What is Hosted VoIP? Features, Benefits & More

In today’s digital era, a groundbreaking technology has emerged that is transforming business communications – Hosted VoIP. This internet protocol-based system enables businesses to make phone calls without depending on traditional telephone lines.

A report from Statista reveals an impressive growth in the number of hosted VoIP lines in the US alone, with over 64 million by 2017. That’s an increase of about 20% since three years prior.

Clearly, small and medium-sized enterprises are recognizing its potential benefits.


What is Hosted VoIP?

A hosted Voice over Internet Protocol (VoIP), in layman’s terms, is your business phone system taken to the cloud.

Instead of relying on traditional telephone lines or an on-site PBX hardware setup, hosted VoIP allows businesses to make and receive calls via their internet connection.

As Alexander Graham Bell once said: “The day will come when the man at the telephone will be able to see distant persons.” That day has arrived with hosted VoIP systems.

The Evolution from Traditional Phone Systems

In contrast with old-school PSTN-based business phone systems that use copper wires for voice transmission, a hosted VoIP provider leverages digital technology.

It converts voice signals into data packets which are then transmitted across cyberspace.

This shift away from physical infrastructure towards virtual solutions represents a significant evolution in telecommunications; it’s part of a broader trend leveraging internet protocol networks for more efficient communication methods.

Hosted vs On-Site VoIP: The Difference

You might ask yourself what differentiates ‘on-premise’ versus ‘hosted’ options? Both utilize similar technologies but differ significantly in implementation.

An onsite VoIP requires you to house all necessary equipment within your premises including servers and PBX hardware. This can incur substantial upfront costs while offering full control over your system.

On the other hand, opting for a hosted solution means technical aspects get managed by providers who own and maintain required offsite secure data centers.

You only need compatible IP phones, mobile devices, or softphones connected to a suitable network such as broadband or 4G/5G cellular service.

How Does Hosted VoIP Work?

Hosted voice-over-internet protocol transmits voice data over the internet, rather than traditional phone lines.

This revolutionary technology, known as VoIP, transforms analog signals into digital packets and sends them via an IP network.

Bypassing the public switched telephone network (PSTN), a system that’s been around for ages but can be quite expensive due to its dependence on physical infrastructure, has led businesses towards significant cost savings.

In fact, Cisco Research states that companies using VoIP systems save $1,727 per month on average.

Data packets are transmitted through your internet connection, reaching their destination where they’re converted back into sound waves.

This opens up possibilities for instant messaging and international phone calls without being tied down by traditional landlines or hefty long-distance call rates.

Options provided by VoIPs

Hosted VoIP systems offer versatility through software applications known as VoIP softphones. All you need is an active net connectivity.

On the flip side, companies preferring a traditional experience via conventional telephony equipment may opt for dedicated IP phones powered by the modern VoIP tech.

The choice depends on individual business needs/preferences hence both remain viable solutions when adopting VoIP technology.

Navigating Network Issues

Potential issues like bandwidth constraints or latency problems should be proactively addressed.

Appropriate measures like investing in high-speed connection and optimizing router settings need to be taken for optimal performance levels.

In fact, many providers even offer comprehensive technical support services aimed specifically towards helping clients overcome these challenges effectively thereby ensuring optimal user experiences.

The Origins of VoIP

Tracing the origins of Voice over Internet Protocol (VoIP) technology is like taking a journey through time, from traditional telephone lines to today’s hosted VoIP systems.

Innovation often begins with bold ideas and ambitious visionaries. In this case, it was researchers in the early 1970s who dared to dream beyond public switched telephone networks (PSTN).

They began experimenting with packet-switched networks for call routing – a revolutionary concept at that time.

The Birth of VoIP

Despite these groundbreaking efforts, making international phone calls via internet protocol remained just an idea until mid-1995 when VocalTec Communications took center stage.

Vocaltech - InternetPhone

This company launched InternetPhone software which allowed users equipped with microphones and speakers on their computers to make VoIP calls across cyberspace.

The introduction of broadband around turn-of-the-century brought about significant changes as it provided sufficient bandwidth required quality audio transmission thus boosting the popularity of VoIP among residential customers.

