What is an IP phone system & does your business need one?
Eliminates the need to maintain complex on-premises infrastructure
Advanced features like auto attendant are already built-in
Integrates seamlessly with your existing business tools
Written by Eric Kenney
Director, Product Marketing
Reviewed by Esther Yoon
VP, Product & Industry Marketing
Updated: 07 October 2024
By adopting an IP phone system, you can transform your business efficiency. If you’re still using legacy landline telephony, it could be time to make the switch. Here, we explain what an IP phone system is and why it could make such a difference for your organization.
What is an IP phone system?
An IP phone system allows you to make and receive phone calls over an internet connection rather than using a traditional landline.
It uses VoIP (Voice over Internet Protocol), a technology invented in the 1990s. This converts the analog sound of your voice into a digital data package, which is then sent across the internet connection and finally decoded back into sound at the other end.
Difference between an IP phone and a traditional phone system
IP phone system
Traditional phone system
Technology
VoIP
Copper wire network
Mobility
High: can be accessed via any internet-connected device
Low: needs fixed phone lines to work
Scalability
Additional connections can be set up in minutes
Additional connections need extra physical hardware
Cost
Low: generally charged on a per-user basis
Potentially high: physical infrastructure has to be purchased and maintained
Technology
Traditional business phone systems depend on the Public Switched Telephone Network (PSTN), which uses copper wires to transmit analog sound signals between desk phones that are fixed in place.
As we’ve explained, an IP phone system doesn’t need a landline. Instead, it uses VoIP technology to convert sound to digital data which it then sends over the internet to its destination.
Mobility
Because of this, a VoIP phone service has the advantage of allowing you to access your business VoIP account from any internet-connected device. This is one of the key differences between an IP phone and a traditional phone, and represents a major benefit.
For companies that employ remote workers or follow a hybrid work model, using an IP phone system makes sense. This is because it enables staff to use mobile devices to access their accounts wherever they are.
But even for organizations where all work happens in-house, IP phones are still highly useful. For example, if you travel for work, it means you can still log in to your VoIP phone system account and make business calls from anywhere in the world. IP phones are also compatible with many desk phones, giving your employees the freedom to choose the device that works best for them.
Scalability
Another crucial distinction is how easy it is to scale IP phone systems. If your business is experiencing a growth phase, you’ll need to quickly set up additional phone lines for new employees. Or, if you operate in a field with seasonality, you may need to reduce the number of accounts during off-peak periods.
With traditional phone systems, this is hard to achieve with any efficiency. You’ll need to purchase new equipment and install additional phone lines, which could mean waiting days or even weeks for a specialist engineer. Scaling down won’t be easy, either. During quieter periods, you’ll have a lot of redundant phone lines - which you’ll continue to pay for even though they’re not in use.
But with an IP phone system, you can add or delete accounts in minutes. You can set up new accounts with just a few clicks, and close unneeded ones just as quickly. In other words, an IP phone system is a highly flexible solution you can tailor to your specific business needs.
Cost
And let’s not forget the difference this can make to the bottom line. When you look at the costs of using an IP phone as opposed to a traditional phone system, there’s really no comparison. To start, if your business makes a lot of international calls, doing so with VoIP technology is usually far less expensive than over a traditional landline.
Additionally, an IP phone system means you don’t need to spend huge amounts on maintaining cumbersome in-house telephony infrastructure. No more engineer callout charges, and no need to buy expensive specialist business phones.
Best of all, you’ll always know how much you need to spend, as you’ll pay a fixed fee per user. This makes it much easier to plan your budget.
Main types of IP phone system
There are a number of different types of IP phone system, and the one you choose will depend on your specific business needs. Here’s a guide to the main ones.
On-premises IP phone system
Some companies prefer to have full control over their own communications infrastructure, in which case an on-premises IP system could be the best fit. With this setup, all the equipment and hardware you need to make VoIP calls sits in your office. The phone service uses your Local Area Network (LAN) to connect to a virtual PBX.
The downside of an on-premises IP system is that it shares some of the drawbacks of a traditional phone system. For instance, you still need to install and maintain all the infrastructure yourself, from Ethernet ports to network hardware, which also means additional costs.
Generally speaking, this kind of system has mostly been adopted by larger companies upgrading from a legacy landline system. It certainly delivers many benefits over the latter. For example, VoIP phone systems offer HD-quality sound and a range of other advanced features.
But on the other hand, it’s simply not as flexible a solution as a hosted IP system.
