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

In the digital, technology-reliant modern world, everything seems to be going ‘virtual’. From virtual reality gaming to virtual working styles, telephones are no different – now boasting the virtual phone system. 

But what is a virtual phone system, how does it work, and how might you take it even further with a virtual receptionist? Let’s take a look. 

What is a virtual phone system?

A virtual phone system is a cloud-based softphone, which makes outbound calls and receives incoming calls over IP. Lost? Don’t worry – let’s break it down! 

We will give you a brief overview of the concepts of cloud-based technology, softphones, the different types of calls, and the role of IP in no-nonsense plain english. 

Cloud based

‘Cloud based’ is the term used to describe something that is hosted in the cloud, on the internet, as opposed to having a physical tangible form. In other words, it is an internet-hosted software that can either be downloaded to a device, or simply accessed through online portals or communication apps


A softphone is a piece of software that acts as a direct replacement for traditional phone systems and private branch exchanges (PBX). This means that any device with an internet connection can make phone calls. 

This includes mobile phones, some models of desk phones like an office phone or business phone, plus laptops, computers, and tablets.

Outbound and inbound calls

Outbound calls are those that you make to someone else – conversely, inbound calls are phone calls made to you. Both outbound and inbound calls can either be made internally or externally. 

Taking business calls as an example, business owners calling the phone extensions of their employees are making internal calls within their organisations, whereas business calls to clients would be classed as external calls. 


Making calls over the internet is called Voice over Internet Protocol, or VoIP

VoIP phone systems are immensely popular in the modern world, as they allow for greater flexibility. Their range of features is particularly useful for remote teams and hot desking, as, depending on your virtual phone service provider, you might have the choice of hundreds of features! 

Examples include:

  • Conference calling (including video)
  • Voice messages and answering service
  • Management features
  • Screen sharing
  • Outgoing and incoming phone calls
  • Advanced call routing
  • Unified communications
  • Phone extensions
  • And many more advanced features

So, what does that all mean? 

To summarise, virtual landlines or mobile phone lines are hosted online and make all types of phone calls – amongst other things – over an internet connection, without the need to purchase or install any physical handsets or phone lines. 

Now that you know what a virtual phone system is, let us take a closer look at how they work. 

How does a virtual phone system work?

Before we get into the virtual phone system, let us take a step back and look at how conventional phone systems in general work. 

Landline telephones 

At its most basic level, a telephone contains a speaker and a microphone, both of which are connected to a switch. This switch, typically called the hook switch, is what connects the call once you lift the handset off its perch. To stop you from also hearing your own voice, you will also have a duplex coil

More modern telephones will usually also have a keypad and ringer – this makes the phone more digital. Despite these digital revisions, in 2021 there were around 884 million landline subscriptions worldwide. This is 24 million less than the previous year, in agreement with the steady decline of this amenity. Though households might be moving away from the traditional landline, many businesses still utilise this type of service in their offices. 

The phone is then connected to the wall, which connects it to the public switched telephone network (PSTN). In Britain, this is owned and operated by British Telecoms (BT). The PSTN is a physical network of copper wires through which the sound from your telephone is received and dispatched. 

Though it once could only exchange analogue frequencies, the PSTN was updated to allow digital phone calls, using the integrated services digital network (ISDN). The ISDN is essentially the transmission of voice, video, data, and more – digitally – along the PSTN phone lines. 

As this requires physical infrastructure, it has become increasingly difficult and costly to update the PSTN. Thus, BT plans to switch off the PSTN (and so the ISDN too) in 2025. 

Mobile telephones 

Unlike landlines, mobiles are on an upward trajectory. In 2021, there were roughly around 14.91 billion mobile devices worldwide, which is expected to rise to 15.96 billion in the coming year alone. 

Also, unlike landline phones, mobile telephones do not require physical cables, hence being coined ‘mobile’. No matter where you are, the phone uses electromagnetic radio waves for the transmission of voice, video, data, and so on. 

The microphone of your mobile converts the sound into electrical signals. The microchip then turns the signals into numbers, which are transferred in a radio wave to the nearest mobile phone cell tower (or mast) by an antenna or aerial. 

The mobile phone mast then passes the signal onto a base station, which forwards the transmission onto its intended destination. The base station also logs everything that is happening in the network, which is called a cell – this is why some people refer to mobiles as cell phones. 

Virtual phones 

As we have already discussed, virtual phones are hosted in the cloud. The software is accessed through the internet, which then goes through an ISP provided gateways like modem or router, which then can be connected to a digital device. 

This means that virtual phone calls can be made on any device that has internet connectivity, such as a computer, smartphone, laptop, or tablet. 

However, this does not mean that the other participant of the call must also be using VoIP. You still have a phone number, which can be dialled from a preferred phone, but it will then be routed through the internet to your virtual phone system. 

This essentially means that you create a custom phone. If you use your personal smartphone for business purposes but wish to keep things separate without the hassle of getting a second phone, you can make virtual VoIP phone calls through your business app

For virtual landlines, which are especially useful for modern businesses, customer service agents can take the phone through their laptop, computer, or tablet with a headset, or it can be connected to a physical handset that supports VoIP calling. 

Virtual systems vs traditional phone systems: What’s the difference?

As you can see, the key difference between virtual and traditional phone systems is how they work. However, there are also several other differences that can be utilised and capitalised upon. 

Let’s take a look at just a few of the most crucial differences between virtual systems and traditional phone systems. 


Virtual phone systems require no new hardware – you can simply use the technology that you already have. If you already own a laptop, smartphone, computer, or tablet, you are good to go. 

On the other hand, traditional phone systems typically require you to purchase new hardware, such as a physical phone and phone system. 


