How Does a Virtual Phone System Work and What Is It?

In comparison to traditional phone systems, virtual phone systems have several benefits, such as cost savings, cutting-edge functionality, and simple scalability regardless of where your staff is located.

By switching to a virtual phone system, you may provide customers with a greater level of customer service, boost workplace productivity, and reduce frustrating miscommunications.

Let’s examine what exactly a virtual telephone system is, how it functions, some of its best features, advantages, and suppliers.

How Does a Virtual Phone System Work and What Is It?

A virtual phone system: What is it?

Instead of using the copper cable of a typical landline, a virtual phone system is a cloud-based business phone service that places and receives calls using an Internet connection and a cloud-based PBX system.

Users of a virtual phone system can also place calls using a softphone interface on desktop computers, mobile apps, or tablets, as well as other devices.

Incoming calls can be redirected to various phone numbers to increase flexibility and prevent missed calls. With the help of reliable CRM system connections and programmable dialing speeds, outgoing calls can be controlled much more effectively.

Virtual phone systems can be swiftly and easily set up online, frequently in less than a day, and require significantly less hardware than conventional phone systems.

Companies can choose numerous of their own toll-free, local, or vanity numbers over various area codes, or they can port in any existing toll-free and local numbers. There are also available international business phone lines.

Although some businesses may have several phone numbers for various departments, most teams and departments are reachable via an extension code.

By giving clients their virtual phone numbers rather than their genuine ones, staff may secure their home or cell phone numbers.

What is the process of virtual phone system?

The protocol is used by virtual telephone systems to operate. An endpoint connection between a caller and a callee is created when a call is made through a virtual network. The voice data is then split into packets, allowing it to be transmitted to another line over the Internet. This packet data is converted back to voice data once it reaches its destination.

Digital phone numbers can direct calls to your mobile, regular analog phones, softphones, and PCs when dialed.

Callers no longer have to hang up and dial several numbers to get through to the intended recipient. Calls can be forwarded to various devices using virtual phone systems in a customized order.

A call path in a virtual phone system might resemble:

  1. incoming call to virtual number,
  2. voicemail,
  3. coworker’s phone,
  4. desktop computer,
  5. business cell phone,
  6. and a personal smartphone.

A corporation must select between hosted PBX and SIP trunking if it decides to employ a virtual phone system.

A virtual phone system that is operated by a third-party vendor using equipment that is located offsite is known as a hosted PBX.

This means that businesses using cloud-hosted PBX don’t need to own any software or hardware, nor do they need to worry about installing updates or handling significant IT problems alone.

SIP trunking, in contrast, is the best option for companies with their own IT department and onsite PBX or gateway. Voice over internet protocol phone lines and PBX gear are virtually connected through the Session Initiation Protocol (SIP).

SIP trunking should be chosen by larger businesses or small business owners with substantial call volumes who already possess private branch exchange equipment. Smaller companies who don’t want to manage their own IT difficulties and are looking for more economical virtual phone system solutions should use hosted PBX.

Important Characteristics of a Virtual Phone System

Features and capabilities of a typical virtual phone system include:

  • Feature Call Management
  • IVR call queueing and callbacks on demand
  • Visual Voicemail Tools for Team Collaboration Video Conference Calling
  • Recording of business SMS calls
  • Integrations with Third Parties for Business Phone Analytics
Important Characteristics of a Virtual Phone System

Feature Call Management

The most crucial call management services offered by virtual phone systems over landlines are call forwarding and call routing.

Call forwarding successively transfers calls between chosen devices without forcing the caller to dial an additional number in order to connect with their intended recipient.

Call forwarding, for instance, would automatically transfer an incoming call to an agent’s mobile phone if the agent missed a call at their desk phone. The call would then be redirected to their home phone or their Google Voice number if they don’t answer their cell phone. The call may be sent to voicemail or another agent if there is no response there.

In addition to meeting business goals and ensuring that callers may speak to a live agent to improve first call resolution rates, remote call forwarding gives employees more flexibility.

Depending on the caller’s responses to IVR (Interactive Voice Response) prompts or the pre-selected routing pattern, the incoming caller will follow a prearranged call path known as call routing.

Call routing guarantees that the caller connects with the agent most suited to help them with their specific problems and avoids call transfers to agents lacking the necessary skill set.

