What Is Hosted VoIP? A Complete Guide for Your Business (2025)

Stuck with an outdated phone system and painful phone bills? Hosted VoIP can be your solution. It’s a modern VoIP calling system that’s feature-rich, cost-effective, and scales with your business size.

Hosted Voice over Internet Protocol (VoIP) uses your existing internet connection—which means you can ditch the bulky hardware—for crystal-clear calls, seamless collaboration, and a professional business phone number. 

This article will explain everything you need to know about hosted telephony, how a hosted VoIP phone system works, and how to use them to efficiently connect with your clients, partners, and team. Let’s start with some basics first.

What Is Hosted VoIP?

Hosted VoIP is a cloud-based telephony solution that uses the internet to facilitate voice, video, and data communications, rather than relying on traditional phone networks. The service provider hosts the necessary VoIP infrastructure and equipment offsite in their data centers, eliminating the need for businesses to invest in and maintain costly on-premises hardware.

Users access communication features through the provider’s hosted platform, bypassing the complexity of managing in-house telephony systems. A hosted VoIP solution typically includes a suite of advanced features, such as call forwarding, voicemail transcription, virtual receptionist services, and video conferencing capabilities.

A hosted VoIP phone system offers significant advantages in mobility and remote access. By leveraging the internet, users can make and receive calls from virtually anywhere using various devices like desktop phones, softphones (software-based phones), and mobile applications.

This flexibility is great for remote work, traveling employees, and geographically dispersed businesses to maintain seamless communication and collaboration.

Hosted VoIP phone service offers a cost-effective, scalable, and feature-rich communication solution. Businesses benefit from transferring infrastructure and maintenance responsibilities to the service provider, so they can focus on core operations while enjoying advanced telephony functionalities.

How does hosted VoIP work?

Traditional phone systems rely on a network of physical wires called the Public Switched Telephone Network (PSTN). When you make a call using an analog phone, your voice travels as electrical signals through these wires to the recipient’s phone.

Hosted VoIP, on the other hand, takes a modern approach. VoIP technology converts your voice into digital data packets, similar to tiny pieces of information. These packets travel over your internet connection instead of phone lines.

Here’s how a hosted VoIP call works:

1. Your voice goes digital: When you pick up your phone (or use a VoIP app), your voice is converted into digital data.
2. Packet travel: The data packets containing your voice are then sent over your internet connection to the hosted VoIP service provider’s servers.
3. Calling the destination: The VoIP provider acts like a smart switchboard. It figures out where to send your call based on the number you’re dialing. This could be another VoIP user, a traditional landline, or even a mobile phone.
4. Conversion back to voice: Once the destination is identified, the data packets are delivered and converted back into an analog signal (similar to your voice) for the recipient to hear.

Even if you already have a phone system, you can still use VoIP features. Session Initiation Protocol (SIP) Trunking connects your existing phone system to a VoIP provider, enabling you to enjoy some of the benefits of VoIP without replacing your entire setup.

Benefits of Hosted VoIP

Hosted VoIP solutions offer a cost-effective, scalable, and feature-rich solution for businesses looking to improve communication and collaboration. With its ease of use, advanced features, and mobility benefits, hosted VoIP better enhances your business operations.

• Slash Communication Costs: Hosted VoIP eliminates the need for expensive PBX hardware and ongoing maintenance. You can also enjoy significant savings on domestic, long-distance, and international calls compared to traditional phone lines. Plans often include features like voicemail, call routing, and online faxing, reducing the need for additional services.
• Boost Productivity and Collaboration: Hosted VoIP integrates with your existing tools like CRM and email, streamlining workflows and enhancing communication.
• Enhance Scalability and Flexibility: Easily add or remove users as your business grows. Unlike traditional systems, hosted VoIP can adapt to your changing needs without costly upgrades. Hosted VoIP systems work seamlessly with softphones on computers and mobile devices, allowing employees to work from anywhere with an internet connection.
• Get Unified Communications: Consolidate your business communications into a single platform. Integrate voice calls, video conferencing, instant messaging, and other tools for improved collaboration and streamlined workflows.
• Enjoy Better Security: Leading hosted VoIP providers prioritize security with robust encryption protocols and data protection measures.
• Get Superior Reliability: Enjoy industry-leading uptime and peace of mind knowing your communication system is always available.
• Improve Customer Service: Offer enhanced customer support with features like call routing, call queues, and interactive voice response (IVR) systems. Hosted VoIP solutions often integrate with contact center and call center tools, allowing businesses to provide 24/7 customer support without significant infrastructure investment.

Key Features of Hosted VoIP 

Hosted VoIP goes beyond simple phone calls, transforming your communication into a feature-rich hub. Here’s a glimpse of the powerful tools you get with a hosted VoIP service:

• Auto Attendant: A virtual receptionist greets callers, routes them to the appropriate extension, or captures messages efficiently.
• Conference Calls: Foster collaboration with seamless conference call capabilities. Host multi-participant calls with ease, improving communication and project flow.
• Mobile App (Softphone App): Make and receive calls, access voicemail, and manage features directly from your mobile device with a user-friendly softphone app.
• CRM Integration: Optimize workflows by integrating your hosted VoIP system with your Customer Relationship Management (CRM) software. Log calls, access caller information, and improve the customer experience effortlessly.
• Advanced Call Analytics: Gain valuable insights into your communication patterns. Track call volume, duration, and trends to optimize your resources and identify areas for improvement.

