There are two main types of internet-based phone systems: voice-over-internet-protocol (VoIP) and virtual phone services. VoIP systems run independently and tend to offer more features at a higher cost, while virtual phone solutions require an existing phone line to forward calls from, but come at far lower prices. They both have their advantages and disadvantages and are ideal for different environments.
With that in mind, most established businesses may want to go with a VoIP service, as it does not require you to keep your old phone line. In this case, we suggest looking at RingCentral. This system, which is our pick for best overall small business VoIP service, comes at a wide range of pricing points to meet nearly any small business budget. It also comes with advanced functionality like video conferencing. Click the button below to learn more.
VoIP vs Virtual Phone Systems at a Glance
VoIP | Virtual Phone | |
|---|---|---|
Best For | Established, midsize companies | Solo workers and freelancers |
Automated Attendant | ✔ | ✔ |
Software Integrations | ✔ | ✔ |
Supports Multiple Simultaneous Phone Calls | ✔ | ✔ |
Supports Video Conferencing | ✔ | N/A |
Does Not Require an Existing Phone Line | ✔ | N/A |
Advantages | Runs independently, has more advanced features | Flexible, affordable |
Disadvantages | Expensive, could be overkill for smaller teams and freelancers | Requires existing line to forward calls from |
What’s the Difference Between VoIP & Virtual Phone Systems?
VoIP and virtual phone systems are similar in the sense that they are both internet-based small business phone services. They serve as alternatives to the traditional landline setups that have been common in offices for many years. They both provide a cost savings over landlines, and the fact that they are connected to the internet allows them certain features, like visual voicemail, that simply aren’t possible with a landline.
The main difference between the two lies in the fact VoIP does not require an existing phone line, while virtual phones need you to maintain at least one existing line through another service. This could be a deal-breaker for established organizations, but it might also be a perfect fit for solopreneurs who need little more than a dedicated professional line, which they can access on a smartphone.
There is also a sizable difference in price. VoIP services have a higher starting cost than virtual phone systems; RingCentral starts at $19.99 per user, per month for two to 19 users with an annual agreement. In comparison, Grasshopper starts at $26 per month, but can support up to three extensions. This means a team of three will save almost $34 a month, or nearly $408 per year, using the virtual system compared to the VoIP service.
However, VoIP solutions tend to have more advanced feature sets than their virtual counterparts. Take RingCentral, for example. RingCentral, our pick for best overall small business VoIP system, includes video conferencing and supports multilevel auto-attendants. Grasshopper, which is considered a robust virtual service, has a number of features, but you cannot hold video conferences or transfer callers to outside numbers.
Most virtual services have the same deficiencies in terms of feature limitations. While VoIP solutions tend to cost more, you get a lot more functionality along with that.
When to Use a VoIP Systems
VoIP systems are ideal for a wide range of users, but they are especially useful for established businesses with midsize or large teams. The fact that they can run independently means you will never have to wait for the availability of another line to make a call. They are useful both in offices and for remote workers via desktop, and mobile apps make them especially appealing. Larger teams will also appreciate common features like video calling and integrations with outside business applications.
The price of a VoIP service will depend entirely on what provider you go with and what service tier you select. That said, RingCentral offers some of the most robust functionality. For two to 19 users on an annual basis, RingCentral ranges in price from $19.99 per user, per month for the Essentials package and goes all the way up to $49.99 per user, per month for the enterprise-level Ultimate version.
When to Use a Virtual Phone Systems
Solo workers, freelancers, and very small teams will probably want to go with a virtual phone service. These systems serve as easy and inexpensive ways to get a dedicated business number. All you need is a number to forward calls from.
Grasshopper, which is our pick for best small business virtual phone service, starts at $26 per month for one number and three extensions. Its most expensive package supports five numbers and unlimited extensions for $80, which is the same price you’d spend for just four RingCentral Essentials users. Virtual phone systems are therefore a better value for cash-strapped teams.
Pros & Cons of VoIP vs Virtual Phone Systems
VoIP and virtual phone systems are both incredibly useful in the right business setting. However, they are not without their unique drawbacks. Larger, more established businesses will likely want more than what a basic virtual phone service can offer them, while a dedicated VoIP system is expensive and may be overkill for solo workers looking for a professional phone presence.
Pros & Cons of VoIP Services
Pros of VoIP Services | Cons of VoIP Services |
|---|---|
Works independently: Unlike virtual phone systems, VoIP solutions do not require an existing phone line in order to operate | Expensive: Most VoIP solutions are charged on a per user basis, which can quickly become very expensive |
Multi-extension support: The majority of mainstream VoIP systems allow you to route calls to multiple extensions at once, or even outside numbers | Potential overkill: Teams that are not looking for much beyond a dedicated business number with calling and texting may find a VoIP solution to be overkill for their needs |
Pros & Cons of Virtual Phone Systems
Pros of Virtual Phone Systems | Cons of Virtual Phone Systems |
|---|---|
Affordability: Most virtual phone systems are more affordable than their VoIP competitors; in some cases, like with Google Voice, they can even be completely free | Requires existing phone line: A virtual phone service cannot run independently like a VoIP solution can |
Flexibility: Virtual phone services can use any existing line to forward calls from; you have the option of choosing a landline, smartphone, or whatever device is most convenient for you | Low multi-number support: You typically get fewer unique numbers for your business with a virtual setup than you do with a VoIP counterpart |
If you do decide to use a VoIP service, it’s worth noting that its performance will depend entirely on the strength of your internet connection. Those with slower network speeds will experience choppy, unreliable call quality. As such, we recommend using our free VoIP speed test tool below.
Frequently Asked Questions (FAQs)
Can I use a VoIP system on my smartphone?
Yes. Most of today’s most popular VoIP services offer mobile apps for iOS and Android, so you can effectively take your work phone wherever you go.
Can I transfer my number from a virtual phone system to a VoIP service (& vice versa)?
Yes. Nearly every mainstream phone service offers some sort of number port functionality. You can either do this in your service’s settings menu, or have a customer service agent do it for you depending on your provider.
What number does someone see when I call them with my virtual phone system?
When you call someone with your virtual phone system, the call will be forwarded from your landline or cellphone. However, the person on the other end of the call will see your virtual phone number on their caller ID.
Bottom Line
Both VoIP and virtual phone solutions have taken market share from landline-based systems for years now. This is due to the fact that they are both more affordable than landline systems and offer can advanced functionality like an internet-based automated attendant and mobile apps. VoIP is more powerful, but it comes at a higher price. Virtual phone systems require an existing line and are more basic, but deliver a great value for small businesses.
Most established organizations will want to go with a VoIP service. For those users, we recommend RingCentral. It offers the best balance of feature set, affordability, and user-friendliness on the market today. Click the button below to get started with RingCentral today.
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