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What Is Hosted VoIP, How Does It Work, and What Benefits Could It Bring Your Business?

This article was published on May 22, 2024

Communication is central to any business, but setting up your telephone technology needn’t be a chore. With a hosted VoIP system, you can reach your customers instantly while benefiting from a range of advanced features to boost efficiency, promote team collaboration, and reduce costs.


This guide will help you understand what hosted VoIP is, what features to look out for, and what benefits you’ll be able to enjoy.

Photo of a casually dressed employee sitting on his desk working on his computer and talking into a headset.

What Is Hosted VoIP?

If you’re looking to make the switch from analog phones to a more modern system, a VoIP (Voice over Internet Protocol) solution could be the right choice for you.

What Is VoIP?

VoIP is a communications system which allows you to make and receive telephone calls over the internet, rather than traditional phone networks. With VoIP, audio is converted into digital signals, which are then transmitted over the internet and converted back to audio.

Making calls this way enables you to use desktop computers, laptops, tablets, and other devices instead of relying solely on phones. This means you can make calls from anywhere with an internet connection, and you don’t need to invest in special equipment to get started.

Are Hosted VoIP and Cloud VoIP the Same?

Hosted VoIP services and cloud-hosted VoIP are similar, and the terms are often used interchangeably. Both services provide the benefits of VoIP hosting, including cost savings, scalability, and flexibility, and both reduce the hassle and cost of maintenance and management.

The difference between a hosted VoIP service and cloud VoIP is that a hosted system could be housed within servers or hardware on a provider’s premises, and not necessarily in the cloud.

Importantly, both options eliminate the need for businesses to have hardware on premises, meaning they don’t have to buy, store, and maintain infrastructure on site.

Cloud VoIP and hosted VoIP pricing structures are similar too, offering subscription-based or pay-as-you-go models with monthly fees.

What About Unified Communications Solutions? Where Do They Fit In?

A VoIP phone service and a UCaaS (Unified Communications as a Service) solution offer similar capabilities and benefits, but with different levels of functionality and integration.

A hosted VoIP system specializes in voice communications, allowing businesses to make and receive calls over the Internet via a cloud-based phone system. On the other hand, UCaaS offers a comprehensive system which can encompass video calls, instant messaging, screen-sharing and file-sharing tools, group chats, and more.

Unified communications systems are useful for big companies who require a lot of communication and collaboration tools to work more effectively. However, for a small business, hosted VoIP may be a more suitable option as it often costs less, requires less maintenance, and allows you to focus on voice communication alone.

Benefits of Hosted VoIP

VoIP systems are a popular choice for any business looking for a cost-effective, scalable, and hassle-free communications platform. Cloud-hosted VoIP offers many benefits compared to traditional analog phone lines, including:

Easier Installation and Lower Upfront Costs

Starting a business often comes with significant upfront costs, but there are strategic ways to reduce expenses without sacrificing quality or functionality.

Using a hosted VoIP solution saves you time, money, and hassle by eliminating the need to invest in any equipment upfront. Forget spending weeks or even months installing, testing, and maintaining infrastructure — VoIP solutions can take the stress out of setting up your business and allow you to get up and running instantly, at minimum cost.

Lower Maintenance

Taking care of technology can be a chore, especially when infrastructure needs to be updated, maintained, or replaced. This not only means the extra cost of personnel to deal with any issues, but also the potential cost of lost business while your equipment is out of action.

With VoIP hosting, your service provider is responsible for managing and maintaining your communications system. They will deal with any troubleshooting, updating, and maintenance needed, reducing the burden on your IT department and giving you the confidence that your system is always up-to-date.

Greater Flexibility and Mobility

As demand for remote and hybrid working increases, it’s more important than ever for businesses to be flexible. The trend for remote working has increased significantly in recent years, and companies who can’t offer this flexibility often lose out on the best candidates. In fact, according to Owl Labs’ State of Hybrid Work 2023 survey of over 12,000 workers, 66% of respondents think that working from home should be a legal right.

Hosted VoIP solutions give companies the ultimate flexibility and mobility, allowing employees to access a centralized platform from anywhere with an internet connection. No matter where they are or what device they have, employees can stay connected to colleagues. This can help your business save further costs by eliminating the need to pay for office space, utilities, etc.

Photo of a man working on his laptop in an office or home office setting Read the article
What Is Unified Communications: An Overview
Cloud computing allows small businesses to leverage the same unified communications technology as bigger competitors. So what is unified communications? Why do small businesses need it? And how can it help your business grow? Dive into our article to learn more.

Easier To Scale (Both Up and Down)

For maximum success, businesses need to respond to the demands of the market quickly and effectively. In times of growth, this may mean adding extra users, features, and phone lines, or having to remove some capabilities when they’re no longer needed.

