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What hosted VoIP is and how to decide if it is right for your business

Hosted VoIP is a cloud-based phone system where a third-party provider manages all the infrastructure.

It is the most commonly deployed system for internet calling, and demand continues to grow as organisations prepare for the upcoming switch off of traditional phone lines in 2027.

This guide covers what hosted VoIP is, how it works, what it includes, how it compares to other deployment models, and what to consider before switching.

Contents:

What is hosted VoIP and how is it different?
How hosted VoIP works
What a hosted VoIP platform includes
Differences between hosted VoIP, on-premise VoIP and hybrid VoIP
Factors affecting hosted VoIP costs

What is hosted VoIP and how is it different?

Hosted VoIP refers to a business phone system that is hosted by a third-party in the cloud and delivered over the internet.

The phone service, including numbers, VoIP features and integrations, is delivered remotely while a VoIP provider operates and maintains the infrastructure in its data centre.

Unlike traditional phone lines or on-premises VoIP alternatives, it does not require an organisation to manage its own on-site PBX and associated infrastructure.

The provider handles updates, security, and uptime, while users access the business VoIP phone system through IP phones, softphone apps, or mobile devices, all managed through a centralised web-based dashboard.

For many SMEs, it is the most commonly adopted route to transitioning away from traditional landlines, especially in preparation for the nationwide switch-off, expected in 2027, where these services will cease to be supported.

Hosted VoIP services are widely valued for their flexibility, cost efficiency, and range of communication features they deliver without the overhead of traditional telephony infrastructure.

However, hosted VoIP may not be suitable for organisations in highly regulated sectors or those with complex requirements, where a hybrid deployment may be more appropriate.

How hosted VoIP works

A hosted VoIP call moves through four stages, split between what the user experiences and what the provider’s infrastructure handles behind the scenes. Here is how each stage works:

When a call is made or received through a hosted VoIP system, it moves through four stages:

A user initiates or receives a call: via an IP desk phone, a softphone app, or a mobile client. The device authenticates with the hosted PBX using Session Initiation Protocol, confirming its identity and availability before the call can proceed.
The signal reaches the hosted PBX: The SIP request is routed to the provider’s hosted PBX, where the phone system’s core logic resides. This is where the call is authenticated and queued for routing, with all configuration, including routing rules, auto-attendants, IVR menus, and ring groups, executed at this layer.
The call is routed and connected: The hosted PBX applies the organisation’s routing logic to determine the correct destination and connects the call. The audio stream is carried separately using RTP (Real-time Transport Protocol), which handles voice delivery independently of the signalling layer.
Activity is recorded and synced: When the call concludes, the platform logs a full set of metadata, including duration, timestamps, direction, and disposition, and pushes it to connected systems via API or native integration, such as a CRM or workforce management tool.

What a hosted VoIP platform includes

A hosted VoIP platform delivers considerably more than a traditional business phone line. The following covers the core components and capabilities that make up a fully featured hosted VoIP deployment.

Core telephony features

The foundation of any hosted VoIP platform is its telephony functionality: The tools that manage how calls are handled day to day.

Auto-attendant and IVR: Routes incoming callers through menu-driven options before connecting them to the right team or individual.
Call queues and ring groups: Distributes incoming calls across available agents or departments based on configurable rules.
Call recording: Captures interactions for compliance, training, and quality assurance purposes, with recordings stored and accessible via the admin portal.
Voicemail to email: Transcribes or forwards voicemail messages directly to a user’s inbox, reducing missed communications.
Call forwarding and transfer: Redirects calls to alternative numbers or hands them off between users without dropping the connection.

User and device management

Hosted VoIP platforms provide centralised control over how users, devices, and extensions are configured and managed.

Extension management: Allows administrators to create, modify, or remove user extensions through the web-based portal without any on-site changes.
Softphone and mobile app support: Enables users to operate from any device using their standard credentials, maintaining a consistent experience across locations.
Presence and status indicators: Shows the availability of colleagues in real time, supporting more efficient internal call handling.
Role-based access controls: Limits administrative permissions to authorised users, reducing the risk of misconfiguration.

Integrations and API access

One of the defining characteristics of a hosted VoIP platform is its ability to connect with the broader technology stack a business already uses. This is also known as VoIP integrations.

CRM integrations: Connects with platforms such as Salesforce, HubSpot, and Zoho to enable automatic call logging, click-to-dial, and screen pops.
Helpdesk integrations: Links call activity to support tickets and customer records within tools such as Zendesk and ServiceNow.
Unified communications integrations: Embeds calling functionality directly within collaboration platforms such as Microsoft Teams or Slack.
Open API access: Allows development teams to build custom workflows, automate call data handling, and connect VoIP activity to proprietary internal systems.

Analytics and reporting

Hosted VoIP platforms provide administrators and team leaders with visibility into call activity across the organisation.

Real-time VoIP analytics: Display live call volumes, queue status, agent availability, and active calls across the system.
Historical reporting: Covers metrics such as call duration, wait times, missed calls, and call outcomes over defined time periods.
Wallboards: Present key metrics in a format suited to contact centre or team environments, keeping performance visible at a glance.
Workforce management exports: Allow call data to be fed into third-party tools for scheduling, forecasting, and compliance reporting.