If there is ever anything wrong with your virtual phone system, or there is an update available, this can be solved instantly. As the system is hosted in the cloud, the update can be downloaded or installed automatically, and the phone system providers will be able to diagnose and fix any issues remotely

However, if your traditional phone system becomes outdated or broken, this will require an in-person solution. Not only can this take quite a bit longer, but it can also be expensive, and result in extensive business down time. 

Which brings us onto our next point… 

Disaster recovery 

In the event of a disaster, you can simply access your virtual phone system over any other device that has internet connectivity without any hassle, futureproofing your business. 

If you have a traditional phone system, however, and there is a power outage or issue with IT systems, this will almost certainly result in significant business downtime and losses

The importance of disaster recovery planning was highlighted during the past couple of years thanks to remote working due to the Covid-19 pandemic, which we will discuss in more detail below. 

Remote working 

During the Covid-19 pandemic, remote working rose to the forefront of business life. As we are coming out of the other end of the tunnel, many businesses are allowing employees to work entirely remotely or at least flexibly as part of a hybrid office

If one positive has come from the past couple of years, it is that not only is flexible working achievable, but it can also be extremely beneficial to businesses and employees alike. So, in this day and age, it is crucial to consider how technology can support remote working

With a traditional phone system, you would need to set up call routing from your business landline to your employees phones. This means they would need to use their home landline or mobile phone. Though this may work, it can feel like an invasion of privacy, as it may mean they get business calls even after the office is shut for the day. 

However, with VoIP, employees can access their phone system from anywhere they like, eliminating the need to re-route calls. Though, if they do not have a dedicated work phone or laptop, they may need to use their own equipment, calls will only come through when they are logged into the software.

With VoIP, once your day at work ends, you will not receive any business calls to the device, keeping your work life and home life completely separate

Call quality 

As long as your internet connection is strong, VoIP systems typically have a higher call quality than traditional phones. This is because the internet is constantly evolving and upgrading, whereas physical phone lines are much more difficult to modernise. 


Similarly, so long as your internet connection is reliable, so will your VoIP phone calls. On the other hand, traditional phones can be susceptible to external interference – both environmentally and digitally – and thus can be less reliable at times. 


To set up a traditional phone system, you must first install the necessary infrastructure, such as wires and connectors, to every location you require a phone to be, which usually requires a physical installation from an expert. 

You then need to programme extension numbers for each department to allow for effectively handling both external and internal calls. As you can imagine, this can take a lot of time. 

However, setting up VoIP is simple, especially if you already have internet access. Simply: 

  • Set up an account on the online portal or software.
  • Make as many accounts as you need.
  • You can even group the users into departments in lieu of extension numbers.

And that’s it! 

Advanced features 

Whilst traditional phones merely make phone calls, VoIP often enables advanced features. This includes voicemail transcription, conference calls, video conferencing, live chat, email integration, instant messaging, and more. 

Though businesses might have a range of software that provide this functionality, VoIP can allow you to condense all of its advanced features into one piece of software called unified communications. Unified communications ultimately streamline a business, increasing efficiency, and thus inevitably increasing customer satisfaction. 


If your business grows – by one person or one hundred – you would typically have to go through the rigmarole of installing and setting up a brand-new telephone handset. However, with VoIP, any administrator can easily add new user accounts, which can then be accessed instantly from the user’s device. 

Similarly, if an employee leaves, or you need to downsize, you can simply remove users from your system. Also, if you need to move house or office, you can access your VoIP account from the new location seamlessly, with no fuss. 


Unlike the long-term contract you typically will be tied into with a traditional phone system, with a standard plan for virtual phones, you only pay for what you use. Instead of paying a sum for unlimited calls, with VoIP, you will only be charged for the number of calls you actually handle

Though cost ranges from provider to provider, this makes for significant cost savings in the long run. 

But why stop with a virtual phone system when you could also get a virtual receptionist too?

Making business communication more efficient with a virtual receptionist 

Here at alldayPA, we offer a truly bespoke call answering service to meet all your needs – after all, with telephony, we know that there is never a ‘one size fits all’ solution. 

Our packages are completely tailored according to what you want, what you need, and what your average call volume might be. In other words, you will never have to pay more than what you require. 

With our virtual receptionist service, you can benefit from:

  • Call answering
  • Call handling
  • Diary management
  • A remote switchboard
  • Call triaging
  • And much, much more

But don’t worry, though our service is offered virtually, our receptionists are real people – we just work remotely. 

Everything that we do is available to you via the Virtual Office App – a bespoke, in-house management portal. Through the Virtual Office App, you can have complete control over how calls are answered, set up users, lay out your availability, and more, all with a click!

Benefits of a virtual assistant, office and phone system

  • With alldayPA, your calls will be answered 24/7, 365 – if no one is available, we will take a message for you to pick up once you are free.
  • We will deal with customers so you don’t have to, freeing up your time to get back to doing what you do best.
  • Your customers will always be greeted by a real-life person, every time. We answer on behalf of your business, following your procedures to the tee to help your brand put the best foot forward all day, every day.
  • Our virtual receptionist services are cheaper than hiring an in-house receptionist. Plus, we operate remotely, meaning you don’t have to worry about allocating desk space in the office.
  • If you only need smaller scale call handling – we can do that too! We will always recommend the best package suited to your needs.
  • If you require help with additional services like emails, live chat, or social media, however, you could upgrade to an Outsourced Call Centre – our solutions are incredibly flexible and scalable.

Make your customer service and telephony dreams a (virtual) reality! Get in touch with alldayPA

From call answering to message taking, virtual receptionists, and more, give us a call today to talk through your needs and begin building your bespoke solution. 

Our phone lines are open 24/7, 365 days a year – just like yours could be too when you partner with alldayPA.