Most business owners are familiar with the cloud — whether it’s for storing files, running software, or making sure your cat videos are backed up forever.. But did you know your business phone system can live in the cloud, too?
Cloud-based phone systems are highly sought after by small business owners everywhere, yet many still aren’t sure exactly what a hosted phone system is, how to set up a system, and how it can help scale business communications. In this guide, we’ll cover all that and more.
What is a hosted phone system?
A hosted cloud phone system is any business phone system that runs over the internet rather than through traditional public telephone lines.
One example is a Voice over Internet Protocol (VoIP) business phone system, which routes calls online instead of through a landline. That allows you to have the best of both worlds: all the features of traditional PBX systems combined with the convenience of VoIP.
With a virtual VoIP-hosted phone system, your business phones connect to an external VoIP data center hosted in the cloud. That means your team can make and receive phone calls from any device with an internet connection — without the hassle of maintaining on-site servers or hardware.
Cloud hosted PBX vs. SIP Trunking
When exploring hosted phone systems, you often hear two key terms: Cloud PBX and SIP Trunking. While both leverage VoIP technology, they differ in how they integrate with your business.
A Cloud PBX (Private Branch Exchange) is a fully internet-based phone system managed by a third-party provider. It replaces traditional PBX hardware, eliminating the need for physical servers or complex wiring. Your provider handles call routing, voicemail, and system maintenance, making it easy to set up and scale. If you have a Cloud PBX system routed through desk phones, those phones stay in the office to connect to the service.
Alternatively, SIP Trunking allows businesses to keep their existing PBX hardware while using the internet for calls instead of traditional phone lines. It’s a hybrid approach — ideal for companies that want VoIP benefits without replacing their entire phone system.
Understanding these options helps you choose the right setup for your business needs.
How does a hosted phone system work?
With most modern hosted phone systems, your office phone system will exist in the virtual cloud, which you connect to for a monthly fee. When you receive an incoming call, your hosted phone system works something like this:
- The incoming call goes to your hosted system, which converts the call data into digital packets. Those packets can be easily sent and received with a stable internet connection.
- The hosted system routes the call to your business phone, which could be a VoIP-enabled desk phone or any device with an internet connection.
- You pick up the phone, the digital packets are translated back into voice data, and the connection with the caller is in place. You can now begin speaking.
This all happens in an instant and functions as quickly and smoothly as a traditional phone call.
With an entirely virtual system, you can use any internet-enabled device, such as a computer or cell phone, to access your business phone number (or numbers). This allows you to ditch hardware maintenance and setup, meaning your IT department (or anyone tasked with this work) can focus on other priorities. You simply have to download your hosted phone system provider’s business phone app to your device to begin placing and receiving calls.
Your team will have the flexibility of using any internet-enabled device as a business phone, whether they’re in the office, traveling, or working from home.
Benefits and drawbacks of hosted phone systems
There are many factors to think about when your business is considering switching to a hosted phone service.
Benefits
The main benefits include perks not offered by traditional, on-premises PBX systems, such as:
Cost-effective pricing
Hosted VoIP phone systems are far more cost-effective when you factor in the costs of traditional systems’ hardware and installation labor. They also allow you to use the equipment and mobile devices you already own. That includes desk phones, VoIP headsets, and computers or cell phones that can use softphone software.
Enables collaboration
Because VoIP phone services utilize the internet to connect and route calls, they have more modern capabilities compared to traditional phone systems. Some VoIP providers offer advanced collaboration features, such as shared phone numbers for calling and texting.
Your phone system will serve as a communications platform where multiple departments can communicate internally and externally.
Flexibility to work from anywhere
It’s estimated that by 2026, over 40 million Americans will work remotely. Spurred on by pandemic safety concerns and enhanced productivity goals, the US workforce is becoming more distributed by the day.
With a virtual hosted phone system, you don’t need to be in the office to accept business phone calls. Simply adjust your caller ID settings in OpenPhone’s mobile app, and your customers will be none the wiser that you’re speaking from home, a cafe, or the airport.
Easy to set up and maintain
Hosted phone systems aren’t susceptible to the setup problems of traditional phone systems.
You won’t have to worry about tangled wires or complicated equipment. You can set up a cloud-based hosted phone system online with your desktop or smartphone. Your provider will take care of system maintenance and updates so you can use the latest tools automatically.
Scalability
As your business grows, your phone system should scale with it — without adding extra work for your team. A cloud-based hosted phone system makes it easy to add new users, numbers, and upgrade features in just a few clicks.
