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Hosted VoIP lets you make phone calls over the internet using a desktop or mobile app. Easily add or remove users and virtual phone numbers, building a scalable and flexible phone system with high-quality audio and advanced features like call routing menus, call queues, and analytics.

This article will discuss everything you need to know about hosted VoIP–including how it works, its benefits, features, and top providers.

 

What Is Hosted VoIP?

Hosted VoIP is an internet-based phone service managed by a provider. Users subscribe to the VoIP provider’s service, which enables calling and SMS texting through cloud-based software. The provider hosts the software, features, uptime, and global phone network, so the user only needs to download an app and connect to the internet.

Voice over Internet Protocol (VoIP) services provide users with many business features: virtual phone numbers worldwide, IVR menus and call routing, call queues, business analytics, even AI features like call transcription. Businesses can quickly add or remove users, purchase phone numbers, and manage phone system settings in the hosted app.

 

voice calling dialpad

 

How Does Hosted VoIP Work?

Hosted VoIP uses the internet, rather than landline, to transmit audio data between callers. VoIP providers manage data centers and servers around the globe, offering this cloud phone service to users via a web and mobile app. When users place a call through the app, their device transmits audio data packets across the web to the recipient and vice-versa, facilitating real-time phone communication. This connection requires each participant to have sufficient bandwidth.

VoIP users subscribe to a provider’s hosted service by paying a monthly fee. The app provides a business phone system with routing features, queuing, analytics, and more. Users access these features and make calls through the app’s dashboard. Administrators manage the phone system through the app, purchasing virtual phone numbers, adding and removing users, and customizing the call distribution system.

 

Hosted VoIP vs On-Premise VoIP

With a hosted phone system, the provider manages the phone system’s hardware, servers, data centers, and VoIP software. With on-premise Voice over IP, the company hosts all their hardware onsite–including PBX servers, SIP trunks, the wires connecting each user, and the software itself.

 

Here’s a more detailed breakdown comparing hosted vs on-premise VoIP:

Hosted VoIP On-Premise VoIP
Where is the hardware hosted? Provider’s data centers Business’s office
On-premise equipment required
  • Internet-connected device
  • PBX server(s)
  • SIP trunk(s)
  • Cables
  • Internet-connected device
Average cost $20-30 monthly per user $20-30 per user, plus over $1000 per year in setup and maintenance fees
Typical features
  • IVR menu
  • SMS texting
  • Ring groups
  • Call queues
  • Business analytics
  • Voicemail
  • Auto attendant
  • Call forwarding
Pros
  • Lower maintenance and hassle
  • Advanced features
  • Mobility, on-the-go usage
  • Easy scalability
  • Data privacy and security
  • Control over software and features
Best for Remote teams, those who want advanced features, or those looking to scale Companies with an in-house IT team that want control over features and data privacy

 

Hosted VoIP

In a hosted VoIP infrastructure, the provider manages all the hardware equipment–data centers, PBX system, and the connection to the landline PSTN. The VoIP provider also hosts the software–including the programming code, features, and updates.

The end user pays the subscription, downloads the desktop or mobile app, and accesses the VoIP service through an internet-connected device, like a smartphone or computer. Make calls and send texts from anywhere you have stable bandwidth–including on the go or internationally. Since companies can quickly add and remove users based anywhere, hosted VoIP works great for remote and hybrid teams.

 

On-Premise VoIP

With on-premise VoIP infrastructure, your business hosts all its equipment in the office. You host the PBX servers, the SIP trunk that connects to the analog PSTN, and the wires running to each user’s computer and VoIP phones. You still need to subscribe to a VoIP provider to have phone service, but you run the phone service through your on-site equipment.

Using on-premise VoIP, your IT team and programmers manage your phone system’s software and features. This usually leads to basic features like auto attendants and simple call management like call forwarding and parking. Since the physical infrastructure is onsite, users must be in the office to handle calls from their business number. Over time, scaling your company may require more SIP trunks, servers, and wires to accommodate the new users.

 

The Benefits of Hosted VoIP

Hosted VoIP is typically cheaper, easier to set up, and more scalable than an on-premise infrastructure. Since hosted VoIP is cloud-based, it supports remote teams and lets users make business calls on the go. Hosted solutions also have more advanced business features and communication channels, improving customer service.

