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Hosted Phone System: Features, Advantages, and Top Providers 

hosted phone system

Most modern businesses use cloud systems for customer relationship management and internal communications. However, only a few business owners are aware of hosted phone systems, how they work, and how they can benefit operations.

If you’re graduating from a traditional telephone system and interested in incorporating hosted solutions, this guide will tell you what you need to know.

What is a Hosted Phone System?

Hosted phone systems are cloud-based communications programs that connect through the Internet and are hosted by a third-party vendor. They don’t require physical hardware. 

Your business’ third-party vendor handles your system’s servers in data centers. All hosted phone systems use VoIP, enabling teams to access features remotely.

How a Hosted Phone System Works

A hosted phone system operates in the cloud and utilizes internet connectivity to manage and handle phone calls. It is powered by a cloud-based infrastructure, where the service provider manages all the necessary hardware, software, and data in secure data centers.

Team members can use any Internet-enabled device to make calls using a hosted phone system. When you receive an incoming call, the hosted phone system converts the call data into digital packets, routing the call to your business phone and translating these packets back into voice data. 

Advantages of Hosted Phone Systems

Hosted phone systems offer numerous advantages, making them a popular choice for businesses of all sizes. Here are some of the key benefits of using a hosted phone system:

  • Cost savings: Hosted phone systems eliminate the need for expensive on-premises hardware and maintenance. Businesses can save on upfront capital costs and reduce ongoing expenses associated with traditional phone systems.
  • Easy setup and maintenance: Setting up a hosted phone system is quick and straightforward. The service provider manages the infrastructure, upgrades, and maintenance, reducing the burden on the business’s IT staff.
  • Scalability: Hosted phone systems are highly scalable, allowing businesses to easily add or remove phone lines and extensions as their needs change. This flexibility especially benefits growing companies or those with fluctuating communication requirements.
  • Geographic flexibility: Because your business can choose virtual phone numbers from different regions, it can establish a virtual presence in multiple locations, enhancing reach and support.
  • Mobility and remote work: With a hosted phone system, employees can make and receive calls from anywhere with an internet connection, which is ideal for remote businesses or distributed workforces,
  • Feature-rich functionality: Hosted phone systems typically have many unique features, enhancing communication efficiency and customer service capabilities.
  • Business continuity: Since the system operates in the cloud, it is unaffected by physical disasters or local outages. Even if the business premises face issues, calls automatically reroute to backup numbers or mobile devices, ensuring continuity.
  • Integration with other business tools: Many hosted phone system providers offer integrations with popular business applications such as customer relationship management (CRM) software, help desk tools, and collaboration platforms, streamlining workflows and enhancing productivity.
  • Professional image: Hosted phone systems offer branded features that make businesses appear more professional and established to customers.
  • Call analytics and reporting: Hosted phone systems provide valuable data and analytics, allowing businesses to improve customer service and optimize operations.
  • Security and reliability: Reputable hosted phone system providers invest in robust security measures to protect communication data. They typically have redundancy and backup systems to maintain reliable service.
  • Global reach: Hosted phone systems enable businesses to expand their operations globally through international phone numbers and services.

Hosted Phone System Features

Hosted phone systems have features designed to enhance communication efficiency, improve customer service, and streamline business operations. The specific features offered may vary depending on the service provider and the plan chosen, but here are some standard hosted phone system features:

  • Voicemail: Allows callers to leave recorded messages when recipients are unavailable or don’t answer
  • Call forwarding: Automatically redirects calls to another phone number, ensuring a response
  • Auto-attendant: Directs callers to the appropriate department or extension using voice prompts
  • Interactive Voice Response (IVR): Responds to voice prompts, facilitating self-service options
  • Call recording: Records incoming and outgoing calls, useful for training, quality assurance, and compliance purposes
  • Call routing: Routes calls based on predefined rules, such as time of day, location, or specific criteria, ensuring calls reach the correct destination
  • Conferencing: Hosts conference calls with multiple participants, enabling collaboration and communication among team members and clients
  • Call waiting: Notifies users of incoming calls while on another call, allowing them to switch between calls
  • Call transfer: Allows users to transfer calls to other extensions or colleagues
  • Caller ID: Displays the caller’s phone number or name, providing critical information before answering the call
  • Call analytics and reporting: Provides data and insights on call volume, call duration, response times, and other call metrics to help optimize operations and improve customer service
  • Hold music or messages: Plays music or recorded messages to entertain or inform callers while on hold
  • Voicemail-to-email: Converts voicemail messages into audio files and sends them to the recipient’s email for easy access
  • Mobile app integration: Allows users to access and manage their hosted phone system from mobile devices
  • Virtual numbers: Provides businesses with virtual phone numbers from different regions, allowing them to establish a local presence in multiple locations
  • Do Not Disturb (DND): Temporarily blocks incoming calls or sends them directly to voicemail, useful when users need uninterrupted focus
  • Call Screening: Allows users to see caller information before answering the call, allowing them to accept or reject the call
  • Time-based routing: Routes calls differently based on the time of day or week, ensuring callers receive appropriate responses
  • Fax-to-email: Converts incoming faxes into digital files and sends them to the recipient’s email for easy viewing
  • CRM integration: Integrates with Customer Relationship Management (CRM) software, synchronizing call data, and customer information

Potential Disadvantages of Hosted Phone Systems

Despite their numerous advantages, no hosted phone system is perfect. Below are a few disadvantages to consider before choosing your provider and service:

  • Internet dependency: Hosted phone systems rely on a stable and robust internet connection. Disruptions or slowdowns can lead to call quality issues, dropped calls, or service interruptions.
  • Limited control: The service provider may restrict customization options and control over system configurations.
  • Service dependence: Any issues or downtime with the provider’s services can impact communication and may be beyond the business’s immediate control.
  • Call quality: The call quality in hosted phone systems depends on Internet connection quality, network congestion, and available bandwidth. Downtime can cause call quality to suffer.
  • Compliance concerns: Some businesses may have specific regulatory compliance requirements regarding data security, privacy, and call recording.
  • Integration challenges: Integrating a hosted phone system with legacy systems or applications might take some work. Businesses need to ensure compatibility and seamless integration for their specific use cases.

