What is an IP phone system?

Learn all you need to know about internet phone systems from 8x8, including how we can help you supercharge your business communications

264466157.jpg

What is an IP phone system?

Learn all you need to know about internet phone systems from 8x8, including how we can help you supercharge your business communications

264466157.jpg

What is an IP phone system?

Learn all you need to know about internet phone systems from 8x8, including how we can help you supercharge your business communications

264466157.jpg

What is an IP phone system?

Learn all you need to know about internet phone systems from 8x8, including how we can help you supercharge your business communications

264466157.jpg

With remote work quickly increasing in popularity, internet-based phone technology has become the go-to option for businesses of all shapes and sizes. Not only does it give you the option to operate from anywhere, but it also offers cost savings, accessibility, and reliability.

In this guide to understanding IP phone systems, we’ll tell you everything you need to know about how this technology works and why your business needs it. We’ll cover:

What is an IP phone system?

What is an IP phone system?

What is an IP phone system?

What is an IP phone system?

An IP phone system (also sometimes referred to as a VoIP phone system or IP PBX) is a business phone system that functions using Voice over Internet Protocol (VoIP) technology. This allows users to take incoming calls and make outgoing calls using an internet connection. It’s a popular alternative to landline phone systems that traditionally dominated communications for business.

With traditional phone systems, calls exclusively take place over the Public Switched Telephone Network (PSTN), which consists of copper phone lines to transmit analog voice signals between phones.

This type of system requires a lot of on-premises hardware (like desk phones) and office space to house the private branch exchange (PBX). It’s often referred to as the Plain Old Telephone Service (POTS).

It’s a legacy system that doesn’t offer the flexibility modern businesses needs, which is why IP telephony is now the preferred voice-based communications solution for organizations.

What is the difference between an IP phone and a traditional phone?

Traditional phones (what we typically refer to as landline phones) require copper wires that physically plug into wall jacks. These phones are part of a hardware-based analog technology system that transmits calls between two phones through switch boxes.

In contrast, IP phones can make and receive phone calls over the internet using VoIP technology, and don’t rely on the physical exchanges that landlines do.

Here’s a closer look at how this works:

How do VoIP phones work?

How do VoIP phones work?

How do VoIP phones work?

How do VoIP phones work?

VoIP phone systems work by converting analog voice signals into digital signals and sending them over your broadband line as data. Here’s what that process looks like, step-by-step:

Let’s assume that the VoIP phone receives digital data from another device, splits the data into information packets, and assigns each packet to their destination address.

  1. Converted data is sent over the broadband line to your VoIP router.
  2. The router finds the shortest path to its destination.
  3. The data packet is received at its destination.
  4. VoIP phone users hear the data as recognizable speech.

IP telephony protocols: an important aspect of how VoIP-based phone systems work

IP telephony relies on various open-source protocols to function. These protocols make it possible to transfer data between the IP phone and the service provider. The protocols used will depend on the VoIP provider and how the system is set up. Some include:

  • Session Initiation Protocol (SIP): This is a signaling protocol that establishes a “session” (or call) between two or more participants.
  • H.323: Similar to the SIP protocol, this is used to initiate, modify, and terminate a session.
  • Real-time Transport Protocol (RTP): Mostly used for streaming video conference calls and voice media, this protocol features a packet format for transmitting audio or video across the internet.

Types of IP business phones

Types of IP business phones

Types of IP business phones

Types of IP business phones

There are two main types of IP phones used by organizations. These are:

  • Purpose-built hardware device
  • Software-based softphone

Purpose-built hardware device (SIP phones, VoIP phones, etc.)

This type of phone resembles a regular office telephone or cordless phone, and even a conference phone. From the users’ point of view, they also work in exactly the same way. The only difference is that they work by connecting to the internet.

Traditional PSTN phones can also be turned into SIP phones using an analog telephony adapter (ATA) to connect to the IP network. When plugged in, the ATA will convert voice signals into an audio file and locate the IP address for the phone number you’re calling.

Software-based softphone

Softphones can be installed on internet-connected devices like desktops, laptops, and mobile devices.

The softphone app requires users to have access to hardware such as a microphone, headset or speaker, and camera if the solution facilitates video calls—which is built into most mobile devices and laptops these days.

The main advantage of softphone apps over SIP phones is that it lets you easily switch vendors and upgrade the system as your business demands change. All you need to do is uninstall the software from your devices.

Is there a difference between Voice over Internet Protocol and IP telephony?

Is there a difference between Voice over Internet Protocol and IP telephony?

Is there a difference between Voice over Internet Protocol and IP telephony?

Is there a difference between Voice over Internet Protocol and IP telephony?