A hosted VoIP system is highly scalable, giving you the flexibility to add or remove features as your needs change. Whether you’re experiencing rapid growth or a sudden downturn in business, such solutions allow you to quickly and easily adapt your operations to accommodate your needs without being locked into a contract.

Simple Hosted VoIP Pricing

Rather than paying a large sum upfront, hosted VoIP plans are affordable, predictable, and scalable, depending on your needs. Unlike traditional phone systems that often come with unpredictable and fluctuating costs, they’re usually subscription-based or pay-as-you-go. This structure not only offers lower call costs, but also gives you peace of mind that you won’t receive any unexpected bills or charges.

As mentioned above, it’s easy to scale the system — meaning you can adjust your subscription as needed. This structure makes it easy to budget and manage costs and ensures you only pay for the services you actually use.

Must-Have Hosted VoIP Features

To make sure you choose the right system, you’ll first need to understand which features are essential for your business. Researching a range of hosted VoIP services before making a decision will help you differentiate between competitors, and may save you some disappointment further down the line.

High Call Quality

There’s nothing more frustrating than bad cell reception. If you’re struggling to hear or keep getting interference, it can lead to misunderstandings, mistakes, or delays.

With VoIP hosting, you’ll benefit from advanced call quality to give your team the best experience possible. This ensures that voice quality is optimized across your devices, even in limited bandwidth and network environments. High-definition call quality is a must if you want to address audio quality issues, improve collaboration, and increase efficiency.

Virtual Receptionist or Auto-Attendant Functionality

According to Paycor’s “The Biggest Cost of Doing Business: A Closer Look at Labor Costs” study, labor can account for as much as 70% of total business costs. Automating tasks and streamlining processes can help you reduce this amount, maximize your revenue, and free up your workforce for higher-value tasks.

A virtual receptionist or auto-attendant automatically fields incoming calls to ensure they are routed to the correct department. This reduces the burden on your staff, allowing them to spend time on the work most important to your business.

Local, Toll-Free, and International Numbers

One of the biggest advantages of a hosted VoIP system is the low call costs. If you operate internationally (or plan to in the future), then you’ll know that the cost of calling overseas can be significant. With a system like Vonage Business Communications, international calling is easy and affordable, with flexible payment plans that can be adapted based on your usage.

Cloud calling solutions also offer toll-free options, allowing external callers to contact you free of charge. This elevates your business’ reputation, helping you appear more professional and mature and empowering you to deliver high quality customer service.

Call Management Features

One major advantage of hosted VoIP solutions is how easy they make call management. Options like call forwarding help you stay connected while your employees are away from their desk or out of office, giving them the option to forward calls to a home or mobile number or to a colleague instead. 

Call routing is another useful call management feature. This process uses predefined rules and criteria to direct inbound calls to the right place, based on factors such as:

  • current or predicted call volumes

  • language requirements

  • employee availability

  • business hours

  • priority level

Setting up call routing in traditional phone systems is not user-friendly, but a hosted VoIP service makes call routing easy, intuitive, and adjustable.

Call Recording and Voicemail

Call recording is essential for any business, especially for companies that rely on this form of communication on a day-to-day basis. Not only is this useful as a record of your customer interactions, but it also supports training, compliance, and quality assurance.

As well as helping you establish best practices, call recording enables businesses to analyze and report on key metrics like call length, wait times, transfer rates, etc. This information empowers organizations to improve processes and services, monitor agent performance, and gain actionable insights.

Voicemail is another must-have feature for any hosted VoIP system. This means you can stay connected outside of business hours or when employees are unavailable. Visual voicemail is a particularly powerful tool, allowing employees to receive voicemail transcripts directly to their inbox to enhance efficiency, promote collaboration with colleagues, and ensure a top-quality experience for the customer.

Going Beyond Hosted VoIP for Business: Unified Communications

While a straightforward hosted VoIP phone system is perfect for some, there are several reasons why you might consider a unified communications system instead.

UCaaS solutions offer a comprehensive solution for bigger businesses who want the full range of capabilities across multiple channels. In addition to voice calling, UCaaS platforms bring together video calls, instant messaging, web conferencing, and more into a single interface.

Unified communications platforms have advanced collaboration and project management tools, making it easier to share files, streamline workflows, and collaborate virtually. UCaaS can also be easily integrated into other applications and programs, including email platforms, calendars, Salesforce, and so on. This level of integration — along with the unified user experience UCaaS systems like Vonage Business Communications offer — can enhance productivity and empower employees to collaborate more effectively.

For a small business, hosted VoIP provides an affordable, flexible service to meet your demands. But if your business is growing rapidly and looking to integrate voice calls, video calls, instant messaging, and more, a UCaaS solution might be the better option for you. Take the time to learn more about these solutions and work out which features you need to make sure you invest in the right platform for your business.

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