Voice Over IP Phone System: Complete Guide to VoIP in 2024

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If you’re not using modern communication technology, you’re missing out on a host of features that can help you close more sales and provide a better customer experience. That said, there are many things to consider when switching out your traditional phone system for a VoIP system.

But what is VoIP, exactly? How does a VoIP system work? And how does it compare to a traditional landline? 

This article outlines the differences between VoIP services and landlines, the pros and cons of a VoIP phone system, and information about how to set up a VoIP phone system.

What is a VoIP Phone System?

VoIP stands for Voice over Internet Protocol. (Another common term for VoIP is IP telephony.) This technology makes it possible to transmit voice messages and other types of communication over the internet. 

VoIP calls can have all the options that a Private Branch Exchange (PBX) systems with multiple phone lines have, like voicemail, call forwarding, call waiting, caller ID, and conference calling.

But VoIP phone systems come with a major advantage: their ability to connect with other business applications, such as CRM systems. This integration provides a unified source of customer information and enhances efficiency and data management.

And when you use a VoIP service, you don’t have to sacrifice call quality; cloud-based phone systems still offer consistent, reliable call quality. 

Because of the many advantages VoIP provides, many businesses are switching to it in favor of the plain old telephone service (POTS), also called the public switched telephone network (PSTN).

This shift isn’t always by choice, as several countries are actively phasing out traditional PSTN networks to embrace more modern digital communication technologies. The Netherlands, Sweden, Germany, and Japan have already switched off their PSTN networks. And Australia, the UK, New Zealand, and Denmark have plans to phase out PSTN between 2023 and 2030.

How Does VoIP Work? 

VoIP technology transforms traditional voice signals into digital data packets that are transmitted over the internet via a router. This means you can make calls from computers, VoIP phones, or traditional phones with VoIP adapters. 

When you speak into a VoIP-enabled device, your voice is captured and converted from an analog signal into a digital format. This digital data is then compressed using a codec to reduce the bandwidth required for transmission and divided into packets. These packets are sent over the internet to the receiver.

On the receiving end, these packets are reassembled, decompressed, and converted back into an analog signal for playback. Interconnected VoIP providers facilitate this process by managing data routing and enabling calls between the internet and the traditional PSTN, ensuring seamless communication across platforms.

Features VoIP Phone Systems

VoIP phone systems come with a range of features that make them a superior choice to traditional landlines. These modern systems improve the customer experience and give you more flexibility in your communication methods.

Auto attendant 

An auto attendant in VoIP systems automatically directs callers to the right department or service representative. This saves employees time and reduces the need for manually transferring calls. 

It also enhances the customer experience by quickly connecting them with the agent who can address their needs, eliminating the frustration of being transferred multiple times.

Call forwarding

Call forwarding seamlessly redirects incoming calls to the appropriate teams. By setting up rules based on caller needs, calls can be forwarded to phone numbers of specific departments or specialists who are best equipped to handle each query. 

This ensures customers are connected quickly and efficiently to the right person, improving service quality and responsiveness.

Call analytics

Call analytics in VoIP systems provide valuable insights into team performance and customer interactions. Managers can assess how effectively their teams are handling interactions by using this feature to track metrics like call duration, wait times, and call outcomes. 

This data lets your sales and customer service teams identify trends and refine sales scripts, so you can improve strategies and ultimately boost sales and customer satisfaction.

Call routing

Call routing automatically connects customers and prospects with the appropriate team or agent, streamlining the communication process. This feature assesses the caller's needs based on predefined criteria such as language preference, location, or inquiry type and then routes the call accordingly. 

By ensuring that callers are connected with the right person without manual intervention, call routing improves efficiency and the overall customer experience.

Call encryption

Call encryption in VoIP systems encodes the data transmitted during calls. This ensures that conversations remain confidential and are protected from eavesdropping or interception. 

By safeguarding sensitive information, call encryption not only protects the privacy of customers but also keeps your business operations secure. This added layer of security builds trust and ensures compliance, which is especially in industries where handling sensitive data is common.

Call quality

VoIP technology supports high-definition (HD) call quality, which significantly improves the clarity and reliability of voice communications. This superior call quality reduces issues like glitches and dropped calls, providing a smoother and more professional experience for employees and customers. 