Hosted IP phone system
Most businesses looking for a modern VoIP-based system choose a hosted IP phone system. This is a cloud phone system whereby a third-party provider arranges setup and maintenance on behalf of the client company.
Hosted systems are very flexible. You can usually choose whether to make all calls over an internet connection, or route some through a traditional PSTN (as long as the host supports SIP trunking).
To use a hosted IP phone system, all you need is a broadband connection and an internet-enabled device. This could be a dedicated VoIP phone or something else like a laptop or desktop computer.
Types of VoIP phones
You can generally place VoIP phones into two categories: hard phones and soft phones.
Hard phones look like traditional office phones. You interact with them in exactly the same way, but instead of plugging them into a landline, you connect them to the IP network.
On the other hand, a softphone is any other device you can use to access your IP phone account. This could be your laptop or a mobile phone handset featuring the relevant IP software.
How do IP phone systems work?
It’s worth digging a little deeper into the technology behind IP phone systems. So, in this section, we explore what’s going on behind the scenes.
What is Voice over Internet Protocol (VoIP)?
As we’ve established, VoIP is a technology that enables the transmission of voice calls over an internet connection. When you speak during a call, the software converts the analog information — the sounds you make — into discrete packages of digital data.
It then sends the data to the VoIP router, which in turn sends it on to its assigned destination (the phone being used by the person you’re talking to). When the data packets are received, they’re decoded into analog sound so that your call recipient can hear what you’re saying.
Other IP telephony protocols
VoIP isn’t the only commonly used communications protocol. Here are a few others you may encounter.
SIP: Session Initiation Protocol. This takes care of various admin tasks. It looks up the correct IP addresses associated with the given phone numbers, determines whether the potential recipient is available, and places the call.
RTP: Real Time Protocol. The protocol responsible for carrying the voice data packets across the network.
TCP: Transmission Control Protocol. A connection protocol optimized for accuracy. Each time a data packet is sent, the endpoint at the other side sends a packet in return to confirm its arrival. If the acknowledgement packet takes too long to come back, the protocol prompts the system to resend the original data package.
UDP: User Datagram Protocol. Another connection protocol, this time optimized for speed. Unlike with TCP, UDP features no error control element. Data packets sent using this protocol can go missing or arrive in the wrong order. For that reason, it’s only generally used for applications in which the constant flow of data is more important than making sure every piece of data arrives.
Benefits of IP phone systems
The huge range of advantages IP phone systems offer is the main reason they’ve become such a popular business phone service. Here are a few of the practical benefits you’ll enjoy if you decide to make the switch.
Cost-efficiency
With traditional phone systems, it’s not usually possible for you to know in advance how much your phone bill will cost. You’re generally charged according to the duration of calls and at different rates depending on whether you’re making a local or long-distance call.
With IP phone systems, everything’s included as part of a single, fixed monthly rate per user. If you choose a hosted cloud service, you don’t even have to pay for upkeep and maintenance. All this makes it a much more cost-efficient business option.
Mobility and flexibility
Need to access your business phone on the go? Not a problem with an IP phone system. Since you can access your account with any internet-enabled device, all you need is a laptop and a broadband connection.
This flexibility isn’t just great news for workers who need to catch up while they’re out of the office. It also means businesses can roll out less centralized working models and capitalize on the upsides of remote and hybrid arrangements.
Scalability
Another notable IP phone system advantage is that it’s simple to scale up your system as your business grows. All you need to do is let the IP phone company know how many new accounts you need, and they’ll set them up in a matter of minutes.
You need to make sure you have enough devices available so your new staff can use the system. But since you can use any computer with the right software installed, it should be pretty straightforward.
Reliability and security
Modern IP phone solutions are more reliable than ever. Even in the rare event of your broadband connection or wi-fi going down, you can usually use a call forwarding feature to piggyback on another connection such as a smartphone network.
And as for security, IP telephony providers put a huge emphasis on making sure your data is completely safe. End-to-end encryption generally comes as standard, so you never have to worry about unauthorized personnel getting their hands on your business-critical information.
Future-proof
Because IP phone systems are so flexible, they’re essentially future-proof. You can adapt them and quickly change your setup as needed.
This is especially true of hosted systems. All the maintenance takes place at the VoIP service provider’s end, which means you never need to worry about it. Effectively, your phone system will be automatically upgraded whenever necessary without you having to lift a finger.
IP phone systems for small business
Choosing an IP phone system for small business purposes is a great idea. We’ve already highlighted the cost savings you can make, as well as the scalability benefits. But there are a couple of extra upsides.