You’ll often hear the terms VoIP and IP telephony used interchangeably. Even VoIP service providers tend to use them to refer to any phone system that uses a local area network (LAN) to connect to and make calls through the internet using a modem or router. However, there is a difference between them.

IP telephony is a term used to describe any system that comes under the umbrella of internet-based telecommunications.

VoIP, on the other hand, is a more specific term that refers to technology that allows you to make and receive voice phone calls over the internet.

Different types of IP phone systems

Different types of IP phone systems

Different types of IP phone systems

Different types of IP phone systems

1. On-premises IP telephony

With an on-premises IP system, all the equipment and hardware required to facilitate VoIP calls resides in your office. The IP phone service connects to a virtual PBX in the office via the Local Area Network (LAN).

You can choose to use phones you originally used with your legacy PBX to a VoIP provider’s system. Using Session Initiation Protocol (SIP) trunking, you can course your internet-based calls through the PSTN and connect with people who are still relying on landlines.

This option originally became popular because they offer more cost savings than traditional phone systems. Long-distance calling fees with VoIP are typically much lower than they are with traditional telephony, for example, while still more or less functioning like a regular phone system from the user perspective.

There are other perks to going with an on-premises solution.

For one thing, IP phones provide businesses with HD call quality and a range of advanced business phone features that won’t be able to expect from old-school telephones.

This type of internet-based phone system also gives you total control over how your communications operate. For example: you can add lines and phone numbers from within your office.

But there are some challenges associated with this setup.

Among other things, it requires you to invest in physical hardware (IP phones, handsets, etc) and Ethernet ports. It also makes an on-site IT team who can expertly manage the system a necessary expense for your organization.

That’s why these business phone systems aren’t the top choice for small businesses anymore. Instead, more businesses are opting for hosted VoIP solutions for the increased flexibility and scalability they provide.

2. Hosted VoIP

Hosted telephony is a setup where a third-party VoIP service provider handles the initialization and maintenance of the IP system on behalf of your business. This means you don’t need to rely on an in-house IT team to install and take care of the solution on-site.

Like on-site IP PBX systems or other telecommunications, hosted systems are capable of transporting data via the PSTN, an internet connection, or a combination of the two if the provider supports SIP trunking (most business-focused VoIP vendors do these days). All that’s required is a strong Wi-Fi or broadband connection and a compatible IP device (such as an IP office phone or softphone app on desktop or mobile phone).

Typically, hosted VoIP systems are more affordable for small businesses as they pay based on a monthly pricing plan.

Which is better: An on-premises or hosted VoIP phone system?

Which is better: An on-premises or hosted VoIP phone system?

Which is better: An on-premises or hosted VoIP phone system?

Which is better: An on-premises or hosted VoIP phone system?

This all depends on the resources and budget of your business, as well as your specific business needs. Here’s a quick comparison of on-premises and hosted phone systems:

This all depends on the resources and budget of your business, as well as your specific business needs. Here’s a quick comparison of on-premises and hosted phone systems:

This all depends on the resources and budget of your business, as well as your specific business needs. Here’s a quick comparison of on-premises and hosted phone systems:

This all depends on the resources and budget of your business, as well as your specific business needs. Here’s a quick comparison of on-premises and hosted phone systems:

On-premisesHosted VoIP
PBX system and hardware resides in your officeHosted in servers and equipment managed by the service provider
High costs associated with on-premises hardware, dedicated IT staffing, and office spaceLower cost, as less in-office hardware is required. The infrastructure is managed and maintained by a third-party provider
Requires multiple phone lines, adding or removing users can be difficult and expensiveOnly requires a broadband internet connection and a computer or smartphone. Business owners can easily add or remove users easily from their account dashboards
More suitable for large businesses that have the budget and resources to manage and maintain the on-premises systemAffordable and customizable for small and medium businesses. Enterprise VoIP systems offer numerous benefits for large businesses, too.

On-premisesHosted VoIP
PBX system and hardware resides in your officeHosted in servers and equipment managed by the service provider
High costs associated with on-premises hardware, dedicated IT staffing, and office spaceLower cost, as less in-office hardware is required. The infrastructure is managed and maintained by a third-party provider
Requires multiple phone lines, adding or removing users can be difficult and expensiveOnly requires a broadband internet connection and a computer or smartphone. Business owners can easily add or remove users easily from their account dashboards
More suitable for large businesses that have the budget and resources to manage and maintain the on-premises systemAffordable and customizable for small and medium businesses. Enterprise VoIP systems offer numerous benefits for large businesses, too.

