Hosted Phone System: Features, Benefits, Pros & Cons

October 14, 2022 8 min read

Julie Bai

Julie Bai

what is a hosted phone system - features, benefits, pros and cons

What is a hosted phone system?

A hosted phone system or cloud phone system is a business phone setup that works via an internet connection and is hosted in the cloud by a third-party vendor. Compared to old-school traditional phone systems that require your own server and equipment on site, a hosted phone system can save your business money in maintenance and equipment costs.

There are two main types of hosted phone systems:

Cloud-hosted phone system

All phones connect to an outside VoIP data center. The phones are configured with an individual login and programmed to register with a SIP server beforehand.

A cloud PBX comes with communication features a modern workforce needs. Voicemail to email, auto attendants, video conferencing — you name it. From a management perspective, this is the easiest PBX platform to use.

SIP trunking

Keep your existing PBX, but the backhaul is completed through a SIP trunk provider for all the outside lines you need. In the event of a PBX issue, you can route phone calls to any brick-and-mortar or virtual office.

A hosted phone system or virtual Private Branch Exchange (PBX) gives you all the benefits of a traditional office phone system without its expensive hardware costs.

Apart from the initial setup costs for compatible handsets, modems, routers, and switches, there’s no need to allocate additional capital for your hosted phone system.

Oh, it gets better. Hosted phone systems include traditional PBX and VoIP phone systems. If you already have an IP PBX, SIP trunking transitions your existing PBX setup into an internet-powered telephone network.

Related: How Does VoIP Work? The Beginner’s Guide To VoIP Phone Systems

Change how you call with hosted phone system.

Get your business phone, messages, video meetings, contact management and notes–integrated in ONE powerful app.

How Does a Hosted VoIP Solution Work?

You’re able to take calls through a hosted phone system with a cloud PBX. This online server manages incoming and outgoing calls with a SIP trunk using a VoIP connection.

How it works:

  1. Your business finds a hosted phone provider that offers a cloud PBX. You’re then connected to their off-site data centers.
  2. You receive an incoming call that goes to your hosted PBX system.
  3. The hosted PBX system converts that call data into digital packets, which can be transmitted via the internet. This is the VoIP part of your hosted phone system.
  4. The PBX routes the incoming call to your office’s desk phone.
  5. Your desk phone rings, and you pick up. The digital packets are converted back into voice messages, and a connection is established. You can talk to your caller with the hosted PBX as your middleman.

With a complete cloud phone system, any device that has an internet connection can make and receive phone calls. Your mobile phone, laptop, desktop, and landline double as your business phone.
Related Post: PBX vs. VoIP: 26 Top Differences to Know Before You Buy

6 reasons to use a hosted phone system - easy installation, cost savings, unified communications, flexibility, scalability, security

6 Advantages of a Hosted Phone System

Here are some key benefits of having a cloud-based phone system that a traditional setup can’t offer:

1. Easy installation

The setup process of a traditional phone system can be long, complex, and expensive. But a hosted phone system doesn’t have any of those problems.
Setting up a cloud-based system happens online means you don’t need anyone to come to your office to get started. That makes it cheaper, too — which is great for small businesses or those with remote teams.

2. Cost savings

Hosted phone systems are cheaper than their traditional alternatives for two reasons. The first: you don’t need to buy a new haul of equipment. With a cloud phone system, you can use the equipment you’ve already got. That includes:

  • Softphones
  • Desk phones
  • Mobile devices and cell phones (including iOS or Android smartphones)
  • VoIP handsets

A cloud-based business phone system offers cost savings when it comes to maintenance, too. You don’t need to call an engineer to come to the office and fix the problem. Your IT staff can fix the most common VoIP problems without contacting your service provider.

3. It’s a unified communications platform

Unified communication platforms let you communicate both internally and externally with a single tool.
With one, various teams — such as sales or customer support—can base their entire strategies around their hosted VoIP solution. The right provider offers several features alongside the ability to make calls. You can instant message team members, host video conferences, and call your customers through the same hosted phone system.

4. Flexibility for remote teams

Do you have a remote team? Whether you’re on an overseas business trip or working from home, you can accept calls with your hosted phone system. You don’t need to be in the office to pick up your wired desk phone.
That’s because most hosted phone system providers offer software for their users. Your remote team can download their business phone software onto their devices. The PBX provider just makes the connection and diverts incoming or outgoing calls to your device. Your callers won’t notice any difference — especially when your provider offers masked caller IDs.

5. Better scalability

It’s important to have a phone system that grows as your business does. Having a call-out from your traditional phone system whenever you add a new team member isn’t just frustrating. It’s expensive, too.
That’s why one of the biggest advantages of having a hosted phone system is scalability. Adding a new team member? Just sign into your provider’s cloud platform and get them in.

6. It’s more secure

It’s no surprise why businesses are concerned about their phone system’s security; the average data breach cost is $3.92 million.

Social engineering is one of the most common types of data breaches. It happens when hackers imitate your phone provider and ask them to hand over information. They can use that data to take over your system.
However, hosted phone systems have an extra layer of protection against social engineering. The majority of reputable VoIP providers have strong identity management tools. You’ll never be tricked into handing over information from a hacker.
And there’s strong encryption to ensure hackers can never eavesdrop on business calls.