 

Easy to Set Up and Manage

A cloud-based phone system is entirely app-based, meaning you can configure the phone system and begin making calls in minutes. Getting started is simple–download the app, choose a plan, pay the subscription, and choose a virtual phone number.

 

 

Scalability

Adding and removing users is quick and easy with a hosted VoIP system. Managers just add a subscription to the company account, invite the new user via email, and choose a virtual phone number. The new team member can access the cloud-based phone system through the web or mobile app.

This simple process makes it a breeze for teams to expand or downsize, adding new users based anywhere.

 

Lower Costs

Switching from on-premise to a hosted VoIP system reduces hardware expenses, maintenance costs, and IT staffing needs. With hosted VoIP, you only need to pay for an internet connection and a monthly subscription, ranging from $15 to $30 monthly per user.

This is why 82% of companies report cost savings AFTER transitioning their phone system to the cloud.

 

Advanced Features

Hosted VoIP phone systems typically include advanced features like IVR menus, ring groups, call queues, call recording, analytics, and AI tools like call transcription. These capabilities provide customer self-service and distribute incoming calls to make your agents more efficient.

Dialpad IVR Workflows

 

More Communication Channels

Many cloud-hosted phone systems bundle VoIP telephony with SMS texting, team chat, and video conferencing–offering a business communications platform that improves team collaboration and provides more ways to connect with customers.

Even though 76% of customers still prefer to contact companies via the phone, contact centers continue to broaden their feature offerings, resulting in lower costs per assisted contact.

OpenPhone SMS

 

Better Customer Service

With self-service tools like IVR menus, customers can contact your company whenever they want. This increased flexibility is important to customers–especially the younger generation, 87% of whom say convenience is critical to them.

Call queues and ring groups reduce customer wait times, giving you an advantage as 73% of customers consider long waiting times a serious problem, according to the CFI Group.

 

Features of a Hosted VoIP Phone System

Hosted VoIP phone systems generally bundle digital features like virtual dashboards, voicemail, IVR menus, call queueing, analytics, and more. These tools lead to shorter wait times, increased customer convenience, and better agent efficiency.

Here are the features often included with a hosted VoIP solution:

  • User dashboard: Desktop and mobile VoIP apps center around a user dashboard, organizing your tasks, communication channels, voicemail, analytics, and call queues
  • Virtual voicemail: Voicemail messages include transcription, with voicemail-to-email and voicemail-to-SMS forwarding
  • Communication channels: Hosted solutions often bundle VoIP with SMS texting. Unified communications platforms add team chat messaging and video conferencing
  • IVR menus: Customize a self-service phone menu that routes callers to the department they want to reach
  • Call queues: Call queues organize callers on hold when an agent or department is busy. Staff can view the queue wait list and average waiting time from the dashboard.
  • Analytics: The analytics portal tracks and visualizes data and KPIs like call volume, agent activity and performance, and channel usage. Filter these metrics by agent, department, and historical period.
  • CRM integrations: Most VoIP phone systems integrate with CRM software like Salesforce or HubSpot. These integrations sync customer data and journey history across platforms for better context.
  • Call monitoring: The supervisor portal gives a live view of agent status and queue activity. Managers can jump into live calls to listen or whisper private guidance.
  • AI features: Advanced and high-tier VoIP plans include AI features like call transcription and real-time agent assistance

 

Main Uses of Hosted VoIP

A hosted VoIP system supports most customer communication use cases–including customer support, sales, inbound self-service, automations, and communicating with customers from the field. Small and enterprise-size companies use hosted VoIP to scale flexible and remote workforces while minimizing costs.

Here are some use cases for hosted VoIP:

 

Scaling Small Businesses

Hosted VoIP service helps small businesses looking to scale, regardless of your industry. Startups like Betterment manage to reduce costs while growing a remote workforce, by switching to VoIP as a communications solution.

 

Customer Experience

Direct-to-consumer companies like Phat Scooters benefit from hosted VoIP’s call routing tools, which efficiently distribute inbound callers to your customer service reps. Call queues and self-service IVR menus make customer service more efficient.

