What is VoIP?

VoIP Basics for Business

Voice over Internet Protocol (VoIP) is the transmission of phone calls over the Internet instead of using traditional telephone landlines.

Among other things, VoIP enables businesses to:

  • Reduce and consolidate IT infrastructure
  • Eliminate the need for traditional phone lines
  • Save as much as 60-70% on phone bills
  • Enjoy advanced phone system features

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How Does VoIP Work?

Voice over Internet Protocol (VoIP) is the process of turning analog audio signal into digital “packets” that can then be sent across your Local Area Network (LAN) or Wide Area Network (WAN) using the Internet Protocol (IP). This means VoIP phone services can be accessed from your computer, on your mobile device, or from a desk phone.

Simply put, VoIP enables you to make a phone call in much the same way as you would send an email.

When you connect your VoIP phones and your VoIP service provider to the VoIP PBX, you’ll probably use HD IP phones to communicate. A VoIP phone system uses IP technology to handle your call control and manage your connections to the WAN. 

Even though a VoIP phone system uses VoIP and is connected to your LAN, most systems can connect directly to the Publicly Switched Telephone Network (PSTN). This gives you the ability to use both VoIP and the PSTN for your calling.

VoIP Protocols and Codecs

A VoIP protocol determines how your voice packet is transported across a network. Most VoIP phones will typically support one protocol.

One of the most popular VoIP protocols is SIP (Session Initiation Protocol). SIP is a standards-based protocol that is used and supported by the vast majority of VoIP phone systems and services.

A voice codec is responsible for the conversion of your analog voice stream into a digital packet. Voice codecs also determine sound quality and bandwidth required to send the packet. A VoIP phone typically supports multiple voice codecs.

The most common voice codecs are:

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Benefits of VoIP

Cost Savings

Without the use of analog lines, VoIP phone systems tend to be much less expensive than traditional systems for both local and long distance calling. 

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Many VoIP providers offer softphones, which are essentially mobile applications that allow you to use your business phone from your mobile device.

Better Internal Communication

Features such as status indicators allow team members to see who’s available and who’s not, while chat features allow direct and instant lines of communication among your team. 


VoIP phone systems can be very flexible and grow with your organization. For rapidly expanding businesses,  resources can often be added or reduced to simplify transitions.

Better Connectivity

VoIP phone systems offer features like Find Me, Follow Me, voicemail to email, and conferencing to enhance collaboration among multiple office locations and remote workers.

Better Data and Caller Insight

VoIP phone systems can integrate calls with a business’s customer relationship management software (CRM), allowing better insights customer needs, purchases, and concerns.

Better Call Routing and Screening

VoIP phone systems have the capability to use auto attendants to answer and route calls to the appropriate location, saving time and money while making business appear more professional and attentive. 

How Much Does a VoIP Phone System Cost?

One of the main benefits of VoIP phone systems is their affordability, but the actual price of a VoIP phone system depends on how you use (or deploy) it.

On-Premise VoIP Systems

On-premise VoIP phone systems are what you might picture when you think of a traditional business phone system. They include on-site hardware and IP phones, as well as any other necessary equipment to connect to your VoIP network.

On-premise solutions are great for businesses that expect their communication needs to remain relatively stable in the near future and are ready to make an upfront investment.

The main advantages of on-premise VoIP phone systems are stability, quality, and capability. Because you’re operating off dedicated equipment that is on-site, on-premise VoIP solutions tend to be capable of offering more reliable service and better quality – even at higher volumes.

Hosted/Cloud VoIP Systems

Hosted VoIP phone systems are often called cloud or cloud-based phone systems because they operate in the Cloud. Think of the Cloud as a server or network of servers that store information or deliver data. 

A hosted phone system requires no physical hardware on your end. They also allow you to access your phone system on pretty much any device that has Internet access, which is a huge advantage for more mobile or remote operations.

Upfront investment with a cloud-based system is significantly less than on-premise phone systems. Pricing structures usually involve either paying a flat amount each month for unlimited use, or paying a metered amount based on how much you actually use it. This is valuable because not all businesses have the money upfront for a capital investment or the manpower to support an on site appliance.


Compare the benefits of hosted and on-premise deployments with our free guide

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