On-premisesHosted VoIP
PBX system and hardware resides in your officeHosted in servers and equipment managed by the service provider
High costs associated with on-premises hardware, dedicated IT staffing, and office spaceLower cost, as less in-office hardware is required. The infrastructure is managed and maintained by a third-party provider
Requires multiple phone lines, adding or removing users can be difficult and expensiveOnly requires a broadband internet connection and a computer or smartphone. Business owners can easily add or remove users easily from their account dashboards
More suitable for large businesses that have the budget and resources to manage and maintain the on-premises systemAffordable and customizable for small and medium businesses. Enterprise VoIP systems offer numerous benefits for large businesses, too.

On-premisesHosted VoIP
PBX system and hardware resides in your officeHosted in servers and equipment managed by the service provider
High costs associated with on-premises hardware, dedicated IT staffing, and office spaceLower cost, as less in-office hardware is required. The infrastructure is managed and maintained by a third-party provider
Requires multiple phone lines, adding or removing users can be difficult and expensiveOnly requires a broadband internet connection and a computer or smartphone. Business owners can easily add or remove users easily from their account dashboards
More suitable for large businesses that have the budget and resources to manage and maintain the on-premises systemAffordable and customizable for small and medium businesses. Enterprise VoIP systems offer numerous benefits for large businesses, too.

Although on-premises solutions provide you with more control over your business phone system, they’re typically more expensive and mean you’ll need to rely on in-house expertise to manage the system. You also need to have the office space available to house the PBX and hardware.

Hosted VoIP only requires you to have a high-quality internet connection and compatible IP devices. Hosted VoIP telephone systems can be housed in a cloud environment or physical third-party data centers belonging to the service provider.

Nowadays, Voice over IP providers have expanded their offerings beyond just voice communications functionality. Many of them have evolved to become vendors of Unified Communications as a Service (UCaaS) solutions, which combine phone features with other communication channels like video conferencing, business SMS, and instant messaging—all hosted in the cloud.

Essential features of a VoIP business phone system

Essential features of a VoIP business phone system

Essential features of a VoIP business phone system

Essential features of a VoIP business phone system

  • Voicemail: Employees won’t be able to answer the phone every time a customer calls. That’s where voicemail and call forwarding features come in handy. Callers can leave a message so staff can follow up on missed calls when they’re available.
  • Call recording: Call recordings can help you improve interactions both across the organization and with your clients. This applies to a small business using an IP phone system in the office to document meetings or to call center customer support staff utilizing IP telephony at a much bigger scale.
  • Call logs: Keeping track of your phone system’s usage within the organization through the use of call records do a lot to help manage operational efficiencies within a company—with this, you can get a sense of who uses these resources most and for what activities.
  • Auto-attendant: This feature automatically greets callers with a message and initiates call routing based on caller input. For instance, priority callers could be routed straight to the boss, or customer queries could be sent to a customer service rep.
  • Caller ID: The best IP phone system can let your calls display any caller ID or number you like to recipients. This is especially useful in sales since current or prospective customers are much more likely to answer a call from a local number or a familiar business contact.
  • Conference bridge: This feature allows you to connect more than two conference phones for conference calls. This is essential for modern businesses that rely on conference calling to connect with clients, multiple offices, and remote teams.
  • Toll-free numbers: Most VoIP providers will offer free or inexpensive toll-free calling so customers can get in touch without incurring extra charges on their phone bills.
  • Unlimited calling: Most traditional phone plans will charge per minute and limit the number of calls you can make. Many VoIP providers offer unlimited calling (the number of areas where they offer unilimited calls to will depend on the vendor and the plan) in order to improve business operations.
  • Mobile app: VoIP can rely more on software than hardware if you choose to set it up that way. These solutions typically include mobile applications that allow you to make business VoIP calls from your cell phone. This way, you can connect with coworkers and clients anytime, anywhere. Almost all internet phone solutions these days are compatible with iOS and Android devices.
  • SMS text messaging: VoIP systems for business also allow you to send and receive text messages with customers or team members using a business phone number to improve business communication.
  • Audio and video conference calling: Modern cloud phone systems offer audio and video conference functionality. Conduct audio or video meetings for improved internal and external communication and collaboration.
  • CRM database integration: This feature lets your business phone system work with your CRM. Access all your customer data and make calls from a single platform.

How do I set up a VoIP system?

How do I set up a VoIP system?

How do I set up a VoIP system?

How do I set up a VoIP system?

1. Test your network and internet connection

The first thing to consider when setting up a VoIP phone system is to keep in mind the number of people that’ll be using the system. This will help you to determine whether your internet bandwidth will be able to support the office VoIP system.