Security and compliance

Because hosted VoIP operates over the internet and handles sensitive communications, VoIP security is a core component of any enterprise-grade platform.

TLS and SRTP encryption: Protects both the signalling layer and the audio stream from interception during transmission.
Multi-factor authentication: Adds a verification step for portal and system access.
Audit logs: Records administrative actions and configuration changes, supporting internal governance and external compliance requirements. Can be aggregated with other enterprise security data in a SIEM platform.
GDPR and regulatory compliance tools: Includes call recording consent management, and data retention controls, typically built into enterprise-tier platforms.

Differences between hosted VoIP, on-premise VoIP and hybrid VoIP

Hosted, on-premise, and hybrid VoIP are different deployment models for VoIP technology, which allow businesses to make calls over the internet.

They vary in how the system’s infrastructure (i.e., PBX, call routing, and data storage) is hosted and who manages it, where:

Hosted VoIP: Maintained by a third-party provider in the cloud, with businesses accessing the system over the internet on a subscription basis.
On-premise VoIP: Places the PBX hardware and software within the organisation’s own location, giving the business full ownership and control but also full responsibility for maintenance, security, and scalability.
Hybrid VoIP: Combines elements of both, typically retaining some on-premise infrastructure such as PBX hardware and local network equipment, while extending or augmenting it with cloud-hosted services.

Each has its pros and cons, which make them suitable for different use cases, budget structures and business sizes. Here is how they differ:

Attribute	Hosted VoIP	On-Premise VoIP	Hybrid VoIP
Cost structure	Per-user monthly subscription, low upfront cost	High capital expenditure upfront, ongoing maintenance costs	Mixed subscription costs for cloud components alongside existing hardware investment
Maintenance	Managed entirely by the provider	Managed by in-house IT or a third-party contractor	Split between the provider and internal IT
Scalability	Users added or removed via the admin portal, no hardware changes required	Scaling requires hardware upgrades and on-site installation	Cloud components scale flexibly; on-premise elements still subject to hardware constraints
Control	Configuration within the boundaries of the provider's platform	Full control over the PBX environment and infrastructure	Partial control, with on-premise elements fully managed and cloud elements subject to provider limitations
Reliability	Built-in redundancy and failover managed by the provider, dependent on internet connectivity	Resilience is fully the organisation's responsibility	Resilience varies by component; cloud elements benefit from provider redundancy, on-premise elements do not
Security	Enterprise-grade encryption and compliance managed by the provider	Organisation retains full control over its own security posture	Security responsibilities are shared, requiring clear governance across both environments
IT resource required	Minimal, managed through a web portal	Significant, requires dedicated expertise for setup and ongoing management	Moderate; cloud components reduce burden but on-premise infrastructure still requires internal expertise
Best suited to	Businesses seeking flexibility, low overhead, and fast deployment	Organisations with complex requirements, strict data sovereignty needs, or existing infrastructure investment	Organisations mid-transition from legacy systems, or those with mixed requirements across sites or departments

Factors affecting hosted VoIP costs

Hosted VoIP is typically priced on a per-user, per-month subscription basis, but the total cost of a deployment can vary considerably depending on a number of factors. Understanding what drives pricing helps organisations budget accurately and avoid unexpected business VoIP costs.

Pricing model and user count

Most providers charge per user per month, meaning costs scale directly with the size of the organisation.

Some providers offer tiered plans with different feature sets at different price points, while others charge a flat rate with all features included.

Organisations should assess which users require full licences and which may only need limited functionality, as some providers offer reduced-cost licences for lower-demand users.

Features and functionality

The features included in a plan have a direct bearing on its cost. Entry-level plans cover the basics, while more advanced capabilities typically sit behind higher tiers or additional charges.

Base plans: Typically include basic telephony features such as call routing or voicemail.
Advanced features: Capabilities such as call recording, IVR and VoIP monitoring are often reserved for higher-tier plans or charged as add-ons.
Integrations: Native integrations with CRM and helpdesk platforms may be included or may carry additional licensing costs, depending on the provider.

Hardware and devices

Not all hosted VoIP deployments are purely software-based. Physical hardware requirements can add meaningful upfront costs depending on how the system is deployed.

IP desk phones: Physical handsets are not always included in the subscription and represent an upfront hardware cost per user.
Headsets and accessories: Required for softphone users, particularly in contact centre environments.
Network equipment: Broadband routers, switches, firewalls, and other networking hardware may need upgrading to support reliable VoIP call quality, representing an additional infrastructure cost.

Implementation and onboarding

The initial setup of a hosted VoIP system can carry one-off costs that sit outside the recurring subscription, particularly for larger or more complex deployments.

Setup and configuration: Some providers include onboarding support within the subscription; others charge a one-off business VoIP installation fee for number porting, system configuration, and initial training.
Number porting: Transferring existing phone numbers to the new provider can carry a per-number cost depending on the provider and volume involved.