Round-robin, simultaneous ringing/call blast, most idle, skills-based, and other call routing methods are frequently used.

The following are additional call management features:

  • Blocking calls and Do Not Disturb
  • Call Hold and Personalized Greetings with Hold Music
  • Call Forwarding
  • Caller ID Hot Desking and Call Screening
  • Call Flip (Switch to another device during a phone call without disconnecting) (Switch to another device during a phone call without disconnecting)
  • Call Observation (Call Barge, Call Whisper, etc.)


IVR, or Interactive Voice Response, is a call routing system improvement tool that also aims to provide a greater level of consumer self-service while freeing up agents to handle more urgent situations.

IVR call menus, which are simply pre-recorded prompts that inquire the client about the reason for their call, can be incorporated to any virtual phone system. It may “understand” a client’s spoken remarks using Natural Language Processing (NLP) or it can respond to prompts when a consumer types their response into a phone keypad. (Press 1 for customer service, 2 for billing, and 3 to speak to a receptionist, for instance.).

The IVR system will then direct the customer through additional pre-recorded prompts or responses from a virtual receptionist based on their responses, all without ever connecting them to an agent.

IVR payments, which enable consumers to pay or manage their bills over the phone by responding to prompts via their phone keypads or spoken responses, are one of the most prevalent examples of this.

Callbacks on demand and call queues

A virtual phone system feature called call queuing enables users to manage and organize incoming calls by placing each caller in a queue as they wait for a representative to pick up.

Call queues are created depending on a number of variables, including the significance of the customer or VIP client, the sequence in which the clients phoned (which is the most typical), and the nature of the problem they are trying to solve.

Once a representative is available, the callers will be placed on hold.

The only drawback in this case?

Long client wait times, which are unpleasant for everyone, can result from a larger business or a packed call center.

By letting the caller select the time they would want to hear from a live agent, automated callbacks do away with the requirement for callers to wait on hold.

By doing this, the customer can obtain the assistance they require on their own schedule, and the agent will get automatic reminders when it’s time to make the follow-up call.

Voicemail with Visual

VoIP visual voicemail, in contrast to traditional voicemail, automatically transcribes missed voicemails and saves the audio attachments.

The option to receive voicemails as text messages allows representatives to automatically respond to missed calls and messages with phrases like “Let me call you in five minutes” or “In a meeting.”

Voicemail-to-email is also useful because it sends voicemail transcriptions and audio recordings to the preferred email address of the agent.

In some circumstances, agents can even hear voicemails right there in the voicemail portal, giving them the option to either store or delete the recordings. When a voicemail message is due, representatives will be notified.

Calling a video conference

Most virtual phone systems will include native video calling capabilities as part of their plans, especially as video conferencing solutions like Zoom or Microsoft Teams become an indispensable component of company communication.

By enabling face-to-face real-time communication and collaboration, web conferencing enhances remote team collaboration.

Users can present slideshows, utilize virtual backgrounds, change camera angles, share their screens with other participants, vote in virtual polls, raise their hands virtually to talk when they wish to, and use team chat messaging while on a video call.

Tools for Team Collaboration

Although team collaboration tools (particularly team chat messaging) are frequently used in combination with a video conference, they can also be used independently during the course of the working day.

Users can upload files and co-annotate them in real-time, for instance, in addition to tagging other users, giving tasks to them, and responding to chat messages. Users can utilize the whiteboard to demonstrate a point, switch from a chat message to a video conversation with just one click, and even take remote control of another user’s screen.

Although the majority of users will need to incorporate their preferred collaboration tools to obtain more complex collaboration functionality, today’s phone system providers do offer some basic team collaboration features.

Enterprise SMS

Using a desktop application or a mobile device, agents can send texts to coworkers or clients using their business phone number.

In order to save time, agents can type longer messages on their desktop computers while still having access to the full histories of their text conversations just like they would on a smartphone. To customers or others who have opted in to receive messages from a business, automatic SMS answers or marketing text messages may occasionally be sent.

Call Retention

Within a virtual phone system, call recording is available for both audio and video calls (including screen sharing, whiteboards, etc.).

Only the most expensive premium plans often offer unlimited call recording, however frequently, carriers will include at least 3-5 GB of recording capacity in lower affordable plans.

