What Is a Hosted VoIP System?

Nov 30, 2023

Hosted VoIP solutions are quickly becoming the new norm for business phone systems. Over 60% of companies switched from a traditional phone system to a VoIP service last year,1 resulting in improved employee productivity, lower telecom costs, better team collaboration, and more.

If you’re considering moving your business communications to a hosted VoIP phone system, our guide will provide you with everything you need to know to get started.

What Is Hosted VoIP?

Hosted VoIP is a cloud-based phone system that allows businesses to manage voice calls over the internet. Unlike traditional PBX systems, which require physical hardware installed on-site, hosted VoIP systems are managed and maintained by your VoIP service provider.

Hosted VoIP vs. Traditional PBX

Traditional private branch exchange (PBX) systems require on-premises hardware and dedicated phone lines, which can be expensive to install, maintain, and upgrade. In contrast, hosted VoIP operates in the cloud, eliminating the need for physical infrastructure and offering flexible features like virtual phone numbers, call routing, and more, all managed through an intuitive online interface.

Other key differences between hosted VoIP and traditional PBX solutions include:


Traditional PBX systems can be limited in terms of scalability, so you may need to purchase additional hardware if you need to add more lines or features. With a scalable hosted VoIP service, you can add or remove lines and features on demand.

Remote Access

With a traditional PBX, your business phone system is tied to your office. Hosted VoIP systems allow employees to make and receive phone calls from anywhere with a reliable internet connection – a must, considering 41% of employees currently have a remote or hybrid work schedule.2


Traditional PBX systems often require large up-front hardware and installation costs, as well as ongoing maintenance costs. Hosted VoIP typically operates on a subscription basis, turning large capital expenditures into more manageable operating expenses.


While both types of phone systems have their strengths when it comes to reliability, hosted VoIP offers redundancy in the cloud. This means if one server managed by your provider fails, the system can automatically switch to another, ensuring your business communication remains uninterrupted.

Advanced Features

Hosted VoIP phone systems often come with advanced features like voicemail to email, call forwarding, auto-attendant, and video conferencing that may not be available with a legacy PBX system.

How Does Hosted VoIP Work?

So, how does a hosted VoIP system manage to route phone calls, connect extensions, and offer advanced calling features without a physical presence in your office? Here are the basics of how hosted VoIP systems work:

Hosted VoIP Provider

A VoIP provider is a company that delivers voice services over the internet. With hosted VoIP systems, the service provider handles all the technical aspects of managing your business phone system.

Internet Connectivity

Hosted VoIP relies on internet connectivity to transmit voice data. When a call is initiated, your voice is converted into data packets and transmitted over the internet to the recipient. This data travels securely through the cloud infrastructure to its destination.

IP Phones or Softphones

To interact with the hosted VoIP system, you need endpoints. These can be physical IP desk phones or softphones, which are software applications that connect your computer or mobile phone to your business phone system.

SIP Trunking

Session Initiation Protocol (SIP) trunking is a method VoIP providers use to transmit voice and multimedia communications over the internet. It uses the SIP protocol – rather than traditional analog phone lines – to connect your hosted VoIP system to the public switched telephone network (PSTN).

Web Interfaces

Employees can interact with the hosted VoIP system through a web-based online portal, which allows for easy management of settings and preferences for features like call forwarding and voicemail.

Challenges of Using Traditional PBX Systems

While traditional, on-premises PBX systems were once the standard for businesses, they present several challenges in today’s increasingly remote and hybrid work landscape. Here are some of the challenges businesses face when using traditional PBX systems:

Difficulty Scaling

Traditional PBX systems can be restrictive since the number of phone lines and features is directly tied to the hardware installed. This makes it difficult to scale telephony services up or down without significant expense and disruption.

No Remote Access

Employees can’t access the features of a traditional PBX system outside of the office, making communication and collaboration between on-site and remote workers disjointed and difficult.

High Costs

Legacy PBX systems require a substantial upfront investment in hardware and installation costs – not to mention ongoing maintenance costs for the lifetime of the system. Expanding your business phone system means buying additional proprietary hardware, cards, licenses, and endpoints.