Support and SLA tiers

The level of support and the terms of the service level agreement can influence overall cost, particularly for organisations with high availability requirements.

Standard support: Typically included within the base subscription, covering access to documentation, ticketing, and standard response times.
Premium support: Higher-tier support packages with faster response times, dedicated account management, or 24/7 coverage are often available at additional cost.
SLA guarantees: Providers offering higher uptime guarantees or more robust SLAs may price their plans accordingly.

Contract length and commitment

The terms of the contract have a direct impact on the per-user cost, with longer commitments generally offering better pricing in exchange for reduced flexibility.

Monthly rolling contracts: Offer maximum flexibility but typically carry a higher per-user cost.
Annual or multi-year contracts: Generally offer lower per-user pricing in exchange for a longer commitment.
Volume discounts: Larger organisations with higher user counts can often negotiate reduced per-user rates, particularly on longer-term agreements.

Hosted VoIP – FAQs

Our business VoIP experts answer commonly asked questions on hosted VoIP systems for businesses:

Does hosted VoIP need special internet or hardware?

No specialist internet connection is required, but the broadband connection must be stable and have sufficient bandwidth to handle concurrent calls. Use our business broadband comparison service to procure one at the best prices.

On the hardware side, the minimum requirement is a device capable of running a softphone app. Organisations preferring physical desk phones will need SIP-compatible IP handsets, and a QoS-configured router is recommended to prioritise voice traffic on the network.

Can I use my existing IP desk phones with a new hosted VoIP provider?

In most cases, yes. Most modern IP desk phones are SIP-compatible and can be reconfigured to register with a new provider without being replaced.

However, some handsets are locked to a specific provider or use proprietary firmware that limits interoperability. It is worth confirming supported devices with the new provider before committing.

Can I keep my current business phone number if I switch to hosted VoIP?

Yes. Existing numbers can be transferred to a new provider through a process called number porting, which applies to both geographic (01, 02) and non-geographic (03, 08) numbers.

The process typically takes between five and fifteen working days and is managed between providers on the customer’s behalf, though a per-number fee may apply.

What happens to calls if the broadband goes down?

Most providers include broadband failover options such as automatic call divert to a mobile number or alternative landline in the event of an outage.

For organisations where phone availability is business-critical, a secondary 4G/5G business broadband connection is a common safeguard to keep the system operational if the primary broadband fails.

To add broadband redundancy in rural areas, a business satellite broadband connection, such as Starlink can also work.

Is hosted VoIP reliable enough to replace a traditional phone system?

For the vast majority of businesses, yes.

Enterprise-grade providers typically offer 99.99% uptime SLAs backed by redundant infrastructure across multiple data centres. The main variable is the quality of the last-mile internet connection at the organisation’s end.

The UK PSTN switch-off in 2027 also makes transitioning away from copper-based telephony a practical necessity for all businesses.

Is hosted VoIP suitable for a business with only five users?

Yes. In fact it’s often ideal. The per-user subscription model means smaller organisations pay only for what they need, with no requirement for hardware investment.

Small businesses get access to the same features as larger deployments (e.g., auto-attendants, call routing, voicemail to email, and mobile softphones) and many providers offer SME-specific plans with simplified setup and lower entry-level pricing.

Can hosted VoIP support multiple UK office locations on one system?

Yes. Because the infrastructure is cloud-based, multiple office locations can operate under a single system with consistent numbering, routing rules, and features across all sites.

Remote and hybrid workers connect to the same system via softphone or mobile app, and calls between sites are routed internally through the organisation’s WAN, eliminating inter-site call costs.

How much bandwidth does hosted VoIP need per user?

Approximately 100 kbps per concurrent call is the standard guideline. The key consideration is the number of simultaneous calls at peak times rather than the total user count.

Most providers recommend adding a buffer above this baseline and configuring QoS on the router to prioritise voice traffic over other data on the same connection.

Businesses that rely on perfect call quality are recommended to support a hosted VoIP system using a fully dedicated, leased line business broadband connection which receives guaranteed bandwidth.

What should I check when choosing a hosted VoIP provider?

There are six key things to check when choosing a business VoIP provider to ensure a quality service:

Uptime SLA: Look for 99.99% uptime guarantees and understand the terms around service credits.
Number porting: Confirm the provider can port existing numbers and clarify the process, timeline, and costs.
Integration compatibility: Check native integrations with CRM, helpdesk, and collaboration tools already in use.
Cybersecurity compliance: Look for TLS and SRTP encryption, MFA support, and certifications such as ISO 27001.
Support availability: Confirm response times, support hours, and whether UK-based support is available.
Contract terms: Understand minimum commitments, notice periods, and data handling at contract end.

Can hosted VoIP be used in regulated industries like financial services?

Yes, but with additional considerations. FCA-regulated firms are required to record and retain certain calls for a minimum of five years under MiFID II.

Hosted VoIP platforms with call recording can support this, but organisations should verify that the provider’s infrastructure meets relevant data residency, access control, and GDPR requirements.

Providers with ISO 27001 certification and experience in regulated sectors are generally better placed to support these needs.

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