As businesses started realizing the benefits of having access to not only cheaper, but also feature-rich communication solutions compared to standard PSTN services, enterprise-grade offerings emerged.

In recent years there has been exponential growth in cloud-based technologies leading to the development of ‘hosted’ variants where all the necessary servers are maintained remotely via a provider.

Nowadays, even call centers have taken measures to fully convert their systems to VoIP systems.

Features of Hosted VoIP

Call Forwarding and Routing

With the call forwarding feature, incoming calls will never go unanswered or end up at the wrong extensions anymore.

You can now route them effectively based on preset rules such as time-of-day or caller ID information ensuring no customer ever feels ignored again.

Plus points if you make use of artificial intelligence routing capabilities which distribute inbound traffic among team members optimally minimizing wait times, and improving overall service quality.

Voicemail-to-Email & Auto Attendant

It doesn’t matter whether employees step away from their desks because voicemails can be sent directly to their email inboxes.

This ensures that they don’t miss out on any important messages even while working remotely.

Furthermore, auto attendants act as virtual receptionists who work around the clock without breaks guiding callers through menu options using voice prompts thus saving valuable human resources.

Conference Calling

In today’s globalized workplaces where teams often span across multiple locations conference calling becomes an indispensable tool enabling meetings where participants can dial-in from anywhere around the globe.

Sophisticated Call Management Features

Advanced features like queuing high volumes of inbound traffic and placing hold until representatives become available.

You can also record calls for quality assurance purposes, and have access to instant messaging for quick internal communications.


A key part of many hosted VoIP solutions includes CRM integration which connects your customer relationship management software with your phone system allowing you access to client information during live conversations thereby improving customer service levels significantly.

Benefits of Hosted VoIP

Switching to a hosted VoIP system can provide numerous advantages for small and medium-sized businesses, from cost savings to enhanced customer service.

Cost Savings

Say goodbye to the hefty installation costs and maintenance fees associated with traditional landlines.

With hosted VoIP services, these expenses are drastically reduced or even completely eliminated as there’s no need for on-site hardware.

In addition, making international phone calls via conventional telephone lines can be quite costly.

But when you make VoIP calls using an internet connection instead of a public switched telephone network (PSTN), your company’s communication budget could see substantial reductions.


Your business isn’t static; it grows and evolves – so should your communication solution.

A key benefit that comes along with choosing a hosted VoIP provider is its inherent ability to scale up or down based on current needs without needing additional physical infrastructure like old-school landlines would require.

This flexibility not only helps save money but also allows companies to adapt quickly in response to changes in their business environment and market conditions.

Better Customer Service Capabilities

Another major perk of adopting hosted VoIP phone systems lies in the enhanced customer service features they offer such as call queues and virtual receptionists.

Fostering Remote Work Trends

The modern world technology has seen a rise in remote work trends globally, particularly amidst recent global events.

The ability to make VoIP calls anywhere fosters this trend further, enabling employees to work remotely seamlessly hence contributing towards productivity enhancement.

Environmentally Friendly

Finally, switching traditional telephony solutions to cloud-based ones reduces carbon footprint since it eliminates the need for physical infrastructure and paper billing.

Thereby making it an environmentally friendly choice for organizations that are conscious about sustainability.

Disadvantages of Hosted VoIP

Dependency on Internet Connection

The first thing that springs to mind when discussing disadvantages is the dependency of hosted VoIP services on a stable internet connection.

Unlike traditional telephone lines which operate independently, your ability to make calls or engage in instant messaging hinges entirely upon your online connectivity status.

If your location suffers from frequent network interruptions or poor signal strength, be prepared for call disruptions and subpar audio quality – factors that could negatively impact customer service experience and potentially lead to loss of business opportunities.

Limited Features Based on Provider

Moving onto our next point; not all providers offer a full suite of features such as VoIP softphones or advanced options like call recording.

This means businesses may have limitations based upon their chosen provider’s offerings.

Furthermore, while most vendors support international phone calls, rates can vary greatly between them.