The Difference Between VoIP Services and Landlines

Traditional home phone or office line systems (POTS or PSTN) use hardware that runs the primary rate interface (PRI) on the ISDN network. This network refers to a set of communication standards for transmitting voice, video, data, and other network services over PSTN.

A PBX system uses traditional phone cables along with a PBX server that’s housed in your office. With a PBX system, you can have more phones than phone lines, and calls between users are free.

VoIP phones, on the other hand, make it possible to transmit voice calls over the internet. There are three varieties of VoIP phones: IP PBX, fully virtual VoIP, and hybrid VoIP phone solutions.

With an IP PBX setup, calls get routed through VoIP networks and the PSTN system. IP PBX servers may be hosted onsite, through a telecom provider, or through an internet service provider.

A fully virtual VoIP, also known as a softphone setup, only uses the internet and phone system software. That means there’s no need for desk phones, cables, or any other kind of hardware. Rather, users make and receive calls via a dedicated app on an internet browser. They can do so using a smartphone, tablet, or desktop computer. 

Here’s a summary of the differences between VoIP and landline functionality:

How to Choose Between Voice Over Internet Protocol and Landlines

At first glance, VoIP seems like the clear choice over PBX phone systems, but don't move too fast. As with any business investment, you need to consider all the factors that affect your operation and budget before making a decision.

7 phone system considerations

1. Current setup

If your current PBX setup meets your needs and scaling calling operations isn’t an issue, changing it may not be cost-effective, unless the regulations in your country require it.

2. Internet reliability

PBX systems operate on phone lines, so you’ll still be able to use them if your internet fails. In contrast, IP PBX systems depend on internet connectivity; outgoing calls cannot be made if the internet fails. 

However, VoIP systems offer features such as call forwarding to another number or receiving calls via voicemail during internet downtime, providing a workaround for continued communication in the case of internet failure—though you still won’t be able to call out.

3. Remote teams

PBX systems limit you to onsite calls, while VoIP systems support remote workers, remote call centers, and distributed teams.

4. Cost

You’ll have lower monthly fees for PBX systems but will pay more for cable installation, equipment, and maintenance. With VoIP, you’ll pay a fixed monthly subscription fee, but there are no costs for calls or equipment.

5. Features

PBX phone system only offer a few basic features, like caller ID, call waiting, call transferring, and voicemail. 

But with VoIP, you get all the same features as a PBX system plus more advanced functionalities like call queueing, call recording, call whispering, call routing, analytics, and AI conversation insights. You can also integrate these systems with your CRM and other business communication software.

6. Availability

It’s rare for companies to install a new PBX system due to the equipment and installation costs. But with a VoIP service, you can quickly and easily set up a phone system as long as you have a stable internet connection. 

7. Sound quality

PBX systems generally deliver good sound quality as they use landlines for transmission. However, IP PBX systems can experience quality issues if the internet connection is weak. 

A VoIP system provides high-quality audio as long as it has a strong internet connection, with fiber optic cables maintaining optimal call quality.

Looking for a reliable cloud-based phone system that prioritizes call quality? How does consistent 99.95% uptime sound? Learn more about Aircall.  

Pros & Cons of VoIP Service Providers

VoIP systems have some big advantages over PBX systems, though they may not be the best option for every company. Here’s a closer look at the advantages and disadvantages of VoIP systems.

Advantages of a VoIP system

• Lower overall costs, as you essentially just pay the subscription costs

• Portable, as you can keep the same phone number when you move or switch phones

• Ability to use them with your CRM and other software via integrations

• Can use multiple channels simultaneously, including phone, chat, and text

• Suitable for remote teams without extra cost

• Typically offers lower rates for international calls compared to traditional phone lines

• Can add and delete lines quickly and easily

• Easily scale up or down based on business needs without significant infrastructure changes

• Improved customer interactions with features like call queues, call recording, and voicemail to email

• Advanced tools like auto AI VoIP conversation intelligence, call forwarding, and interactive voice responses

Disadvantages of a VoIP system

• Need a strong, consistent internet connection to prevent lag and jitter

• Need adequate bandwidth for good call quality

• Small risk of decreased voice and call quality

• Devices need a sustained power source, such as charged batteries or direct plug into an outlet

When should you make the switch to a VoIP service provider?

If you’re considering switching to a VoIP phone system, you’re probably questioning two things. The first is if your current phone system is working well enough for you. The second is whether you’re missing out on a phone system that will help you take your business to the next level.

