A phone call being received from Dialpad's mobile app

Hosted VoIP

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More and more businesses are making the switch from analog phones to hosted VoIP for their business communications. In this guide, we'll walk you through how this telephony technology works and how businesses can decide if it's the right communications solution for you.

What is hosted VoIP for businesses and how does it work?

Voice over Internet Protocol (aka, voice over IP) is a type of telephony technology where voice signals are transmitted over the Internet instead of through traditional copper wires.

Hosted VoIP solutions are administered by vendors (it's hosted by them) who maintain all the servers and hardware in their own data centers. All you need is a reliable Internet connection to make phone calls, usually through your VoIP solution's desktop or mobile app on your computer or cell phone.

What about a hosted PBX system? How does that work?

A virtual PBX or hosted PBX (Private Branch Exchange) is a slightly more evolved business phone system than traditional PBX systems.

Even though the technology is located off-site (meaning you don't need server closets or office space for all the hardware), hosted PBX doesn’t give you the same freedom and advantages as a true cloud phone system that can make calls entirely over the Internet. With hosted PBX systems, all calls, signalling, and features are still handled through an IP-PBX server—it's just hosted at your provider’s location.

Many office workers are already familiar with on-premises PBX (aka, traditional PBX) phone systems which require on-premises hardware.

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Hosted VoIP solutions vs. on-premises VoIP (vs UCaaS)

VoIP systems tend to come in two categories: hosted VoIP solutions and on premises alternatives.

On-premises VoIP

On-premise systems are hardwired physical telephony setups that have to be located in your business premises (usually in a server room). You'll need skilled IT staff to set up, configure, administer to, and maintain this system.

Hosted VoIP

A hosted VoIP system is different in that it doesn't require any physical hardware. Everything is handled by your hosted VoIP service provider, who'll administer the system from a remote location and be responsible for all service updates and maintenance. This is typically a much more small-business-friendly option.

Long story short: Hosted VoIP solutions generally cost much less than traditional phones using PSTN (Public Switched Telephone Network) landlines, and are also much more flexible and scalable.


And just to keep things interesting, if your business is considering a hosted VoIP solution, you may want to check out a UCaaS or Unified Communications as a Service solution. If hosted VoIP is the next evolution of on-premises PBX phone systems, then you can think of UCaaS as an even more modern alternative.

Like VoIP phone systems, UCaaS platforms let you make phone calls over the Internet—but unlike VoIP systems, UCaaS platforms let you do lots of other things too, like have video meetings and send instant or SMS/MMS messages from the same app. If it helps, you can think of UCaaS solutions as super-robust communications platforms that have built-in enterprise VoIP phone systems along with tons of other features.

👉 Did you know:

After going through a period of hyper growth, investment startup Betterment wanted to build a more connected company. They chose a collaboration platform with hosted VoIP features that let them answer phone calls, have video meetings, and send SMS/MMS messages from the same app—and even saved over $1,000 a month with a unified communications platform instead of a bunch of disparate tools.

The most common reasons why companies switch to hosted VoIP phone systems and UCaaS solutions

Always on: It makes sure your business stays up and running

With hosted VoIP for business, your vendor is responsible for delivering consistent service. When things go wrong they’ll have backup so that your systems don’t experience excessive downtime.

Less equipment: It eliminates the need for expensive on-site equipment and installation

One of the biggest benefits of business hosted VoIP solutions is that it doesn't involve a ton of expensive and time-consuming equipment installation. Because everything is hosted off-site, there’s no real initial capital investment needed to start using VoIP telephony. Instead, you’ll just pay a monthly or annual fee to your service provider and start using it on your computer and/or cell phone.

Low maintenance: Your VoIP provider handles all of it

And not only is there zero physical equipment (unless you want to have desk phones), you’ll also get to hand over all of your maintenance responsibilities to your VoIP vendor! Of course, the important thing here is to make sure your provider has excellent customer support.

Growth: VoIP is built to scale with your business

Another advantage of VoIP solutions: they're much more scalable than on-premises alternatives. That means if you want to add-on more phone numbers, or add lots of new users because you're scaling up (or even scaling down because of seasonality), you can do that easily. With Dialpad, you can do that in just a few minutes, right in your online dashboard:

Adding and managing phone numbers from Dialpad's online dashboard.