Administrators can establish policies for corporate-wide recording or let users control their individual recordings. These recordings can be shared through email or in the team chat, and they are transcribed so that users can simply search for keywords.

For further privacy, users can password-protect recordings or pause and resume them at various points throughout a discussion.

Analytics for Business Phones

Real-time and archived employee and client data and analytics are offered by business phones. Most often, customers can get these statistics through pre-built report templates or fully customizable reports that let them choose their own KPIs.

An individual agent, department, call direction, and other options are available to users. To enable users to maintain a close eye on shifting patterns, these reports can be automatically sent out at predetermined intervals.

Frequently used analytics are:

  • average length of a call
  • amount of incoming and outgoing phone calls (Daily Call Volume)
  • place of the caller
  • the call’s time
  • abandonment rate for call centers
  • linguistic analysis
  • typical problems and causes for support requests
  • rate of conversion
  • consumer contentment

Integrations With Third Parties

Even with all the aforementioned advantages, team members can still require more functionality that the provider of the virtual phone system does not deliver. Or they might just favor alternative tools that they feel more at ease with.

Through third-party connectors, team members can link their virtual phone system to other CRM programs and business communication applications.

For instance, you may incorporate well-liked workflow management apps into your business phone system like Asana, Slack, or To organize forthcoming video meetings or conference calls, you might also integrate applications like Microsoft Office or Google Calendar.

What Advantages Do Virtual Phone Systems Offer?

A virtual phone system has many advantages over a regular phone, including:

The first benefit of virtual phone systems is their great scalability, which enables businesses to start with basic phone service and progressively add more features or additional users as needed.

Users won’t pay for features they don’t use, which means the phone system is not just tailored to the unique demands of a business and can expand with it.

Additionally, customers can add other communication channels to their virtual calling platform, such as video calling, online faxing, or SMS text messaging, which is not possible with Plain Old Telephone Service (POTS.) Customers and coworkers can communicate on the channel of their choice, and all conversations are immediately synchronised across channels and devices so that no crucial information is missed.

The most typical virtual phone system advantages and disadvantages are shown below, based on user feedback.

How to Determine if a Virtual Phone System is Necessary

If any of the following apply, it may be time to switch to a virtual phone system:

  • If your team members are regularly away from their desks on sales or business travels, for client meetings, or for service visits, your company may have a large number of remote workers.
  • You frequently transition between platforms while on calls since you use a variety of business communication tools. Virtual phone systems have strong connectivity with third-party software, like as CRM solutions, allowing you to view all the crucial data on a single dashboard.
  • Your daily call volume has recently increased significantly or has beyond the number of agents you currently have available. An increase in missed business calls or voicemail messages is a strong indication that you’ve reached capacity.
  • Your telecommunications bills have skyrocketed due to an expansion of your firm or your workforce.
  • You recently launched a new site or are considering growing your company to include several locations. Remote workers and team members who work across multiple places can connect with each other much more easily thanks to a virtual phone system. Due to quicker access to a professional, it also shortens the time it takes to resolve customer support issues.


What is the price of a virtual phone system?

A virtual phone system typically costs between $25 and $50 per user, each month, though prices will vary depending on:
particular provider
picked a plan
annual or monthly billing cycles
bundles and supplemental features
packages for customer service upgrades
costs for hardware and equipment (if not using existing hardware)
discounts for volume or committed use

What is the operation of a virtual phone system?

Instead of using the wire of the conventional PSTN, the operation of a virtual phone system involves the transfer of call data via the Internet. VoIP, or Voice over Internet Protocol, is the name of this virtual communication technique.
Virtual calls can be placed and received by users not only on landline desk phones but also on any device with an Internet connection. Tablets, desktop, and laptop computers, as well as smartphones, are all effective communication tools.

How should a virtual phone system be configured?

A virtual phone system can be set up quickly and almost totally online in less than 24 hours. The majority of businesses reuse their existing hardware and equipment, which reduces installation costs and time. Make sure you have an Ethernet-powered Internet connection with a minimum speed of 100 kbps per line before choosing a provider and desired package, paying with a credit card.
Within the web portal, administrators can add users and specify individual preferences. The majority of providers provide individualized installation, setup, and configuration support if necessary (though they almost certainly charge extra for this help).

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