 

Brand Awareness

With an on-premise phone system, users must be in the office to make voice calls. This forces field workers to contact customers from their personal cell numbers, which confuses communication and disrupts brand uniformity.

Companies like Advantage Plumbing use hosted VoIP to communicate with customers from the field, using a consistent business number. This builds a more stable brand identity and improves customer communication.

 

Process Automation and Sales

Hosted VoIP lets you automate inbound customer service and outbound proactive customer communications via phone and texting. Companies like 24 Hour Tees can generate outbound calling campaign lists or automate SMS texting sequences–based on CRM information and lead data.

 

How to Choose a Hosted VoIP System?

Use the following process to choose the right hosted VoIP system for your company:

  1. Determine the features and channels you want
  2. Compare VoIP providers by features, channels, and pricing
  3. Check the unlimited calling area, phone number availability, and texting limits
  4. Use free trials or virtual demos
  5. Choose the plan with the best value

 

1. Determine the Features and Channels You Want

Using the features list above as a guide, check out a few providers’ pricing pages to generate a list of your must-have features and channels. Determine which routing tools you want, if you need call queues, and if you need real-time analytics or just basic call logs.

Decide if you want internal team collaboration channels, like chat and video, or if you only need voice and SMS.

 

2. Compare VoIP Providers by Features and Pricing

Compare five to eight VoIP providers’ phone systems. Visit each service provider’s pricing page and compare the features they offer in each plan. Note which plans provide all your must-have features and channels, and which extra bells and whistles that you would like to have.

Compare each provider’s pricing to get an idea which ones offer the best value for your communication needs. Aim to narrow your search down to three or four potential VoIP providers.

 

3. Check Calling Area, Phone Number Offerings, SMS Limits

Each VoIP phone system offers a unique calling area, per-user SMS limit, and phone number selection. Anticipating your SMS usage and calling destinations, confirm this information for your top provider choices. You may be able to find hidden value and avoid extra fees.

 

4. Use Free Trials or Virtual Demos

Many VoIP providers offer free trial periods lasting from 7 to 30 days. And nearly all providers offer in-depth product demos on their website or YouTube. These resources let you test user experience and the interfaces for your top choices.

Try out the dashboard, send SMS texts, make calls, design an IVR menu, and take a look at the analytics portal. Use this hands-on experience to disqualify VoIP systems that your staff find difficult to use.

 

5. Choose the Plan with the Best Value

Considering your top choices’ features, channels, and user experiences, identify which provider and plan offer the best value. Bottom-tier plans tend to offer a wide variety of communication channels and critical routing features, while mid-tier plans add advanced features like analytics and call queues.

In general, I find that mid-tier plans tend to provide the best value for small companies.

 

Popular Hosted VoIP Providers

Here are our picks for the top hosted VoIP providers:

Provider Pricing (Monthly per User) Key Features Communication Channels Best For
Nextiva $20-$30
  • Social media management
  • IVR menu
  • Ring groups
  • Voice
  • SMS
  • Team chat
  • Video meetings
  • Live chat
  • Email
  • Messaging apps
  • Social media
  • Review platforms
Multichannel service and social media management
RingCentral $20-$35
  • Call queues
  • Multi-level IVR
  • Real-time analytics
  • Voice
  • SMS
  • Team chat
  • Video meetings
User-friendly phone system
Zoom Phone $10-$20
  • Call monitoring
  • Call queues
  • Unlimited SMS
  • Voice
  • SMS
  • Team chat
  • Video meetings
Low-cost phone system
GoTo Connect Quote-based
  • Real-time analytics
  • Custom surveys
  • Unlimited IVR
  • Voice
  • SMS
  • Team chat
  • Video meetings
  • Live chat (add-on)
International calling
8x8 Quote-based
  • Multi-level IVR
  • Call monitoring
  • Supervisor analytics
  • Voice
  • SMS
  • Team chat
  • Video meetings
Team collaboration

 

Hosted VoIP Simplifies Your Phone System

A hosted VoIP phone system is generally cheaper, easier to set up, and simpler to maintain than an on-premise phone system. Cloud-based systems include advanced features, are easily scalable, and support remote teams. Companies of all sizes can easily implement and grow with a hosted VoIP system.

For a closer look, check out our in-depth comparison of business VoIP phone systems.

 

FAQs