What Is An IP Phone System
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- IP phone systems offer advanced features like voicemail-to-email, call forwarding, and auto-attendant.
- Integrates with other communication tools like video, and messaging.
- Reduce long-distance charges and eliminate the need for on-premises hardware.
You’re not alone if you’re asking yourself, “What is an IP phone system?” Businesses are exploring and adopting this communication solution to stay ahead of the curve.
With remote work becoming increasingly popular, 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 business 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?
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.
Traditional phone systems rely on the Public Switched Telephone Network (PSTN), which uses copper phone lines to transmit analog voice signals. These systems require on-premises hardware, such as desk phones, and dedicated office space for the private branch exchange (PBX). They're also often referred to as Plain Old Telephone Service (POTS).
Unlike these legacy systems, which lack the flexibility modern businesses need, IP telephony offers a more adaptable and efficient solution. This is why IP phone systems have become the preferred choice for organizations looking to enhance voice-based communications.
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What is the difference between an IP phone and a traditional phone?
You might be thinking that VoIP phone systems are only accessible to large enterprises. That may once have been true, but now it’s affordable for any size of business. In fact, it can save you money in terms of the initial setup, the ongoing costs, and the phone calls themselves.
You’ll also get more advanced features than you would with a traditional phone system. VoIP is usually part of a UCaaS (Unified Communications as a Service) platform that offers other communication tools, such as text messaging, video conferencing, etc in one convenient platform. This unified service will help streamline your business communications and improve the overall efficiency of your team.
Just make sure you choose a vendor that provides high uptime, good call quality, and top security.
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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:
When the VoIP phone receives digital data from another device, it splits the data into information packets and assigns each packet to their destination address. From there . . .
- Converted data is sent over the broadband line to your VoIP router.
- The router finds the shortest path to its destination.
- The data packet is received at its destination.
- VoIP phone users hear the data as recognizable speech.
IP telephony protocols: an important aspect of how VoIP-based phone systems worklink to this section
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 VoIP business phones
There are two types of business IP phones used by organizations:
- Purpose-built hardware device
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 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 old software from your devices and replace it with the new one.
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 the technology that allows you to make and receive voice phone calls over the internet.
Types of IP business phones
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 it offers 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’s 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 you 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.
However, 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 that 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.
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:
| On-premises | Hosted VoIP |
|---|---|
| PBX system and hardware resides in your office. | Hosted in servers and equipment managed by the service provider |
| High costs associated with on-premises hardware, dedicated IT staffing, and office space. | Lower 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 expensive. | Only requires a broadband internet connection and a computer or smartphone. Business owners can easily add or remove users from their account dashboards. |
| More suitable for large businesses that have the budget and resources to manage and maintain the on-premises system. | Affordable and customizable for small and medium businesses. Enterprise VoIP systems offer numerous benefits for larger 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
Employees won’t be able to answer the phone every time a customer or coworker 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 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.
Keeping track of your phone system’s usage within the organization through the use of call records does 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.
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.
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.
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.
Most VoIP providers will offer free (thus, toll-free) or inexpensive calling so customers can get in touch without incurring extra charges on their phone bills.
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 unlimited calls will depend on the vendor and the plan) to improve business operations.
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 cellular 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.
Commercial VoIP systems can also allow you to send and receive text messages with customers or team members using a business phone number to improve communications.
Modern cloud phone systems offer audio and video conference functionality. Conduct audio or video meetings for improved internal and external communication and collaboration.
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?
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. Or you can just take this VoIP speed test.
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
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.
Advanced features
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.
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.
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.
Ready to upgrade your business phone system?link to this section
If you’re ready to upgrade your traditional phone system and harness the power of IP telephony, there’s no better time than now.
8x8’s cloud business phone system offers an extensive range of features for leveling up your company’s operations. Whether you need to connect remote teams located around the globe or communicate with customers across multiple channels, the 8x8 platform lets you serve anyone 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.