Hosted phone systems: What they are, how they work, and what to look for

New business phone systems are appearing on the market every day—you might have heard of cloud phone systems, hosted phone systems, and more—but how do you choose the best one for your business? In this article, we’ll look at hosted phone systems specifically, and what a good hosted phone system looks like.

Firstly, though, what is a hosted phone system and how does it work?

What is a hosted phone system exactly?

Representing a more modern approach to telephony, hosted phone systems allow you to leave clunky hardware behind in favour of cloud-based solutions that need only the internet to make and receive calls.

This is what the “hosted” part of the term refers to: The telephony system itself is hosted in the cloud.

But what does that mean?

Essentially, the cloud is a virtual storage space that can be accessed from anywhere as long as you’ve got an internet connection.

As hosted telephony solutions are accessible from almost anywhere, this makes them a great choice for companies with remote or hybrid employees who might not always work from the office.

These solutions also don’t take up a ton of room as they work over laptop and mobile phones, which can free up storage and server space in your office building.

How do hosted phone systems work?

As we mentioned earlier, hosted phone systems exist in the cloud and use the internet, as opposed to traditional landline networks, to place voice calls.

When you use the internet to make calls, the technology behind it is called Voice over Internet Protocol (or VoIP for short). This is why a hosted phone system might also be referred to as a VoIP phone system.

With VoIP technology, there’s no practical difference between calling someone in the next room over or on the other side of the world—both calls use the internet to connect (though VoIP long-distance calls are usually less expensive).

This means hosted phone systems are handy for making calls to anyone from anywhere. The only requirement is that all conversational partners have access to the internet via devices like mobile phones, laptops, or tablets—whereas traditional telephony solutions require plugged-in office phones.

Types of hosted phone solutions and related systems

Now that landlines are getting phased out in the UK, it’s more important than ever to understand your options for a modern hosted phone solution.

There are different approaches that hosted phone system providers can take when it comes to the services they offer.

Hosted PBX

Built as a modern alternative to traditional on-premises systems, hosted PBX spares you the need to set up costly and maintenance-intensive hardware in your office. You can instead leave this to your provider, who hosts any and all hardware for you.

The technology itself is very similar to traditional PBX options. In other words, if you’ve been using a traditional PBX setup for a long time, you’ll likely need very little instruction to familiarise yourself with its hosted counterpart.

This means that hosted PBX, despite being decidedly more current than its legacy forbearer, isn’t the most feature-rich option on the market. It largely functions as an upgraded on-premises PBX system.

VoIP phone systems

The category of VoIP phone systems is quite broad, as it covers any solutions that use VoIP technology. They may or may not also use physical phones (some VoIP providers do give you the option of using more traditional office phones if you prefer), with some being purely software-based.

For the most modern and greatest variety of hosted phone system features, you’ll want to look for a specific type of communication system, which we’ll discuss below.

Unified communications or collaboration platforms

For many businesses today, the best phone system isn’t technically a phone system—it would be a unified communications or collaboration platform.

This is because these platforms are much more than just a modern phone solution. They’re built to bring all your communications—not just phone calls—together under a single banner. All you have to do is launch one application to access all your messaging, emailing, video, and voice-calling tools.

This means you can place client calls, send SMS messages, and host company-wide conferences all from the same virtual workspace where you message your coworkers.

The business benefits of hosted phone systems over traditional telephony setups

So, are hosted phone systems worth it compared to traditional business phone systems? Generally, yes. Here are a few reasons why.

Easier implementation and use

Typically, modern hosted phone systems are quite easy to set up and use compared to on-prem phone systems. You don’t need to wait for an IT team to come in and install wiring or hardware, and some providers can get you up and running in literal minutes.

What’s important to note is not every provider has the same user experience. Some hosted phone systems are easier to set up than others, and this is something to ask about (or try out yourself by signing up for a free trial) before you choose a hosted phone system for your business. Unlike other features, you can’t just look at a pricing page on a website and check it off a list—it’s hard to assess user-friendliness without clicking around in the software yourself.

Suitability for hybrid and remote work

If you have a remote team, your employees could be setting up workspaces in a home office, a friend’s guest room, a relaxing coffee shop, or anywhere else with a good internet connection.

Hosted phone systems are essential because they make it possible to communicate with team members and clients no matter where they’re working.

Greater scalability

In the days of on-premises PBX solutions, scaling your business could be something of an ordeal. Engineers and other specialists would have to add additional hardware for each new employee, and if your business were growing quickly, you’d need to procure additional office space for not just your employees, but also their equipment.

Thanks to hosted phone systems, these are now problems of the past.

If you want to scale up, you can add more accounts with a few clicks. Your new employees can start making phone calls right away, without having to wait for anyone to install anything. Here’s how adding a new user looks in Dialpad Connect, a unified communication system:

Scaling down is also easy. You only need to close or cancel the accounts you’ll no longer be using, as hosted phone system plans are usually charged on a per-user subscription basis.

Integrations with other tools

Another advantage of hosted phone systems is some solutions have a good selection of prebuilt integrations with popular other tools. That means your phone system could integrate with Microsoft Outlook or Google Calendar and automatically pull your contact lists, or it might integrate with your CRM (customer relationship management system) to auto-log notes and call records to your CRM.

Cost-efficiency

Last but not least, we should also mention that hosted phone systems are generally more cost-effective on the whole than their traditional counterparts. This is true for many reasons.

For one, there are the hardware installation costs of traditional setups. These upfront costs can quickly become prohibitive, especially if you’re a larger company that needs to pay to have lots of employees connected to your office’s phone system. These costs fall dramatically with hosted phone setups.

Hardware also has to be maintained. When you use an on-premises model, you’ve got to foot these bills yourself. Hosted phone systems, on the other hand, put that responsibility in the hands of your provider, who will pay for any upkeep.

