What Is Voice-over-Internet-Protocol?

Voice-over-Internet-Protocol (VoIP) systems, also known as IP telephony, are a type of business phone system that transmits calls as data over the internet rather than conventional copper wires. As a result, they are more versatile and easier to implement than public switched telephone network (PSTN) technology, which is more commonly called a traditional landline.

VoIP services are less expensive than landline-based alternatives. They also provide a suite of advanced features like video conferencing, automated attendants, and text messaging. This gives businesses more control over their communications program and customer experiences. However, they do require a high-speed data connection to perform at their best.

How VoIP Phone Systems Work

At a fundamental level, VoIP works by making and receiving calls over the internet. Breaking it down further, here’s the step-by-step process:

1. You use your VoIP-enabled device to connect to the internet.
2. Once you dial a number, your VoIP service establishes a connection between your device and the end-user.
3. Next, your VoIP service transforms your voice into data packets and sends them over a packet-switched network to the user’s device.
4. The service then converts those data packets back into sounds that you and the other party can hear.

VoIP Pros & Cons

VoIP phone systems are changing the way businesses handle customer communication, but they’re not perfect. There are a few pros and cons you’ll need to consider before opting for this technology.

VoIP Pros

• Less expensive: VoIP phone systems are lightweight and flexible. You won’t need to invest in a traditional private branch exchange (PBX) system, landlines, or costly desk phones. VoIP providers often have less expensive monthly pricing and per-line costs.
• Remote calling: Since VoIP phone systems don’t rely on traditional landlines, you can take your conversations with you as you go about your day. As long as you have an internet connection, you’ll be good to go.
• Multichannel functionality: You can use VoIP communications to call, text, chat, video conference, and more. You can even send images and videos.
• Advanced features: Leverage high-level technology like interactive voice response (IVR), application programming interface (API) integrations, call recording, call queues, and more.

VoIP Cons

• Dependent on the internet: If the internet goes down, your VoIP system will not work. You’ll need to maintain a high-speed internet connection with enough bandwidth for all your lines to retain quality communications.
• Deprecates analog phones: You’ll often need to update your phone systems and hardware to work with a VoIP system. This can be expensive and time-consuming, especially if you already have a large-scale analog system in place.
• Emergency service limitations: 911 calls become tricky with VoIP phone systems. Traditionally, 911 calls alert first responders to your phone’s fixed location. However, thanks to the portability of VoIP phones, there’s often no fixed location, making it difficult for first responders to locate your whereabouts without you giving them explicit details.

Who VoIP Is Right For

VoIP phone systems are a great communications solution for businesses of all sizes. Whether you’re running a small business with one to two lines or a massive call center with hundreds of operators, VoIP services tend to be cheaper and more powerful.

VoIP is incredibly popular among small business users. Year-over-year growth has been steady throughout the last decade. VoIP technology is especially helpful in the following environments:

• Call centers: Most mainstream VoIP services include features that are helpful for call center environments, including IVR, call queuing, and call monitoring capabilities.
• Sales teams: Leading systems provide features for hosting conference calls and connecting caller data with popular customer relationship management (CRM) solutions like Salesforce and Freshmarketer.
• Mobile teams: Workers can use mobile VoIP apps so that they can work from virtually any location.
• Growing companies: VoIP solutions tend to come in many different pricing packages. Adding new users can typically be done in just a few minutes, making VoIP phone systems a fantastic tool for growing teams.

VoIP Phone System Providers

VoIP phone systems come in all shapes and sizes. Some providers cater to small businesses while others provide functionality for enterprise-level call centers and sales teams. You’ll have your hands full sifting through all the options, so we did the hard work for you to narrow down your choices.

Check out our recommendations for the best VoIP providers by visiting our article on the best small business VoIP systems or take our quiz to help you narrow down your choices:

What Type of Business Phone Service Is Best for You?

VoIP Phone System Costs

VoIP providers offer a range of different service packages and pricing options. They usually break down pricing into separate tiers that provide specific user counts, features, and customer service.

If you choose a small business-friendly option like Grasshopper or Phone.com, you could end up paying as little as $10.39 per user, per month. However, if you opt for a more sophisticated unified communications platform, such as RingCentral or Nextiva, you’ll be paying anywhere from $19.99 to $49.99 per user, per month.

Most providers offer monthly and annual pricing plans. Annual pricing can discount your costs by as much as 33%. You can also score bigger discounts by adding more users to your account, making it more affordable as you scale. Providers like Vonage offer a la carte pricing to let you pick and choose the features you want to pay for and use.

Top Must-have VoIP Phone System Features

There’s a lot to think about when choosing the right VoIP provider for your business. You have pricing, contracts, usability, and scalability to consider, and you also want to think about which features are provided. Not every platform guarantees the same functionality, so you’ll need to do your research to ensure the platform you’re considering will provide the communication solutions you need.

Here are a few of the top VoIP phone features to consider:

• Automated attendant: Auto attendants eliminate the need for a live receptionist by allowing you to program a bot to handle inbound calls. This attendant can route calls, play prerecorded messages, and help customers self-service many of their day-to-day issues.
• Call recording: Call recording lets you record calls for training or legal purposes. You record calls automatically or on a call-by-call basis.
• Video conferencing: Go beyond old-school phone calls by adding video conferencing to your communications repertoire. Some conversations are handled better face-to-face or with screen sharing, which are both available via video conferencing.
• Call monitoring: Listen in on live conversations to gather performance feedback. Some advanced providers even empower you to whisper in the ear of your employee or hop into a call if they need backup.
• Call parking: Instead of asking your caller to hang up and redial or telling them you’ll call back soon, park them temporarily while you switch devices or transfer the call.

Common VoIP Terminology

The VoIP world is full of confusing terminology, which can leave most business owners confused and overwhelmed. Here are a few of the more common terms you’re likely to encounter:

• Softphone: A softphone is an on-screen representation of your virtual telephone. Typically, it includes screens for dialing, checking contacts, and looking at your voicemail inbox. VoIP softphones work almost identically to the default phone app on a smartphone.
• International calling: When you need international calling, some VoIP providers charge calls on a per-minute basis, or you may have unlimited international calling.
• Codec: A codec is the method of data compression used by a VoIP system. Most services use G.729 or a G.711 codec.
• SIP trunking: Session initiation protocol (SIP) trunking is the process of transmitting data, including phone calls, over the internet. This is the underlying technology that powers many VoIP systems.

Bottom Line

VoIP business systems can upgrade your business’ entire end-to-end communication. Whether you need to control large call volumes better, drive down costs, or add multichannel functionality to your program, VoIP is the go-to solution for making it all happen.

If you’re looking to adopt a VoIP service at your business, check out our list of the best small business VoIP providers. It’ll help guide you to the most appropriate and affordable tool for your business.