The disadvantages of a hosted phone system

We know that a hosted phone system has many advantages. But when it comes to the downsides, the truth is: there aren’t many.
You’ll need to consider whether you’ve got a strong enough internet connection for VoIP calls. That’s relatively easy if you’re in an office.
Yet, if you’ve got a remote team, you need to ensure each team member has access to a strong internet connection to make and receive phone calls.

Business VoIP calls need at least 100 kbps of upload and download bandwidth per line. Plus, you need at least a megabyte of available, dedicated bandwidth for ten high-quality simultaneous VoIP calls.
Major carriers offer gigabit speeds (1000 Mbps) for business subscribers. For a small business, a single DSL or fiber connection will be plenty sufficient.

Graph showing bandwidth growth
Nielsen’s Law of Bandwidth Speed Growth – 50% Growth Every Year since 1983. (Nielsen Norman Group)

The biggest disadvantage of hosted VoIP is that it doesn’t have the always-on nature of traditional phones. Hosted phone systems require power to both the phones and the network infrastructure to provide internet access.
That’s why traditional PBX phone systems are generally deemed more reliable: because they don’t rely on two external power sources.

top hosted phone system features you need include: voicemail to email transcription, video conferencing, security and scalability, call recording, real-time analytics, auto attendants, top call quality

7 Hosted Phone System Features Your Team Needs

There are tons of hosted phone system providers to choose from. Not all of them offer the features your business needs.
Here are several advanced features to look for when you’re choosing a VoIP service provider:

1) Voicemail to email transcription

It’ll come as no surprise to hear that voicemail is a key feature your phone system should have. Without it, you risk people never calling back after you miss their call — and potentially losing a customer.
However, finding time to get through those voicemails can be tricky. With this feature, you can have your voicemail messages transcribed and sent directly to your inbox. You don’t need to listen to the message to respond. Just listen to the voicemail transcription and have a permanent log of what the incoming call was about.

2) Video conferencing features 

Workplaces are embracing remote work now more than ever. This means companies seek out hosted phone system providers that offer video conferencing as part of their package.
Your virtual PBX can double as a conferencing tool for your team. No more add-ons for video conferencing like Google Meet, Skype, or Zoom! Just make sure to double-check this feature is included in your chosen package.

3) Security and reliability 

The reliability of hosted phone systems is a cause for concern for many businesses new to cloud technology. But fear not: VoIP connections are just as (if not more) secure than traditional wired setups.
The key is to pick a secure VoIP provider, such as Nextiva. Our network has 99.999% uptime, and connections are made through carrier-grade data centers. In other words: it’s almost impossible for someone to hack the connection and eavesdrop on your phone calls.
Related Post: Is VoIP Secure? An In-Depth Look at VoIP Security & Encryption

4) Call recording

Call recording can help you monitor customer interactions, whether for one-on-one progress reviews or training. For example, you might see that one sales rep has a lower close rate than others.
Use their call recordings to spot why that might be happening. You might find they’re failing to explain one of your brand messages, contributing to their poor close rate.

5) Real-time call analytics

Ask most businesses how effective their teams are, and they’ll struggle to find out. Traditional phone systems just match incoming calls to a desk phone — that’s it. No extra statistics are available.
However, some hosted phone systems offer real-time call analytics. This means you can report on how effective your teams are with actual data, such as:

  • Inbound calls
  • Total calls
  • Answered calls
  • Missed calls
  • Toll-free calls
  • Internal/external calls
  • Talk time
  • International calls
  • Voicemail calls
  • Calls in queue

6) Auto attendants

You don’t need a receptionist to screen and divert incoming calls if your hosted phone provider offers auto attendants. This automated message asks what a caller needs help with, and passes them to the most relevant person.
Also known as an Interactive Voice Response (IVR), this call routing system saves time for everyone. You can set up rules for the system online. So, if someone calls your business phone number and presses #2 for a customer support agent, you’ve already got rules for which agent’s line will ring.
(If you’ve got a call center, you can even opt for a group of agents’ lines to ring. The hosted phone system sends them to the next available agent.)

7) Superb call quality 

A common concern for businesses switching to a VoIP-based phone system is the call quality. They assume that the quality will suffer because the connections aren’t wired (and internet connections can be unstable).
That isn’t true. In fact, hosted VoIP calls are much clearer than traditional phone lines. You’ll need a decent internet connection that’s at least 100 Kbps, but most ISPs provide at least a hundred times that (10 Mb). That means you’re likely already set up to make and receive high-quality calls through a virtual phone system, even if you’re making long-distance calls.

Ready to switch to a hosted phone system? 

There’s no doubt that a hosted phone system is the way forward. Long gone are the days of copper wires creating mazes around your office and tired technology that needs replacing every few months.
But remember to check that your new phone service provider offers the advanced features you need. That way, your entire business won’t need to deal with outdated, costly phone systems that take over the entire office.
Pricing for our cloud phone system (which includes all of those features) starts from just $18.95 per user per month. You’d be crazy to miss out. Book a demo today.

Julie Bai


Julie Bai

Julie Bai was a product manager at Nextiva, UCaaS evangelist, no-bull communicator, and translator for people, dog lover, and mother to an adorably active boy.

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