What is VoIP and how is VoIP used in business?

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An employee using VoIP to make business calls with clients
voip phone system

The popularity of business VoIP

Over the last several years, businesses have come to recognize the advantages and benefits of taking the VoIP route over traditional telecom carriers.

As a result, VoIP has become the foundation of most modern business phone systems and is now the top telephony solution for many industries.

In fact, the question is no longer “which is better, VoIP or PSTN (Public Switched Telephone Network)?” These days, the question is “when will VoIP totally replace PSTN?”

voip to voip

What is VoIP?

VoIP is the technology that allows voice communication over the internet. What it does is take audio data, like the caller’s voice, and encapsulate it, then break it down into small data packets. These packets travel through IP networks until they reach their destination, where they are reformed into the audio data. Together with a set of transmission capabilities, it is able to duplicate telephony functionalities.

voip to pstn

What are the perceived disadvantages of VoIP?

Critics of VoIP often argue that VoIP has lower call quality compared to PSTN. However, they fail to acknowledge that this is only true for the old, basic versions of VoIP like Skype (from years ago), Yahoo Messenger (now defunct), and Google Voice. Calls made from services such as these are often jittery and unstable.

Modern business VoIP providers, however, have worked hard to make significant improvements to voice call quality and, in some instances, even surpass PSTN. In fact, RingCentral has already implemented HD voice across all their calling plans, which also applies to their unified apps for laptops and mobile devices—not just to IP desk phones.

Clearly, VoIP is making an impact on businesses. But how exactly is VoIP used in business? And why is it better than PSTN? Let’s start by defining what VoIP is.

How does VoIP work for business?

As was mentioned above, VoIP is now the telephony solution of choice for a lot of businesses. VoIP adoption is actually expected to grow continuously in the foreseeable future.

Aside from allowing businesses to have a telephone service that can be accessed from anywhere that has an internet connection, it also gives them the benefit of having virtual phone numbers or VoIP phone numbers. These phone numbers are not tied to a specific telephone, so they can be connected to any device the company wishes to connect them to—mobile phone, home landlines, or even laptop computers.

Organizations can also choose what type of number to get, depending on their goals. For example, a toll-free number can give them national exposure and is therefore perfect for those that have plans for growth. On the other hand, a local number can provide grassroots enterprises a closer sense of connection to local communities. It allows your business to create a virtual presence in the community even if you do not have a physical presence in that locale.

In addition, VoIP is also the technology many providers leverage to support other communications and collaboration solutions like audio and video conference.

Lastly, most modern business phone systems use VoIP as the foundation for telephony. The call management aspect of the phone system, however, is performed by a group of servers that perform the call routing functions. This is what is referred to as a VoIP phone system.

A virtual phone system is mobile and desktop

What is a VoIP phone system?

In the past, companies had to host the servers on their own premises. This required large capital investment. That changed, however, with the arrival of the cloud.

Cloud technology changed the business communications landscape. It allowed VoIP providers to host the PBX component in house, giving them the option to offer virtual business phone systems as a service instead of as products.

As a result, the modern iteration of the VoIP phone system is more connected to the cloud phone system version of the technology. But it’s important to remember that these days “VoIP phone systems” still more accurately refer to the combination of voice over IP and private branch exchange call management features.

However, it’s also fair to say that the on-premise phone system is already on its way toward becoming obsolete because of the cloud. It is just a matter of time before the term “VoIP phone systems” only refers to the cloud-based version we’re enjoying today.

What are the advantages and disadvantages of VoIP?

To really emphasize the impact of VoIP on businesses, here is a list of the advantages and disadvantages of VoIP and how each impacts companies:

Advantages and benefits of VoIP

VoIP provides businesses with big savings.

The primary reason businesses take the VoIP route in the first place is because of the big savings it can get for their company.

For one, VoIP usually has lower overall costs compared to traditional phone carriers and generally treats long-distance calls as local calls as well. As for international calls, VoIP providers usually charge lower international call rates compared to traditional telecoms companies.

Second, most VoIP phone systems tend to include extra features that don’t require subscribers to pay additional premiums. Advanced options that are usually treated as add-ons for traditional phone plans, like call forwarding, call screening, and caller ID, are all typically included in most VoIP plans.

VoIP is scalable.

Adding new phone numbers and new lines is very easy with VoIP. Unlike how it is with traditional telecoms (where new phone numbers and new users require new cabling to be installed), VoIP only needs to have the additional lines set up from their online account dashboard. Just a few taps or clicks are all it takes to add new lines.

The same goes for VoIP phone systems connecting office branches. Instead of installing and setting up separate phone systems at each location, you can actually bring each of your offices around the world together under one telecommunications system without having to install a single piece of hardware.

VoIP allows users to be more mobile.

VoIP provides businesses more flexibility in terms of where and when their employees work. Aside from uniting multiple locations under one system, the cloud-based solution also allows organizations to implement operational options that were not available when they were using traditional landlines and on-premise systems.

This includes remote working and other work-away-from-office setups. With VoIP, they are still able to use official business phone numbers for calling without having to use cellular minutes. They can even use other communication tools like video conferencing to stay connected with the company if their provider’s service is robust enough.

What are the disadvantages of VoIP?

While VoIP is clearly the better option for business communications, it is not perfect. That being said, the disadvantages and limitations of VoIP are pretty easy to get around.

VoIP is dependent on your internet connection

For better or worse, the quality of your VoIP experience will depend on your broadband connection. Slow and unstable internet connection will lead to jittery and unstable VoIP calls. And of course, no internet will lead to no VoIP calls at all.

The solution is just to partner with a reliable internet provider. In some cases, companies have a dedicated internet line solely dedicated to the VoIP phone system. It is also recommended that you use QoS (quality of service) routers that you can set up to prioritize VoIP transmissions over other IP transmissions.

Emergency 911 needs to be configured when using VoIP.

The physical location of traditional landlines is used by emergency responders, including the police and fire department, to get your location in moments of crisis. But since VoIP is virtual and not actually associated with a physical location, 911 calls using this technology can result in authorities being sent to the wrong dispatch

Fortunately, there is such a thing as Enhanced 911 or e911, which supports wireless users. RingCentral actually allows its users to update their customers’ e911 emergency addresses, which allows users to implement changes to the information concerning the physical address assigned to the VoIP line. This address can be used by 911 to trace the call.

Now you know why more and more businesses are taking the VoIP route. It is time to find the right VoIP provider for your company.

Try RingCentral for free, and see if it’s a good fit for your company.