ClarityTel Industry Insights

Hosted VoIP vs SIP Trunks: Which Works Best for Small Businesses?


Eighty-six percent of small business owners believe reliable communications technology is essential in allowing them to focus on core business.¹ That’s a strong position for small businesses to take, considering experts predict phone calls to influence $1 trillion worth of consumer spending in the U.S. in 2019.²

But recognizing the importance of communications is easier than selecting the right system for your business. Small businesses have a number of options in this area, but to get the reliability they need without extravagant costs, many are turning to different types of VoIP technology, such as hosted VoIP and SIP trunks.

Why Hosted VoIP and SIP Trunks are a Good Fit for Small Businesses

Both hosted VoIP and SIP (session initiation protocol) trunks have significant benefits over a traditional, voice-only private branch exchange (PBX) phone system – what we typically associate with business landlines.

Hosted VoIP and SIP trunks both combine voice and data communication, sending each type of data over the same network. Perhaps more importantly to a small business, however, is that both services include setup, installation, and technical service and system maintenance, providing as-needed communications expertise without the need for a full-time expert on staff.

Related Reading: Why is VoIP Cheaper than a Landline?

Hosted VoIP and SIP trunks have several key differences as well, though, making each option appropriate for different businesses. In the remainder of this article, we’ll dive into each option in more detail, discussing advantages and disadvantages, as well as the types of businesses that will be a good fit for each.

Hosted VoIP: What Small Businesses Need to Know

Hosted VoIP is a voice communication service that functions by sending voice data over an internet network. With hosted VoIP, all communications hardware resides at an off-site location, usually a data center or private vendor location. The PBX, which allows internal and external phone calls, is also located off-site.

Hosted VoIP provides all the functionality of an on-premise phone system, including calls, conference calls, and voicemail as well as group calls, caller ID, and call waiting. It’s also user-friendly, requiring minimal time and resource investment.

Benefits and Drawbacks of Hosted VoIP

Because hosted VoIP is a service, charges fall under operational expenditures rather than capital expenses, and there is a potential for cost savings because voice and data communications are unified and bundled in a single system. Responsibility for maintaining hardware and service is outsourced. And depending on the vendor, the system may be more flexible and scalable than a traditional phone system.

However, the stability of hosted VoIP communications relies upon the quality and consistency of your company’s connection to the vendor’s location. If there is a problem with the connection between your location and the vendor data center, the quality of your business communications will be affected. Your business VoIP provider will maintain a high degree of control over the system, and the costs for different features and services may vary greatly from one vendor to the next.

SIP Trunks: What Small Businesses Need to Know

SIP trunks connect an on-premise PBX system to the public telephone system over the internet, via VoIP. This allows small businesses to own their PBX system, but combines voice and data communications onto a single IP connection, eliminating the need for separate voice and data connections.

SIP trunks allow small businesses to leverage any existing investment in PBX equipment, while updating and modernizing the system to support multimedia communications. SIP trunks also make use of your IP network, and provides the flexibility and scalability many small and medium businesses need to manage communications for a growing company.

Benefits and Drawbacks of SIP Trunks

With SIP Trunking, companies can reduce costs associated with gateway and desktop equipment, as well as hardware maintenance and support. Efficiency is improved, as voice and data transmissions are combined, eliminating the need for separate circuits.

However, a small business must acquire hardware and maintain the system themselves, which can be expensive. It is also important to have the bandwidth to maintain quality of service, as the network can be easily overloaded with multimedia transmissions.

Which VoIP Phone System is Right for Your Small Business?

While hosted VoIP and SIP trunks both offer benefits to small business owners, deciding which is best for your business can be a difficult decision. Hosted VoIP offers the opportunity to outsource hardware, taking that burden from the small business owner; SIP trunks provide the customer with better system control.

In general, hosted VoIP is ideal for businesses that want to be actively involved in choosing the hardware and software for their VoIP phone system, but don’t want to be responsible for administration or maintenance.

SIP trunks are a better fit for more hands-on businesses that want to manage their own technology. With a SIP trunk, your business can install your own hardware or leverage what you already have, managing the tools yourself. You’ll still get all the benefits of VoIP technology, but with more control over technology and management. Select the small business phone system that best fits your organization’s needs.