10 Features you need from hosted business phone systems

Now you know how a hosted business phone system works and what types are on the market, it’s time to delve into the features that separate satisfactory solutions from outstanding ones.

Please bear in mind that not all of these features will be included with every hosted phone system. For example, a hosted phone system for small business owners might not come with contact centre features, as most smaller businesses won't need them.

However, the majority of these features are worth holding out for and will help you get the most value from your solution over the long term.

1. Good call quality

If you’re looking for a phone solution, one of the features you want is top-of-the-line call quality. This will help you understand everything that’s said during both customer and team interactions, so you’re able to close deals and chat with other staff members seamlessly.

Because VoIP-based calling relies on the internet, this is a highly variable factor because your users will have to have a strong internet connection wherever they’re working from. Look for a VoIP provider that provides carrier-grade voice quality.

2. Call recording

Call recording is another must-have.

With it, you can keep a playable record of every conversation you and your team members have, whether it was one-on-one, a conference, or a call with a client. This means you can listen back for any important details you might have missed the first time around. It also helps get new employees caught up much faster.

Bear in mind that you’ll need to let your conversational partners know they’re being recorded, as in many regions of the world this is a legal requirement.

3. Built-in Ai

Trends may come and go, but in the world of virtual telephony, artificial intelligence is here to stay. Already, there are many examples of AI turning business phone solutions into powerful collaboration platforms.

There are many factors to consider when using Ai-powered phone systems. For example, do you want a phone system that incorporates Ai features through a third-party LLM or Ai provider? (Generally, built-in Ai that’s proprietary to that solution is better because your conversation data doesn’t go through as many parties.)

Built-in Ai tools can transcribe calls in real time, provide post-call summaries, highlight recurring topics, and much more. For example, here’s a look at Dialpad Ai—which is an Ai that is proprietary to Dialpad and that is trained on over seven billion minutes of business conversations—transcribing a phone call in real time:

4. Voicemail transcription

All business phone systems should have a voicemail feature, but not all of them have voicemail transcription.

A premium hosted phone solution should ideally come with a visual voicemail feature. This is especially helpful for salespeople who are in and out of meetings all day and can’t always reply immediately to prospects or clients.

5. Auto attendant features

When someone calls your hosted phone system, they should be greeted professionally. With that said, not every business wants (or can afford) to hire a receptionist or operator to manually direct calls.

An auto attendant greets callers and gives them menu options to direct them to the right agent or department so they don’t have to waste time waiting in a queue.

It also means your employees are only put in touch with customers whom they can help, which in turn boosts efficiency and productivity.

A good hosted phone system should make it easy to set up and customise your auto attendant from a dashboard. Here’s how it looks in Dialpad, as an example:

6. Instant messaging, SMS, and MMS

As important as voice calls are, not every conversation or topic is best suited to live voice calls.

Most businesses use instant messaging, SMS, and MMS features on a daily basis as well. Instead of paying for two separate solutions, why not have onecommunications solution that consolidates all of those features? Here is where a collaboration platform may be a better choice than a simple hosted phone system.

There is a growing number of hosted solutions that let you send all kinds of text-based messages from the same application where you make phone calls. This saves time you’d otherwise spend swapping between apps while keeping all your notifications in one central space, so you don’t need to constantly toggle back and forth.

7. Video calls

Just as some interactions should ideally be text-based, others are better suited to video calls. Imagine having a team meeting or congratulating a coworker on an important promotion and seeing their joyful reaction on your screen in HD—without having to exit your phone system’s app.

This is just one reason why video calling features are so useful and why you should look for them in a hosted phone solution (instead of paying for yet another piece of software). It goes without saying that video calls should also be high quality, so ideally look for a setup with HD video calling included as standard.

8. Reporting and analytics

If your business handles a large volume of calls every day, you may find call analytics useful.

A hosted phone system with robust reporting and analytics features can automatically collect data on your calls, as well as conversational insights (if they have built-in Ai) that can inform marketing or sales strategy.

Analytics are at their most helpful when they are easily accessible in an intuitively designed dashboard. Top-quality phone systems should provide data on metrics such as missed calls, abandoned calls, average handle time, and more.

9. Integrations with your favourite business tools

If your business uses a fair number of applications, thent your hosted phone system should integrate with as many of those tools as it makes sense to.

For example, a hosted phone system should integrate with your calendaring app and CRM for starters so that your team can connect your contact lists and customer profiles without having to copy and paste data back and forth.

Examples of the kinds of tools you might want to integrate include Microsoft 365, Google Workspace, Salesforce, Okta, and Zoho CRM.

10. Contact centre features you can add to the same platform

If keeping all your favourite business tools in one place saves you time, imagine how much of an impact an integrated contact centre within the same platform could have.

If you have a high-volume sales or customer support team, this is something to consider.

Dialpad can provide a range of built-in contact centre features that can form a seamless part of your solution, for example:

• Customisable call menus and flows

• Quality assurance (QA) features

• Real-time, Ai-powered agent coaching

• Call queuing, with callback functionality

Hosted phone system or Ai-powered collaboration platform?

Businesses can—and should—get more from their hosted phone systems than legacy solutions are typically able to offer.

If you want a more cost-effective option, it makes sense to look beyond a phone system and consider a unified communications platform instead.

A complete collaboration platform should come with all the capabilities of a hosted phone system, but with added convenience, various bonus features, and greater value for money to boot.

Dialpad comes with every feature you could need to make and take calls, both as a business and as a contact centre—with industry-leading Ai features such as real-time transcription, agent coaching, conversational intelligence, and more.

To find out more and see how Dialpad could help your business, sign up for a 14-day free trial.