Hosted Phone System Pros and Cons

Here is a quick, comparative look at the pros and cons of hosted phone systems:

Reduced upfront and maintenance costsRelies on stable Internet connections, quality may become compromised 
Quick hands-off setup and automatic updatesLess control compared to on-premises solutions
Easy to add or remove lines and extensionsReliant on service provider’s availability
Geographically flexiblePotential network congestion and bandwidth limitations
Functional anywhere with an Internet connectionPotential service outages and frequent maintenance
Supports dozens of featuresCompliance concerns and restrictions, depending on your state
Redundancy and backup systems keep communications running even during downtimeIntegrations may be limited
Improves professional appearanceHeavy usage may require upgraded bandwidth
Insights provide data-centric suggestions for improvementDelays in transmissions due to potential latency
Operations are easy to expand without a physical presence in other locationsAdd-ons can become expensive

Top Hosted Phone System Providers

If you’re looking for a hosted phone system provider and need to narrow your choices, this comparison table can provide some perspective.

PROVIDERULTATELRingCentralGoogle VoiceAXvoiceOnsip
Virtual Phone NumberYesYesYesYes at $3.99/moYes
Support Hours24/724/7N/A8:00 am – 7:00 pm8:00 am – 7:00 pm
International CallingYesYes, with chargesYes, with chargesYesYes, with charges
Free TrialYes, varied15 daysN/ANo30 days
Cheapest Rates$15.95/mo$19/moFree$8.25/mo$8.95/mo

Best Practices When Moving to Hosted Phone Systems

Moving to a hosted phone system can be a significant transition for any business. To ensure a smooth and successful migration, consider these best practices:

  1. Assess your communication needs: Assess your organization’s communication requirements. Identify essential features, call volume, and specific department needs to select the most suitable hosted phone system.
  2. Choose a reliable provider: Research and select a reputable hosted phone system provider with a track record of reliable service, good customer support, and positive reviews from other businesses in your industry.
  3. Conduct a network readiness assessment: Ensure your internet connection meets the bandwidth requirements for a hosted phone system. Assess network stability and reliability to minimize potential call quality issues.
  4. Plan for business continuity: Develop a plan to ensure business continuity during the migration. Consider potential downtime and have contingency measures in place to handle unforeseen issues.
  5. Train employees: Properly train your employees on how to use the new hosted phone system. Provide resources and support to ensure they understand the features and can use the system effectively.
  6. Test the system: Conduct thorough testing of the hosted phone system to identify and address potential issues. Test call quality, feature functionality, and integration with other business tools.
  7. Implement a phased approach: Consider implementing the hosted phone system in phases to minimize disruption and allow easier troubleshooting if issues arise.
  8. Integrate with existing systems: Ensure the hosted phone system integrates seamlessly with your business applications, such as CRM software, help desk tools, or collaboration platforms.
  9. Establish a support plan: Establish a support plan with your provider to address any questions or technical issues arising during and after the migration.
  10. Discuss data backup and security measures: Protect your communication data using appropriate encryption.
  11. Monitor and optimize: Regularly monitor performance and collect feedback from users to identify areas for improvement and optimization.
  12. Update documentation: Keep documentation and user guides up-to-date to assist employees in using the hosted phone system effectively.
  13. Consider customer experience: Consider how the system impacts your customers’ experience. Ensure that call routing and auto-attendants are well-configured for a smooth customer journey.
  14. Have a rollback plan: If the migration encounters significant issues that you can’t resolve quickly, have a rollback plan. This plan will allow you to revert to the previous system temporarily while you address the problems.

Frequently Asked Questions

What is a hosted PBX system?

A hosted PBX system is a virtual, cloud-hosted system that doesn’t require hardware. A service provider manages its entire infrastructure on a business’s behalf.

How much does a hosted phone system cost?

A hosted phone system costs between $15 and $40 per user per month, depending on the number of users, the unique service provider, the features required, and potential add-ons.

What equipment is needed for a hosted phone system?

Hosted phone systems require a modem and router to connect to your Internet. Users can access hosted phone systems through computers and mobile devices.

What’s the difference between hosted PBX and VoIP?

Hosted PBX refers to the cloud-based system, whereas VoIP is the call method. Thus, a hosted PBX system uses VoIP to function.


If your business needs to cut telecom costs and is looking for an intuitive, powerful setup, a hosted phone system may be for you. These Internet-reliant systems allow for seamless communications and don’t cost nearly as much as traditional setups.

By making ULTATEL your chosen service provider, you can rest assured you’ll get the best possible uptime, support, and prices. Our solutions are secure and reliable solutions take your business places it’s never been.

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