With OpenPhone, for example, you can instantly assign teammates a new number or share an existing business phone number — just invite them to the app, and they’re ready to go.
Drawbacks
As with any technology, cloud-hosted business phone systems come with potential drawbacks.
Relies on the internet
Having a slow internet connection with limited bandwidth is the biggest barrier to making good use of your cloud-hosted phone system. While VoIP calls generally use small amounts of data, ensure your office or home internet connection can handle your new hosted phone system before diving in.
This can get a bit trickier if you are working with a remote team, but typically, it isn’t hard to verify everyone has adequate access to the internet with a simple VoIP speed test.
Needs an external power source
Another disadvantage to cloud-hosted phone systems is the need for a WiFi router and the network to be connected to power. This reliance on electricity could cause problems during severe weather events, power outages, or times with a shaky network connection. Traditional telephone systems, also known as POTS (Plain Old Telephone System), deliver calls over copper wires that can work without power, depending on your hardware setup.
Potential for hidden fees
Check that your provider offers free calls to the US and Canada and affordable international calling plans like OpenPhone. Otherwise, a hosted phone system could lead to unexpectedly large bills rather than cost savings.
Some providers also require you to sign an annual contract upfront, locking you in for at least a year. OpenPhone gives you the option to pay monthly instead, allowing you the flexibility to explore all your new phone system has to offer without a long-term commitment.
Higher security risks
Since hosted phone systems operate over the internet, they can be vulnerable to cyber attacks. Choose a provider that prioritizes security with features such as data encryption, text message encryption, and compliance with industry standards.
7 key hosted phone system features to look for
When browsing around for the perfect VoIP provider, your business needs should be your top consideration. Think about these must-have hosted phone system advanced features to get the most functionality from your cloud telephony system:
1. Auto-attendants (IVR) with call routing
Auto-attendants — or IVR — are an efficient way of routing incoming calls to save time for your customers and team. With customizable ring order settings, such as simultaneous or sequential ringing, you can ensure calls are directed to the right person quickly. Alternatively, you can set up call forwarding to never miss a call.
2. Call recording, transcriptions, and summaries
Call recording is essential to monitor the quality of service your team provides. For teams actively measuring how well they’re serving customers, call recording with AI-powered transcripts and summaries can help improve customer satisfaction rates. They can also be a helpful record of what’s been said when multiple team members are dealing with a customer.
3. Business app integrations
Your OpenPhone account can be synced with apps like HubSpot CRM and Slack for easier communication. You can also connect with apps like Make and Zapier to automate workflows and save your team time on repetitive tasks.
4. Time-saving messaging capabilities
Not all business is conducted over voice calls, which is why SMS and MMS capabilities are essential in today’s business world. You should also look for features like auto-replies, scheduled messages, and text message templates to help you serve your customers more efficiently.
5. Voicemail features
If customers call after hours, when you’re out of the office, or simply too busy to pick up, reliable voicemail features are a must-have. Even better is if your system supports voicemail transcription features or allows you to set precise business hours.
6. Good call quality
When customers call, they won’t be impressed if they can’t hear the person speaking on the other end of the line. One of the misconceptions of VoIP phone systems is you’ll experience lower call quality. As long as you have a decent internet connection and a reliable service provider, call quality need not be a concern.
7. Call and text analytics
Keep track of how your team is performing with analytics and reporting tools. For example, OpenPhone lets you use real-time metrics to:
- Track call and text volume over time
- Find out the busiest times for your team
- Monitor service level agreements
- Better train your teammates (e.g., sales or customer support teams)
Make the switch to a hosted business phone system with OpenPhone
If you’re looking for a provider with all the above features and more, look no further than OpenPhone’s hosted VoIP business phone system. Ideal for growing businesses, OpenPhone’s user-friendly interface and friendly customer service make it easy to get started and add team members to your hosted phone system.
Sign up for your free trial today to explore all OpenPhone has to offer. You’ll find out how switching to a cloud-based business phone system can streamline your operations while providing your company with increased flexibility. What’s not to love?
FAQs
PBX is a private phone system businesses manage on-site, while a hosted system is cloud-based and maintained by a third-party provider, eliminating the need for on-premises equipment.
VoIP is the technology that enables voice calls over the internet, while a hosted system refers to a VoIP-based phone service managed by an external provider.
Cloud-based phone systems are generally secure, using encryption, firewalls, and authentication protocols, but security depends on the provider and if they follow proper network safeguards.