It’s time to consider switching to a VoIP phone system when:

• You’re spending too much on PBX repairs, maintenance, and IT staff

• You want a predictable budget with fixed subscription costs for phone expenses

• Mobility has become essential for your operations

• You could be more efficient if your CRM worked with your phone system

• You’re ready to implement call center software

• You need your phone to ring on multiple devices simultaneously

• Using national or international phone numbers would benefit your business

• You’d like to start using distributed teams

Equipment needed for VoIP Setup

You just need a few things to set up a VoIP system: a reliable internet connection, VoIP-compatible phones or adapters, and optionally, a specialized router. Remember that internet connection is the core of VoIP communications, so a high-speed internet connection is vital, especially for handling multiple simultaneous calls.

When it comes to hardware, users can choose between dedicated VoIP phones that connect directly to the network via Ethernet or Wi-Fi, or use traditional phones with Analog Telephone Adapters (ATAs). 

Dedicated VoIP phones often feature advanced functionalities like HD voice and touchscreens, while adapters allow the continued use of existing analog phones within a VoIP system. Alternatively, you can use a headset with earphones and a microphone that links directly to a computer or other device, allowing for hands-free calls.

In larger or more demanding setups, you may want to consider a specialized router. This prioritizes voice traffic to ensure consistent call quality, even when the network is otherwise heavily utilized.  

Factors to Consider When Choosing a VoIP Provider

Your goals, current activities, and vision for the future of your business should guide your decision around choosing a VoIP phone service. Here are some considerations to help you make up your mind.

Current setup

Are you a startup that hasn’t chosen a phone system yet? Flexibility is crucial for growing companies, and you need a system that can easily scale as you do. 

Have you decided to upgrade your current phone system from a PBX system? Evaluate how smoothly you can transition to VoIP, considering the need for new hardware or software and training for your team.

Can you transition to a virtual setup smoothly? Check for features like mobile apps, virtual fax capabilities, and cloud service integrations to ensure your team can operate efficiently from any location.

Call volume

If your inbound and outbound call volume is minimal and you already have a PBX system that works well, it may not be worthwhile to make a switch. If your call volume is heavy and you have or need a call center, it’s probably time to move to VoIP.

Scalability

Consider whether the VoIP service can scale with your business growth. The provider should be able to support an increasing number of users and expanded functionalities without significant disruptions or excessive costs. 

Seasonal businesses, for example, will benefit from a VoIP phone system that lets them add lines during peak seasons with minimal additional costs or energy.

Budget

PBX systems have high upfront costs, as well as ongoing costs for repairs and IT maintenance costs—and an IP PBX can be just as much. Virtual solutions, on the other hand, are much kinder on your budget.

Compare the expenses associated with different VoIP providers, including setup fees, monthly rates, and charges for additional features. Understand their pricing structure—whether it's flat-rate, pay-as-you-go, or tiered— and check for any hidden costs that might apply.

Employee adaptability

If your employees resist learning how to use all the features and tools that a VoIP system can give you, you won’t get the full benefit of the platform. 

But if you’ve been considering allowing your employees to work remotely and they’re willing to get on board with virtual calling, a VoIP system is your best bet.

Features

A VoIP system gives you an impressive amount of features. What’s more, a VoIP system will evolve along with future innovations. 

VoIP providers like Aircall offer advanced features like queue call back, smart routing, call analytics, and call monitoring. This is in addition to other functionalities like call recording, AI conversation intelligence, power dialer, auto transcription, and integrations with business tools, which enhance operational efficiency and productivity.

However, features are much more limited with a PBX system.

VoIP Migration in 5 steps

When you’re ready to migrate to a VoIP system, you’ll need to prepare for it. Using a reliable VoIP service provider and planning ahead for the change will make the process easier. 

Here are a few tips for getting ready for the transition: 

1. Evaluate your current network: Ensure your current network can handle the voice traffic and maintain high call quality. Check to see that voice is optimized on your router.

2. Use a reputable VoIP service provider: Be sure they know your needs and what you hope to accomplish. They should be able to see the migration process through from start to finish.

3. Map out a migration plan: Schedule time with your VoIP service provider to map out the migration plan and understand how, if, and when the transition might interrupt your business operations.

4. Train employees: Hold a training session for your employees and network administrators so they’re ready to use the system as soon as it’s up and running.

