What is hosted VoIP? The non-technical guide

Between missed calls, dropped handoffs, and frustrated customers, it’s high time you found a real small business phone system. But maybe you don’t have time to learn complicated telephony setups, or maybe you don’t want to invest in expensive phone hardware. 

So if you’re looking for a simpler phone system that’s easy to set up, simple to use, and can grow alongside your business, you’re on the right track. Because hosted VoIP checks all these boxes and more. 

Hosted VoIP is perfect for service-based businesses that want a business phone service without landlines or IT support. It’s a great fit for field service teams that need to take calls on the go and small operations that want enterprise features without the high costs.

Here’s what you should know about hosted VoIP, how it works, and why it’s the best solution for most service-based businesses.

What is hosted VoIP?

VoIP (Voice over Internet Protocol) is a technology that lets you make calls over WiFi instead of traditional cell towers or landline phone setups. 

Hosted VoIP phone systems don’t require physical infrastructure or on-site hardware like a traditional PBX phone system. Instead, everything is managed through a mobile app or web-based dashboard.

Basically, every time you hop on a Zoom meeting or FaceTime with your spouse, you’re using VoIP. 

Side note: When most people say “hosted VoIP,” they usually refer to hosted phone systems. You might also hear them called “hosted PBX,” “cloud VoIP,” “business VoIP,” “hosted VoIP service,” or sometimes just “VoIP.” 

But they all mean the same: phone systems using voice over IP technology.

How does hosted VoIP work? 

Here’s a quick breakdown of how hosted VoIP works:

1. Sign up for your hosted PBX provider online. You’ll usually pay a monthly fee per user per month, like a Hulu or Max subscription. You can download the app or use the web browser to access your phone system from anywhere.
   
2. Choose your business phone numbers (local, toll-free, and/or vanity). Then you can make and receive calls on your tablet, mobile phone, or phone software (aka softphone) on your desktop or laptop.
   
3. If you want to send texts to US numbers, complete carrier registration. Providers like OpenPhone guide you through the entire process in-app. Once you complete registration, you can make and receive unlimited texts in the US and Canada.

That’s it! Your hosted VoIP provider will take care of all the technical bits, like hosting the system in the cloud and keeping things secure and up-to-date. You don’t need to worry about maintenance, hardware, or setup.

In other words, you can get your business phone up and running in 15 minutes or less (at least with OpenPhone). 😉

On-premises PBX vs hosted VoIP phone systems

You’ve probably come across traditional PBX systems (on-site Private Branch Exchanges) as an alternative to VoIP. You can use both systems to make and receive calls, but they’re considerably different and lead to different outcomes.

For starters, PBX systems are traditional phone systems that connect desk phones to a physical telephone network. You’ll need more phones and cables to add new users to your systems, which means you’re glued to your desk and can’t easily scale as your company grows.

In contrast, VoIP phone systems don’t require hardware — just an internet connection and devices you already own. You also don’t need a server closet or analog phones, which makes call management easier (and cheaper) for small businesses.

Let’s break it down:

💡 Learn more in our guide to VoIP vs traditional PBX.

7 reasons hosted VoIP is the best choice for small businesses

Here’s why hosted VoIP providers are some of the best phone systems for growing businesses:

1. Talk to customers from anywhere: Run a field service team that juggles remote work? When they get an incoming call, they can see if it’s business vs personal without needing to carry around a second cell phone..
   
2. Go beyond just phone calls: The best providers offer features that go far beyond voice calls — including VoIP texting support. You can send texts to customers, share pictures or documents, or set up automated messages with auto-replies or Zapier.
   
3. Consistently spend less: Hosted VoIP doesn’t require hardware to set up, and the best ones charge a flat monthly rate per user. This means you don’t need to worry about traditional PBX costs like per-minute pricing, desk phones, or maintenance bills.
   
4. Get set up in minutes: Signing up for a hosted VoIP phone service can take 15 minutes or less. Traditional PBX systems can require days or weeks to set up. In the meantime, you’ll need an alternative way to stay in touch with customers.
   
5. Add new users effortlessly: The best VoIP apps let you add new users in just a few clicks. You can also scale plans up or down to access new features — or even get them for free if your provider constantly updates their software and adds new features to your tier.
   
6. Make it your own: Unlike traditional PBX systems, a hosted PBX adapts to your workflow. You can route calls to specific team members or departments, set business hours for users and phone numbers, and connect with thousands of third-party tools like Zapier, Slack, or HubSpot.
   
7. Work better as a team. You can use a hosted VoIP system to manage calls and texts with shared numbers, then follow up faster with shared access to call recordings and transcriptions. Need to delegate tasks or get context from coworkers?  You can tag teammates in internal threads.

How to choose the right VoIP provider

Struggling to narrow down a hosted VoIP? Here’s a simple checklist to help you choose the right VoIP service provider in 2025. That way, you can measure your shortlist against four essential categories: features, reliability, scalability, and customer support.

Essential features for growing businesses

✅ SMS/MMS capabilities to build stronger customer relationships

✅ Integrations and texting automations to save time and follow up faster

✅ Unlimited calling and texting to the US and Canada

✅ Call routing to direct customers to the right team

✅ Collaboration features like shared numbers to work together as a team

✅ Call recording and transcriptions to get context quickly

✅ Availability on mobile, desktop, and web app to access your system from anywhere

✅ Affordable international calling and long-distance rates to tap into international markets

💡 Pro tip: You should look for a phone solution that offers a free trial so you can try the features for yourself before committing to a paid plan. With OpenPhone, you can test VoIP phone calls and use advanced features like AI call transcriptions with our seven-day free trial.

Reliability and support

✅ Prompt customer support to get issues resolved faster

✅ Strong uptime (at least 99.9%)

✅ Transparent status page or real-time alerts so you have visibility into your system status

✅ Access to guides, help docs, and how-to videos to troubleshoot issues or configure features

✅ History of high call quality for customers and team members (you can check with a VoIP speed test or a dedicated tool like Callyzer or VoIPmonitor)

Flexibility and scalability

✅ No long-term contracts required

✅ Free trial available for testing

✅ Easy to add features and new numbers as you grow

✅ Option to keep your existing business number

✅ Wide variety of numbers (local, toll-free, or vanity)

✅ Cost-effective add-ons as your business grows (such as AI phone agents)

Customer satisfaction

✅ Positive recent reviews on platforms like G2, Capterra, and TrustPilot

✅ Case studies of existing customers to see how the VoIP provider helps businesses like yours

✅ Multiple methods of contacting support

✅ Responsiveness to feedback (like frequent product updates or a public roadmap)

OpenPhone: The best hosted VoIP app for small business needs

So, is hosted VoIP the right fit for your business? You be the judge. Compared to traditional PBX, hosted VoIP scales as you grow and doesn’t serve as another duct tape fix. You can get up and running in minutes and add new features and team members as your company grows. Then tap into tools the average PBX can’t offer — think texting, automations, integrations, and more.

That’s why 58,000+ service-based businesses in the US and Canada have turned to OpenPhone for hosted VoIP. With OpenPhone, you can manage customer communications from anywhere, collaborate with your team using shared numbers, and spend less time on manual tasks with auto-replies, snippets, and our AI agent, Sona.

See why small businesses like yours trust OpenPhone’s VoIP system by signing up for a seven-day free trial.

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