1. Business Ideas
  2. Business Plans
  3. Startup Basics
  4. Startup Funding
  5. Franchising
  6. Success Stories
  7. Entrepreneurs
  1. Sales & Marketing
  2. Finances
  3. Your Team
  4. Technology
  5. Social Media
  6. Security
  1. Get the Job
  2. Get Ahead
  3. Office Life
  4. Work-Life Balance
  5. Home Office
  1. Leadership
  2. Women in Business
  3. Managing
  4. Strategy
  5. Personal Growth
  1. HR Solutions
  2. Financial Solutions
  3. Marketing Solutions
  4. Security Solutions
  5. Retail Solutions
  6. SMB Solutions
Product and service reviews are conducted independently by our editorial team, but we sometimes make money when you click on links. Learn more.
Grow Your Business Technology

What Is VoIP?

What Is VoIP?
Credit: Office phone image via Shutterstock

With costs of telephone and Internet service on the rise, many businesses are looking for ways to save money. One option they have is to forgo a traditional phone line in favor of VoIP service.  While saving money on their phone bill is appealing, many business owners don't fully understand what VoIP service is or how it is used.

VoIP is an acronym for Voice over Internet Protocol. Instead of using a traditional analog phone line, VoIP technology lets businesses make voice telephone calls via an Internet connection and bypass the telephone company completely.

VoIP technology turns a user's voice into a digital signal that is sent through the Internet to the person being called. When the digital signal reaches the person on the other end, it is converted back to a traditional telephone signal. While some VoIP providers may limit users to calling only those also using VoIP technology, others provide calls to anyone with a telephone number.

Internet users can make calls using VoIP technology in three different ways: directly from a computer, by using a special VoIP phone, or with a traditional phone connected to a specially designed adapter. When using a VoIP phone or a phone that's connected to a VoIP adapter, the phone will ring, just as a traditional phone, when a call is incoming.  Those who make calls directly from the computer are alerted to incoming calls by special software that is given to users by the service provider.

The main advantage to using VoIP technology is that it saves the cost of paying for both a traditional phone line and an Internet connection. Disadvantages include not being able to access traditional 911 services in case of an emergency and the fact that, depending on the provider, it might not work during a power outage.

There are a number of reasons more and more businesses are turning to VoIP for their calling needs. The top reason is the cost.  Rather than shelling out additional money for telephone services, companies can save money by tapping into a service they already are using — the Internet. The cost of using VoIP is substantially cheaper than traditional telephone services and it saves even more money for those companies that make lots of international calls.

VoIP services also provide businesses with greater flexibility. In an article for Entrepreneur.com, Cisco Systems Inc.'s Peter Alexander said VoIP systems allow businesses to do things that are simply not possible with traditional phone technology. Among the things he points to include the ability to take your phone system with you, wherever you are.

"As long as you have access to a broadband connection, you can use your VoIP system anywhere, such as in a hotel room or at a friend's home," Alexander wrote. "Customers and employees can stay in touch just by calling your regular business phone number — they don't need to call your cell phone, which means you can save precious cell phone minutes."

Additionally, he said the service allows employees to talk via their laptop and receive voice mail and faxes through their email address.

"You get all your messages in one place, and your voice mail and faxes can be easily archived or forwarded to others," Alexander wrote.

In an article for TMC.net, contributing editor David Sims said scalability is another benefit for businesses that choose to use a VoIP system.

"Compared to traditional phone lines, VoIP services enable any company to easily and with minimal additional capital investment, adapt to future changes," Sims wrote. "Traditional phone systems always require the purchase of additional hardware or modules to handle changes or expansion."

When choosing a VoIP system, there are several things businesses should be looking for, including:

  • Service plan: Among the items on a service plan a business owner should be concerned about include contract lengths, customization of plans to suit their needs, allotted minutes for long-distance or international calls and reduction of prices for adding other users or extensions to an existing plan. The best products will let businesses choose from multiple service plans.
  • Features: The best VoIP providers offer not only the usual calling tools, such as as voicemail, e911 service, call forwarding and call transfers, but business specific features like call queuing systems, mobile applications and additional numbers.
  • Network: The best VoIP providers should offer multiple server locations and a fully redundant network to ensure that service continues even if part of their network goes down for any reason.
  • Help and support: Business owners should look for a service that offers both live customer support, as well as online help that can walk them through any problems they run into.

As VoIP services have become more popular, a number of providers have begun offering the service.  Some of the top VoIP service providers for residential users include RingCentral, Jive, 8x8, Phone.com, Vonage, Nextiva, RingByName, Phone Power, Velocity Networks and 1-VoIP.

With consumers relying on their smartphones more than ever, many are using Mobile VoIP services to cut down on costs. Instead of using the traditional wireless network to make telephone calls, Mobile VoIP allows calls to be made over the Internet using a smartphone. In order to use Mobile VoIP technology, you must have a smartphone that is compatible with the VoIP service provider you choose. Some of the top Mobile VoIP service providers are Yeigo, Fring, TruPhone and Vopium.

Chad  Brooks
Chad Brooks

Chad Brooks is a Chicago-based freelance writer who has nearly 15 years experience in the media business. A graduate of Indiana University, he spent nearly a decade as a staff reporter for the Daily Herald in suburban Chicago, covering a wide array of topics including, local and state government, crime, the legal system and education. Following his years at the newspaper Chad worked in public relations, helping promote small businesses throughout the U.S. Follow him on Twitter.