For one thing, the advanced functionality of Voice over IP phone systems puts your organization on the same level with much larger companies. Suddenly, you’ll be able to use features previously only available to enormous enterprises with deep pockets.
A small business IP phone system can help you transform your company’s contact center into a sleek, modern machine. As it keeps costs down, you’ll be able to do more with your budget. You could allocate extra cash to other projects, which will improve your overall ROI.
The best IP phone systems for small businesses offer customizable services, so you’ll never need to pay for features you don’t use. Ultimately, they deliver efficient, reliable, and secure communications solutions with exactly the kind of flexibility modern companies need.
Essential features of an IP phone system
Whatever system you decide to go for, there are a few core elements you’ll want to check. These are the key features of an IP phone system that many businesses find indispensable.
An IP phone system is usually inexpensive. Don’t miss out on potential savings by tying yourself to a service that’s needlessly costly.
Sophisticated automation technology supports a virtual receptionist function that automatically answers calls when all your agents are busy. You can program these to interact with callers via their keypad or with voice response.
Then, the system will either offer callers self-service options or use smart routing to direct the call to an appropriate live agent. This saves a lot of time and helps minimize call queues.
Then, the system will either offer callers self-service options or use smart routing to direct the call to an appropriate live agent. This saves a lot of time and helps minimize call queues.
IP phone systems offer basic voicemail functionality, but be on the lookout for additional features that help optimize your time. For instance, visual voicemail is a common feature that allows you to manage your voicemails across multiple devices. You can also often get voicemail transcripts sent to your email inbox for convenience.
Call recording allows you to keep a record of all inbound and outbound calls so you can use them for training or auditing purposes. (You can also disable the feature if you need to.)
If the information is available, the Caller ID feature will show you the caller’s name, location, and account details before you answer a call. You can also use caller ID to screen out spam calls and save time.
You can choose phone numbers with specific characteristics and assign them to your preferred account. For instance, you’ll be able to secure a toll-free number your customers can call you on, so they don’t have to overspend to get in touch. Or if you’re expanding to a new country, you can easily get a local phone number without traveling or opening an office.
One of the main benefits of an IP phone system is how you can use it across multiple devices. That means you can use one that comes with a dedicated business phone app for iOS and Android.
This could make it easier for your remote team members to use the system, since they can just fire up the app rather than negotiating their way to their account via a mobile browser.
This could make it easier for your remote team members to use the system, since they can just fire up the app rather than negotiating their way to their account via a mobile browser.
The best IP phone systems, like RingEX, do so much more than facilitate voice calls. They’re actually Unified Communications as a Service (UCaaS) solutions.
In addition to IP telephony, UCaaS platforms for business communications support a number of other functions. They include SMS messaging, video calling, and file sharing—all in one highly integrated product that’s ideal for collaboration across your company.
In addition to IP telephony, UCaaS platforms for business communications support a number of other functions. They include SMS messaging, video calling, and file sharing—all in one highly integrated product that’s ideal for collaboration across your company.
These systems are also designed to work well with your existing tools. For instance, many are compatible with popular products like the Salesforce CRM or Google Workspace.
This means your teams can easily use all the familiar platforms alongside your IP telephony software, without the need to constantly switch between applications.
This means your teams can easily use all the familiar platforms alongside your IP telephony software, without the need to constantly switch between applications.
How to set up an IP phone system with RingCentral
Setting up your IP phone system with RingCentral is easy. Simply register your account and select your preferred plan and phone features. Then, all you need to do is download the software to get started.
You can use hard IP phones or other devices such as laptops. Beyond that, all you need is a good internet connection. And that’s it! You’re ready to go. It literally couldn’t be easier.
IP phone system frequently asked questions (FAQs)
When you speak on a VoIP phone, it translates the analog sound of your voice into a number of digital data packages. It then transmits those data packages across the internet to be decoded at the other end.
VoIP is the name of the underlying technology that IP telephony uses to work. It stands for “Voice over Internet Protocol”.
It depends on your business needs, but to get the full benefits of cost savings, flexibility, and easy scalability IP systems can deliver, most companies are better off using the cloud.
They can. You can use an IP phone system on any internet-enabled device. If you prefer, you can even get an app for your smartphone.
It depends on the system you want and how many advanced features you need. You can check out the details of our plans and pricing to give you some idea.
All you need is IP telephony software and a device that you can use to connect to the internet. That’s it.
Yes, because they use the internet to make and receive calls rather than a traditional landline.
Get started with an IP phone system today
If you’re ready to make the switch to an IP phone system and capitalize on the great benefits it can deliver for your business, reach out to our experts for more information.