5. Test the system: Before the new system is completely up and running, test it to make sure everything works properly.

Technical Requirements for Using VoIP Services

In order to use a VoIP phone system, you’ll need to build an infrastructure with specific technical components. This includes: 

• Hardware: Router, VoIP adapter, phone equipment, and headsets.

• Internet connection: A reliable internet connection, preferably using fiber optic cables.

• Bandwidth: Test your system to ensure it has enough bandwidth for your call volume.

• Software: Applications, integrations, and a cloud-based phone system.

Each of your devices should have at least 100 kbps (kilobits per second) upload and download speed available. Connections should have less than 70 ms (milliseconds) ping and jitter, which will prevent problems with latency and stability.

Installation

You’ll need to pay attention to certain details when setting up a VoIP system, so follow these steps during installation: 

1. Designate administrators: Assign one or more employees to control your phone’s system and settings. Everyone needs to know who to go to for questions and problem-solving.

2. Create Voicemails and IVRs: An IVR is an interactive voice response system. Administrators will need to set it up to route your calls. Admins will also need to create a professional, yet personal voicemail message to greet your customers.

3. Set calling hours: Set your phone system up so that it rings during your normal business hours on all extensions and locations. It seems like a basic step, but don’t overlook it and risk upsetting customers.

4. Integrate with other workflows: Connect your phone with your existing tech stack. Once you integrate your other business tools, they automatically update across your various teams, meaning better, more consistent service for your customers.

Integrations

VoIP integrations are easy to install and straightforward to use. These are just a few of the business tools you may want to integrate:

• CRM

• Sales software

• LiveChat

• Help desk

• SMS/text or chat

• HR and recruiting platforms

• AI and transcription tools

• Payments and billing software

• Productivity and workforce management tools

Check out Aircall’s App Marketplace for a host of valuable apps the platform connects with; you may be using some of them already.

Best Practices for VoIP Performance Management Checklist

Once you’ve made the decision to adopt a VoIP service, follow these best practices to ensure you make the most of the software and to get your system up and running smoothly: 

• Verify your network’s stability.

• Test your devices, headsets, and network.

• Check firewalls for a clear flow of traffic.

• Make sure you have quality network cables for all devices.

• Put VoIP phones on your network into their own Virtual Local Area Network (VLAN).

• Ensure that incoming calls ring and don’t go to voicemail.

• Prioritize SIP traffic with QoS on your router.

• Test your system for appropriate data speed (ping).

• Test your system for variations in response time (jitter).

• Choose a reputable VoIP phone system provider like Aircall with a proven track record.

• Provide training for your staff on how to effectively use the VoIP system and troubleshoot common issues.

• Implement monitoring tools to continuously track the performance of your VoIP system. 

Learn how Aircall’s features help your team hold better conversations for increased sales and happier customers. See our list of advanced features.

Frequently Asked Questions

What is a VoIP system?

A VoIP system enables voice communication over the internet rather than through traditional landline networks. Unlike regular landline calls that use dedicated copper wires for transmission, VoIP converts voice signals into digital packets and transmits them over the internet. 

This digital approach allows for features like call forwarding, HD voice quality, and integration with other online services, making it a more versatile and cost-effective communication solution.

What is an example of VoIP?

An example of VoIP use in a business is managing a customer support center. VoIP integrates with CRM software, allowing support teams to access customer data during calls—in turn enhancing service efficiency. It also offers features like call recording and analytics, which are crucial for training and quality assurance.

For sales teams, VoIP provides tools like auto-dialers and call tracking, helping streamline outreach. This makes VoIP an excellent choice for improving sales and customer support communications.

What are the 2 types of VoIP?

There are two primary types of VoIP services: hardware-based, which uses physical devices like VoIP phones or adapters, and software-based, known as softphones, that run on computers or mobile devices. 

If you're looking for high-speed internet connectivity for clear voice calls, software VoIP services are preferable. They offer greater flexibility and can be optimized for high-quality voice transmission without the limitations of physical network infrastructure.

Is VoIP better than landline?

VoIP is often considered superior to traditional landlines for business due to its flexibility and advanced capabilities. 

Unlike traditional systems that rely on physical hardware and lines, VoIP transmits voice calls over the internet. This allows for features like integration with business software, use of mobile apps, and operation on various devices like smartphones and computers. 

VoIP systems, including IP PBX and fully virtual setups, also adapt more easily to business needs, making them more cost-effective and efficient.

Published on September 30, 2020.