s look at the best kind first.

Cloud-Hosted PBX System (Non-VoIP)

This is arguably the best type of virtual phone system out there right now. There are a lot of advantages to using this type. First and foremost, this type is not a VoIP service; however, there are some providers that blend cloud-based PBX with the classic VoIP technology, which we’ll touch on in the next section.

So, since cloud-hosted PBX systems are not VoIP, they don’t rely on your local Internet connection. In fact, the only time you will need Internet (cellular or WiFi) is when you log into your online control panel to make setting changes, which, once you have everything set the way you want it, won’t be very often.

Keep in mind that “cloud-hosted” is now somewhat of a broad term. To see an example of how this system works when it is not Internet-based, whatsoever, you can check out the Talkroute demo here:


…or, you can try the whole service live, for free. Do that here:


With this system, calls are connected using the existing networks of the phones you already have, meaning the cellular network, PSTN (landline), or other network, depending on whatever phones you’re using.

You don’t need any specific phones for this service. It works with any phone that has its own phone number and active service. The great thing about this type is that there is no new equipment you need to buy.

The even greater thing about it is that it gives you all of the features and benefits of a traditional office phone system, without the hassle and the high cost for installation and hardware.

VoIP-Based Virtual System

This type is one of the most popular virtual phone systems and one of the most often regretted systems. VoIP technology has been around for quite a long time now and used by all kinds of businesses, due to the fact that it has been the best option for a couple of decades.

The only issue with that is, those businesses who still use them either aren’t aware that there is anything better, namely the cloud-hosted PBX we mentioned previously, or they assume virtual systems are not a viable alternative.

The main reason that businesses like VoIP systems is that they’re pretty solid, but there is a catch to that. As they work through the Internet, your office needs to have a really strong Internet connection for them to be reliable.

So, now there are services who attempt to create next-generation systems by making them virtual and still use VoIP. In contrast to the virtual PBX from the previous section, VoIP-based virtual systems can be managed using the Cloud, but they still need an Internet connection to work. This can be problematic for a few reasons.

Number one, if there isn’t enough bandwidth at any given time, or you have a lousy Internet connection through your ISP, then it will affect connection and call quality. That means you’re probably going to end up needing a dedicated Internet line for your phones, as well as additional hardware.

Also, the service provider will most likely require that you buy special phones for it to work. If you have all of that, then a virtual VoIP provider can work great, but that can obviously ramp up your cost pretty quickly. If you want a high-functioning virtual phone system, you’re probably better off going with the exclusively cloud-based virtual PBX system.

App-Based Virtual Providers

These service providers are generally the cheapest and most basic type of virtual system, and they are certainly plentiful. There is a lot of competition with the app-based type of service because people flock to them due to the very low cost.

Yes, if all you need is basic phone service to take calls and nothing else for your new business, then it may work fine, for a while. But it cannot really grow with your business. These phone apps work entirely through your smartphone and usually cannot be used with any other type of phone–only your cell.

Most of these services also don’t have the features you may need, such as a call menu, holding queues, etc. It’s also worth pointing out that there are typically problems with customer service and support. Many customers complain of terrible customer support and trouble getting through to someone with these phone apps.

You’re going to be forced to upgrade to a real phone system as your business grows, anyway; so, this may not be the best route to go.

What to Look Out for

Taking great caution when you’re shopping around for a virtual system will protect you from making a bad decision, and there are some red flags that it’s very important to catch, as well.

The first red flag to watch out for is a virtual provider that doesn’t offer a trial period. If they don’t offer a free trial, then they don’t have confidence enough in their product and you should probably steer clear because it’s common practice with virtual service providers to offer a free trial.

A reputable provider will always have a free trial available because firstly, they know they have a good system, and second, they understand that not every virtual system is a good fit for every business.

Another thing to watch out for are long-term contracts, especially with the cheap phone apps. There is absolutely no reason that you should have to commit to a full year, or two years, for that matter, with a phone service because there are plenty of great services that don’t require any commitment or service contract.

Additionally, as you start looking at reviews for each service, as we do, that’s another thing to pay attention to. Everybody posts reviews for everything now, so it’s a pretty good indicator of the experience you’re going to have with that service.

There will always be a couple of bad reviews for any phone service, but if the majority of the feedback you find is overwhelmingly negative, then that’s definitely a bad sign.

Finally, when you’re pretty close to making a decision, make sure that the provider offers all of the features you’re going to need for your business. Don’t assume that you will be able to add features as you need them because that’s a classic mistake.

Many of these virtual service providers bank on the presumption that once you sign on with them, you’re not going to want to go back on the hunt for another service. So, after they made their money, you’re then stuck in the position of switching services yet again, porting your phone number again, and possibly losing business during the transition.

The bottom line is that you don’t want to get locked in when you’re not entirely sure the virtual provider is right for your business. Use these tips, do your homework, and choose the virtual phone service provider that satisfies every need your business has.


Stephanie is the Marketing Director at Talkroute and has been featured in Forbes, Inc, and Entrepreneur as a leading authority on business and telecommunications.

Stephanie is also the chief editor and contributing author for the Talkroute blog helping more than 100k entrepreneurs to start, run, and grow their businesses.

Stephanie3 Types of Virtual Phone Systems & What to Look Out For