• HD Call Quality: Experience crystal-clear conversations with high-definition audio quality. Eliminate background noise and ensure every word is communicated perfectly.
• Toll-Free Phone Numbers: Project a professional image and increase accessibility with toll-free numbers for your business.
• Local Phone Numbers: Establish a local presence with phone numbers in your target markets, fostering trust and brand recognition.
• Voicemail-to-email transcription: Stay on top of your messages with voicemail conveniently delivered to your inbox as email attachments.
• Unlimited Scalability: Easily adapt your phone system as your business grows. Add or remove lines in minutes to accommodate your evolving needs.

This is just a starting point. VoIP providers offer a vast array of features to cater to your specific requirements.

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What Is the Difference Between Hosted and Cloud VoIP?

These terms are often used interchangeably. There’s a very subtle difference.

Hosted VoIP specifically refers to the service model where the provider manages the hardware and software for your phone system in the cloud.

Cloud VoIP is a broader term encompassing any voice service delivered over the internet, which could include features beyond traditional phone calls. Hosted VoIP is a type of cloud VoIP, but not all cloud VoIP solutions are hosted.

Hosted PBX vs. VoIP

A PBX, or Private Branch Exchange, is a traditional business phone system that offers features like call queuing, extension dialing, and voicemail. However, these features rely on complex hardware housed on-site, requiring IT expertise for management and maintenance.

Hosted PBX is an improvement over traditional PBX. It’s a type of hosted VoIP service specifically designed to replicate the functionality of a traditional PBX system in a cloud environment. You can still use your IP phone or deskphone with VoIP functionality, no on premise VoIP environment needed.

Hosted PBX systems provide all the functionality of a traditional PBX without the hassle. A cloud PBX service, like Hosted VoIP, uses the internet to deliver these features.

The VoIP provider manages the hardware in the cloud, eliminating the need for on-site equipment and IT expertise. Your phones connect directly to the provider’s servers, offering features like call routing between offices and smooth integration with other cloud-based applications.

If your business relies on features like call extensions and voicemail, a Hosted PBX might be the ideal solution.

However, if you prioritize cost-effectiveness, scalability, and mobility, Hosted VoIP offers a more flexible option.

Beyond Hosted VoIP: UCaaS for Unified Communication

If you want a truly unified communication experience, consider UCaaS (Unified Communications as a Service). UCaaS builds upon the foundation of Hosted VoIP, seamlessly integrating features like:

• Video conferencing: Collaborate with colleagues and clients in real-time, regardless of location, with high-definition video conferencing capabilities.
• Business SMS: Enhance communication with team members and customers through secure and convenient business text messaging.
• File sharing: Effortlessly share documents, presentations, and other files within your team for streamlined collaboration.
• Instant messaging: Foster real-time communication and team discussions with instant messaging functionalities.

UCaaS offers a comprehensive communication solution that empowers businesses to connect, collaborate, and achieve success in today’s dynamic world.

Is Hosted VoIP Right for You?

Hosted VoIP can be an excellent choice for small businesses and startups thanks to its cost savings, scalability, mobility features, and robust calling capabilities included at no extra cost.

Not having to purchase and maintain on-premises hardware provides major financial benefits. The ability to easily add or remove users as needed supports business growth. And features like auto-attendants, video conferencing, and find-me/follow-me calling help projects a polished, professional image.

However, hosted VoIP relies heavily on stable, high-speed internet connection and bandwidth, which could be problematic in certain areas with poor connectivity. Businesses dealing with sensitive data or stringent compliance requirements will also need to thoroughly vet providers’ security practices and regulatory adherence.

Partnering with an enterprise-grade hosted VoIP provider helps mitigate these issues.

Reputable hosted VoIP providers take care of all security measures and comply with key regulations like HIPAA, PCI-DSS, and GDPR to provide a safe and secure communications infrastructure. They also offer robust service level agreements (SLAs) to ensure high uptime and quality of service.

Assess your hosted VoIP service, security needs, and calling requirements to determine if the benefits outweigh the potential drawbacks for their specific situation.

Choosing the Right VoIP Provider

With numerous providers offering hosted VoIP services, choosing the right one is crucial. Where do you begin?

• Pricing plans: Compare features and costs to find a plan that aligns with your communication needs and budget.
• Reliability: Uptime is key. Look for a provider with a proven track record of reliable network performance.
• Customer support: Ensure the provider offers prompt and efficient customer support to address any issues that may arise.
• Security: Choose a provider with robust security measures in place to protect your communication and sensitive information.

There’s no one best VoIP provider; although many competitive options like Nextiva do fulfill the requirements of an ideal VoIP provider.

Why Choose Nextiva for Your VoIP Provider

Need a new VoIP phone system or want to integrate your existing PBX with VoIP? Nextiva has you covered.

We offer a seamless migration process, exceptional customer support recognized by Gartner and GetVoIP reviews, and a reliable, secure network built for business continuity.

A 99.999% uptime is enterprise-level system availability. Nextiva also offers HIPAA-compliant hosted VoIP solutions for enhanced security.

Nextiva conducts regular security testing to scale its network. We pair that with award-winning customer service so businesses can focus on what matters: customers.

Whether setting up the new VoIP system, transferring existing data, or training your team, Nextiva offers a smooth transition to hosted VoIP so you can use it without interruptions.

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