Essential features to look for in a business hosted VoIP solution or UCaaS platform

There's a huge range of VoIP services out there—here's a rough shopping list of the features that most businesses would need:

Call queues / auto attendant / call routing

Look for a VoIP solution that has well-designed call queue and call routing features. This is incredibly useful—especially when you’re dealing with a lot of incoming calls on a daily basis.

Specifically, you'll want something that lets you set up your auto attendant and call queues easily on your own (without contacting a third party support team). This way, your incoming calls can essentially distribute themselves to the right person and reduce the workload for your staff. (This is especially useful for contact center teams.)

With Dialpad, you can even set up in-queue callbacks so that callers can choose to get a call back later instead of waiting on hold:

Enabling in-queue callbacks from Dialpad's online dashboard

Built-in call analytics

If your business receives lots of phone calls, then another must-have feature for any VoIP system is call analytics. You’ll want to be able to access real-time metrics that can help you make more informed business decisions, like missed and abandoned calls:

Dialpad's built-in contact center analytics dashboard

For contact center teams, Dialpad's analytics can go one step further with contact center analytics, including metrics like call volume patterns and average speed to answer. Can't get that with a desk phone.

Dialpad's built-in heat map analytics feature showing average speed to answer.

Video and audio conferencing

With so many people now working from remote locations, audio and video conferencing features have become a mainstay for many offices. Make sure that your VoIP solution provides both conference calls and video conferencing features across desktop and mobile devices. Again, this is an example of a feature that you won't necessarily get with a hosted VoIP solution—but that comes standard with UCaaS.

Voicemail transcription

Beyond letting you customize your voicemail greeting right in your online dashboard, Dialpad also has a "visual voicemail" feature, which essentially transcribes your voicemail messages in real time. Great for checking messages when you’re unable to pick up the phone (and for archiving for future reference).

We mentioned that video conferencing is one of those features that typically comes built-in with UCaaS solutions, but voicemail transcription is not! Make sure to check the fine print if this is something you're interested in.

Screenshot of Dialpad Ai transcribing a voicemail message in real time

Long-distance phone numbers

If you have offices or customers around the world, then you need international calling. (Although in most cases, having a global phone number is good to have if you have ambitious growth plans.) Calling overseas on a landline can be costly, and one of the other big advantages of VoIP is that it's much more affordable.

With Dialpad, for example, you can get international business phone numbers for almost every country in the world in a few clicks. Dialpad-to-Dialpad communications are always free—check out the international rates here.

👉 Fun fact:
Dialpad also comes with toll-free phone number support!

A softphone app

Again, this doesn't come with hosted VoIP solutions, generally, so if you want to be able to make phone calls and send messages from your computer and cell phone, then you'll want to consider a UCaaS solution like Dialpad. The app works across computers and mobile phones (PC, Mac, Android, iPhone, Microsoft, iOS, you name it):

A phone call happening on Dialpad's desktop and mobile app
🔎 Did you know:

TED (yes, that TED) was looking for a modern telephony system to replace their previous on-site PBX telecom provider. Now, they got rid of desk phones, and their employees can work from anywhere using Dialpad's softphone app.

Call recording

For most businesses, call recordings are essential, not only as a detailed record of customer interactions, but also to help train different teams and gather insights. Most business VoIP providers charge for call recording as an add-on, so again, check the fine print if you want to be able to record customer calls for training or compliance. Fun fact: Dialpad offers call recording and cloud storage at no extra charge.

Call forwarding

Last but not least, call forwarding is essential for most businesses. With Dialpad, you can forward calls to five different phone numbers—forward to your mobile phone, a colleague's phone line, another landline, whatever you prefer.

Both UCaaS and hosted VoIP solutions should come with this basic feature, and the main difference to check here is how easy it is to make changes to your call forwarding numbers. With Dialpad, for example, you can add and change numbers right in—you guessed it—your online dashboard:

Adding a call forwarding number from Dialpad’s online dashboard.

Before you upgrade to a hosted VoIP solution...

If your business is thinking about switching to a hosted VoIP service, but may need other communication channels too, like messaging and video conferencing, why not check out Dialpad's AI-powered collaboration platform?

Try Dialpad for free

With Dialpad, you can make phone calls, send SMS/MMS messages, have video meetings, and more—no hardware needed, right from your computer or mobile phone. Book a demo to see how it works, or take a self-guided interactive tour of the app first!