VoIP performance can be affected by the quality of your connection, so make sure your wired or Wi-Fi network connection can handle peak traffic.

Not sure how or where to begin? There should be a lot of places where you can test your internet connection.

2. Which hardware do you want to use?

Whether you opt for an on-premises or a hosted system, your hardware setup will require some standard resources. You may need:

  • VoIP desk phones or other calling devices
  • VoIP headsets (particularly for contact centers where employees need to work on computers and keep their hands free while on a call)
  • ATAs (if you want to connect your regular desk phones to the VoIP network)

If you want to minimize hardware costs, you can choose to use a VoIP softphone app instead. These apps provide increased flexibility and mobility as your team can access the business phone system on any desktop or mobile device. All you need to do is allow the system to access your device’s microphone and speaker.

3. Choose your VoIP provider

Lastly, you’ll need to choose your VoIP provider. Explore your options to find a solution that offers all the features and functionality you need.

The right solution will allow your team to communicate and collaborate effectively both internally and externally. It should be affordable and scalable so you can grow it as your business grows while eliminating workplace silos and enhancing productivity.

The solution you choose should also have appropriate security measures in place to ensure the safety of your business communications.


Can IP phones be used at home?

VoIP softphone apps can be used to work remotely if you want to do business at home or on the go. It’s also possible for the organization to assign IP handsets to employees who primarily work from home offices. When you use an IP phone at home, you can:

  • Keep the same business phone number.
  • Use your IP phone in the same way you would at an office location.

Access all of your business phone features (call transfer, extension calling, video conferencing, voicemail, etc.)

You can do this whether you’re using a desktop computer, a mobile device, or an actual IP telephone using your business phone number.

Benefits of hosted IP telephony for small businesses

Benefits of hosted IP telephony for small businesses

Benefits of hosted IP telephony for small businesses

Benefits of hosted IP telephony for small businesses

1. Cost savings

Switching from landline to VoIP telephony results in huge savings for your business. With traditional phone systems, you’ll typically be charged for each call. When your business makes thousands of calls every day to customers or team members around the world, costs can quickly add up.

VoIP calling is carried out over the internet and you’ll pay a monthly fee according to the service provider’s plans. Hosted PBX and UCaaS solutions also eliminate costs associated with on-premises PBX hardware and office space.

It’s also much easier and more affordable to add or remove users with a cloud-hosted solution, as there’s no copper wiring involved. Business owners can manage the phone system using an administrative portal in the cloud, so changes can be implemented in no time at all.

2. Advanced features

VoIP phone systems provide businesses access to a range of advanced features (like the ones detailed previously) to improve the calling experience. Businesses can choose which services they require and customize their VoIP system to match their exact needs.

Features like auto-attendant and call transfer can boost business operations and team productivity for companies of any shape or size. These features are built into the business VoIP service and can be accessed from a single softphone app on a desktop or mobile.

With commercial VoIP features and functionality, even small teams can operate like an enterprise business. On the flip side, the calling features can help streamline and personalize the customer experience, making large enterprises more accessible.

3. Better accessibility

Another huge benefit of a hosted VoIP system is that it offers the ability for your team members to make and receive calls from anywhere. The system is accessible via a softphone app that can be downloaded on a desktop or mobile phone.

This makes VoIP phone systems and the robust features they offer invaluable for businesses that operate with a remote workforce. Remote accessibility allows your employees to remain productive no matter where they’re working from.

4. Scalability

With traditional systems, you have to pay a lot of money for each phone line, along with the amount of time spent on each call—not to mention wait a long time for every extension to be set up. IP phone solutions aren’t restricted in the same way, and you can easily add phones without worrying about installing new lines.

Simply use your online account to add new users to the account and ensure they download the necessary software required to use the solution.

Since hosted IP is managed in the cloud, you don’t even need a dedicated in-office team to handle calls. Hosted IP phone platforms are highly portable, so remote workers can handle calls from anywhere.

You can scale your solution as your business grows and access features like video calling and text messaging, allowing you to build a unified communications platform for your team.

Ready to upgrade your business phone system?

Ready to upgrade your business phone system?

Ready to upgrade your business phone system?

Ready to upgrade your business phone system?

If you’re ready to upgrade your traditional phone system and harness the power of IP telephony, there’s no better time than the present.

8x8’s cloud business phone system offers an extensive range of features to level up your business operations. Whether you need to connect remote teams located around the globe or communicate with customers across multiple channels, 8x8’s business phone system empowers your employees to work from anywhere.

Unify your communications with integrated contact center, voice, video, messaging, and APIs. Empower every employee and delight every customer with a single, scalable platform to manage all your business communications, locations, and users.