Limited Features

Traditional PBX systems often lack all the features commonly found in hosted VoIP solutions, such as video conferencing, auto-attendants, call routing, and other advanced functionality.


Traditional PBX systems require dedicated personnel or an external service provider for maintenance, which adds another layer of complexity and cost – particularly for small businesses that might not have a dedicated IT team on-site.

Vulnerable to Outages

If a traditional PBX system fails due to a power outage, there’s no backup system to ensure the continuity of your business communications. This lack of redundancy can lead to potentially significant disruptions that impact employee productivity, customer satisfaction, and your bottom line.

What Are the Benefits of Hosted VoIP?

Switching to a hosted VoIP solution offers several advantages that can help improve your business communications and overall operations. Some of the biggest benefits of hosted VoIP include:

Increased Agility

Cloud PBX providers make it easy for businesses to scale their telephony needs up or down. If you need to add a new office or additional users to your phone system, it’s as simple as ordering new lines via your hosted VoIP provider.

Lower Costs

Businesses that switch to a VoIP service can reduce telecom costs by up to 50%.3 Since hosted VoIP systems are delivered using cloud technology, they eliminate the high hardware investments, installation costs, and ongoing maintenance costs associated with a traditional phone system. And because VoIP technology reduces the costs of long-distance calls, international communication can be significantly more affordable.

Remote Work Support

With hosted VoIP services, phone calls can be sent to any device that has an internet connection. Remote workers can use desktop and mobile apps to access phone system features from anywhere.

Improved Resiliency

With hosted VoIP, there is no single point of failure like with on-site hardware. Server redundancy provides maximum uptime, and many cloud-hosted voice providers deliver carrier-grade voice reliability to ensure business continuity.

Enhanced Productivity

Switching to a hosted VoIP service can improve employee productivity by 20%.4 The advanced features offered by cloud-hosted PBX, such as auto-attendants, video conferencing, call recording, automatic call distribution, follow-me capabilities, and more, help teams improve workflows and streamline efficiency.

Easy Administration

Hosted VoIP phone systems enable administrators to configure settings and employees to personalize their preferences through easy-to-use online portals, eliminating the need for specialized on-site technicians.


Hosted VoIP isn’t just a modern solution; it’s also future-proof. As technology evolves, your VoIP provider can seamlessly integrate new features and improvements, keeping your business at the forefront of communication technology.

What Does the Future of Hosted VoIP Look Like?

As more businesses embrace remote and hybrid work models, hosted VoIP solutions will only become more prevalent.

Advances in technologies like AI and machine learning are allowing service providers to offer even more sophisticated calling features that make communication and collaboration more efficient for businesses of all sizes. Additionally, hosted VoIP systems will deliver even better call quality and reliability as internet infrastructure improves and 5G technology becomes more widespread.

The future is bright for hosted VoIP, and businesses that embrace this modern solution now will be better equipped to meet their communication needs in the years to come.

Find the Right Hosted VoIP Phone System With Granite

The shift from traditional PBX systems to hosted VoIP solutions isn’t a trend – it’s a necessity for businesses aiming to stay competitive and resilient in today’s evolving digital landscape. Transitioning to a flexible, feature-rich hosted VoIP phone system can help you future-proof your business communications and keep your remote and hybrid teams connected and productive. However, finding the right hosted VoIP provider is key for ensuring your new phone system meets your organization’s unique needs.

For over 25 years, Granite has helped businesses in Montana and the surrounding states solve their technology problems with end-to-end IT and voice solutions supported by people who truly care. Our all-in-one hosted VoIP services offer all the features and functionality you need to support your remote and in-office teams, backed by enterprise-grade reliability and performance.

Ready to get started with a trusted hosted VoIP provider? Contact the Granite team today.


  1. https://www.vonage.com/resources/articles/when-should-i-choose-voip-over-landline-for-business/
  2. https://www.forbes.com/advisor/business/remote-work-statistics/
  3. https://www.founderjar.com/voip-statistics/
  4. https://fitsmallbusiness.com/voip-stats/

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