Potential Security Concerns

Cybersecurity Hosted VoIP Cybersecurity concerns always loom large whenever we talk about any technology operating over internet protocol.

Cyber threats including hacking attempts and data breaches pose risks unless robust safeguards are put in place by hosted VoIP providers.

This underscores the importance of choosing a reputable vendor that prioritizes stringent security measures.

Maintenance & Technical Support

Maintenance issues come into play when dealing with cloud-based technologies.

Since remote servers are maintained via third-party vendors, troubleshooting problems often requires assistance from technical support teams rather than being able to resolve them internally.

Dependence on external help could potentially lead to delays, thus rectifying issues affecting overall communication within a company ultimately impacting productivity levels negatively.

Is Hosted VoIP Right for Your Business?

Making the transition from a traditional telephone system to hosted VoIP is not an option that works for everyone. It’s crucial to consider the size of your business, industry type, and communication needs.

A small start-up with remote team members might benefit significantly from a VoIP system like RingCentral’s, which offers flexibility and scalability.

Conversely, an established company with complex call routing requirements may prefer on-premise solutions that provide more control over their telephony environment.

Evaluating Costs – Traditional Phone Lines vs Hosted VoIP

Traditional hosted VoIP

Prioritizing cost comparison between traditional phone lines and hosted VoIP is essential before making any decisions.

Traditional telephone services often involve significant upfront costs for hardware installation plus ongoing charges for maintenance and line rental.

In contrast, VoIP providers like RingCentral typically offer packages based on fixed monthly fees inclusive of all features such as auto attendant or CRM integration.

This makes it easier for businesses to budget their communications expenses without worrying about unexpected costs cropping up down the line.

Potential Scenarios Where Traditional Phone Systems Might Be Preferable

While there are many advantages associated with switching to hosted VoIP technology, certain scenarios might warrant sticking with traditional phone systems instead:

  • If you operate in an area where internet connectivity is unreliable or slow speeds are common; this could affect voice quality when using VoIP service.
  • Your organization has already invested heavily in PBX equipment; migrating entirely to cloud-based telephony might not be financially feasible or practical.
  • You’re dealing with strict regulatory compliance issues (such as HIPAA) requiring specific security measures beyond what most cloud-hosted VoIP providers can guarantee.

Navigating The Transition from Traditional to Cloud-Based Telephony

Remember though that regardless of whether you choose to go the full-on digital route or opt hybrid approach, careful planning and due diligence will always serve well ensuring a smooth transition and minimal disruption in day-to-day operations.

SIP Trunking – A Cost-effective Solution

If you’re looking at leveraging the power of VoIP technology without completely abandoning your existing PBX hardware setup, SIP trunking could be your answer.

This method offers an ideal balance between maintaining familiar equipment while embracing new technology – making it particularly attractive for companies hesitant about fully transitioning into hosted VoIP solutions immediately.


What is a hosted VoIP?

A hosted VoIP is an internet-based phone system where the provider houses all necessary hardware and software off-site, offering businesses cost-effective communication solutions.

What are the benefits of hosted VoIP?

The benefits include cost savings, enhanced customer service, global accessibility, scalability, and advanced features like call forwarding or voicemail to email.

What is the difference between VoIP and hosted?

The main difference lies in their setup. While both use the internet for calls, traditional VoIP requires on-premise equipment whereas Hosted VoIP leverages cloud technology with no need for physical infrastructure at your business site.

Can you host your own VoIP server?

You can technically host your own VoIP server but it’s complex and demands significant technical expertise. Most businesses prefer using a service provider to avoid maintenance hassles and enjoy better reliability.


Hosted VoIP is revolutionizing the way businesses communicate. It’s a game-changer. The technology has come a long way since its inception, and it’s here to stay.

It works by transferring voice data over the internet instead of traditional phone lines. With features like auto attendant, conference calls, and CRM integration, your business operations can be seamless.

After reading the article, if a hosted VoIP solution fits your business, I definitely recommend you give it a try at least.

It is always better to adapt to changing technologies as they arise to make sure you stay ahead of the pack.

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