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VoIP (Voice over Internet Protocol) represents the latest in phone system technology. With it, regular voice calls are sent over a computer network instead of traditional phone lines.
PC-to-PC telephony applications were introduced in 1995 – and it looks like it may have finally arrived. In recent years the audio quality has improved drastically, technology has gotten cheaper, and business adoption has started to spike. According to industry analysts Frost & Sullivan, worldwide revenues for IP PBXs (the heart of a VoIP phone system) are expected to grow from $1.96 billion in 2003 to $9.08 billion in 2007. Other industry players predict that by then, more than half of all phone traffic worldwide will be IP-based.

There are two basic varieties of VoIP. In its simplest form, VoIP requires a regular phone, an adapter, broadband you place a call, it is sent over the Internet as data until it nears the recipient’s destination. Then the call is translated back into a more traditional format and completes the trip over standard phone lines. Also known as Internet telephony, this allows for extremely cheap long-distance and international calls.

This Buyer's Guide, however, addresses VoIP phone systems - equipment installed at your business that routes internal calls over your computer network. With VoIP, you can unite multiple offices on a single phone system. No matter how remote the locations, a VoIP phone system can completely eliminate long-distance calling charges between them. However,

VoIP systems can work for the smallest offices and the largest enterprises. In fact, IP PBXs will likely replace traditional PBX phone systems as prices fall and reliability improves, which helps explain why so many IP PBX manufacturers are familiar telecom heavyweights.
Is a VoIP Phone System Right for You?

The buzz around VoIP phone systems has been enough that many businesses are diving in without really understanding their benefits. Contrary to the assumption many potential buyers start with, a VoIP installation now, features alone are not reason enough to upgrade. However, there impact on your business.

If your company has multiple locations – branches, telecommuters, remote sales offices – that are already connected to a company Local Area Network (LAN) or Wide Area Network (WAN), you are a prime candidate for a VoIP system. You can share the full features of your phone system across all your locations. In addition, even if you have one office in Connecticut and one in California, VoIP allows calls between them via extension dialing, making it a zero cost call. For businesses with hefty monthly long distance charges due to calls between locations, that can be a very attractive reason to upgrade.

A VoIP phone system can also save money as you are setting up a new office – you will not have to run separate cabling for your phone system. However, if you are setting up a new data network anyway, adding a parallel voice network at the same time is relatively cheap so the cost savings here might not be as large as you expect.

In many cases, the best solution will be a system that uses existing phone wires within the main office and VoIP for calls between locations. This combination works well if you have relatively new telecom equipment - many PBXs can be IP-enabled with software upgrades and minor hardware additions. Sticking with digital phones internally will save you money, as well as increasing the overall reliability of your phone system. Vendors can also set up systems that use only traditional lines and extensions at first, but support later expansion to VoIP
How Do VoIP Phone Systems Work?

The premise behind VoIP is fairly straightforward: instead of using "circuit-switched" technology, where a dedicated path from caller to receiver is reserved for their entire conversation, VoIP phone systems treat voices as data, turning your words into tiny packets of information that are sent over data networks. As they arrive at the other end of the call, the data is turned back into audio.

To set up a business VoIP system, you need several components. A central device manages the calls, the way a private branch exchange (PBX) or key system unit (KSU) does in traditional phone systems. This can be a dedicated piece of hardware such as an IP PBX, a regular PBX that has been IP-enabled, or a server running specialized software. You will also need phones and a data network. In many cases, you may be able to use your existing digital phones and computer network, although you may need to upgrade some of your network hardware.

Depending on your setup, internal calls are routed over your existing phone network or your computer network. Calls within the same office will typically be conveyed over your phone network, while calls to other company locations get routed over your computer network. Calls to external phone numbers get sent through the network to a gateway, which connects to the public telephone network. All of your calls connect seamlessly to any phone user - there are no compatibility issues to worry about.
Features and benefits of an IP PBX

The single biggest advantage of an IP PBX is for businesses with multiple locations. With VoIP, any and all offices on a LAN or WAN can get the benefits of having a common office phone system, including extension dialing, seamless call transfers, and other features. In addition to making it easier to communicate, this sharing of features can enhance collaboration as employees at different locations can truly feel like they are part of the same organization. Plus, if they are on the company network, the phone calls are free – even if your offices are located thousands of miles apart. Simply looking at your current phone bill for calls between far-flung offices can give you an idea of how much you can save.

There are other cost savings that stem from the streamlined network infrastructure and improved administration. For network administrators, VoIP means they only have one network to maintain instead of two. There is still separate phone system hardware to maintain – but only one network. The Move, Add, Change (MAC) process also is greatly simplified, because almost all VoIP systems are configurable through a web interface that can be managed by the administrator. This means lower ongoing costs -- you will not need to call your vendor for every MAC. And because multiple offices are seamlessly connected, they can share a single receptionist, auto-attendant, and voice mail system.

Another significant benefit is for employees on the go. If your remote users connect to the company network via a Virtual Private Network (VPN), VoIP allows them to make phone calls from the road at no extra charge. One salesperson on an extended trip can save hundreds of dollars in cell phone or hotel long-distance charges. All the user needs is a “soft phone,” (software that lets a laptop function as an IP phone), a PC microphone, and speakers.

Other familiar and essential phone system features like caller ID, call forwarding, simultaneous ringing across multiple phones, and other features you would find in PBX systems are available in most VoIP systems. VoIP also works with advanced Computer Telephony Integration (CTI) applications, such as call center management. These popular applications can prioritize incoming calls based on the caller’s identity and automatically bring up callers’ account information as the phone is answered. However there is little difference in this arena between VoIP and modern digital phones.
VoIP Phone Systems Potential Drawbacks

The two main drawbacks to VoIP systems are the network requirements and the potential for outages.

Network demands
One challenge to maintaining call quality is bandwidth: high quality sound requires quite a bit of it. The technology to compress audio and to reconstruct it has been improved to the point where VoIP sound quality over a high-bandwidth connection is as good as or better than that of regular phones. But some networks that are fine for data are not up to the demands of VoIP.

Computer networks are designed to handle messy data: packets arrive out of order and some are even lost, but in most cases the data being sent can easily be reconstructed before it is needed. Voice conversations, though, are not as tolerant of these kinds of disturbances. Each packet of sound has to arrive in the correct order because they are being sent in real time – if packets are lost, the conversation sounds distorted, choppy, or falls off all together. This is why VoIP services that rely on the Internet to transmit calls can have uneven phone quality.

If your company will be routing calls over private data networks, much of this potential problem is avoided. Companies shopping for VoIP generally have networks suitable for high-quality voice conversation – frame relay networks are ideal, but standard Ethernet networks are fine. However, they may need to be boosted with a Quality of Service (QoS) application.

QoS maintains a dedicated amount of bandwidth for voice calls by giving voice data a higher priority as it is trafficked through the network. If there is network congestion, VoIP data is routed through first so call quality does not suffer. QoS applications are built in to some VoIP systems, as well as some routers. They can also be purchased separately as upgrades. From every indication, running VoIP on a company network without QoS is a risk no business should take. If you have a WAN that routes data over the Internet, you can still run QoS, but there can be no guarantee of quality. Internet call quality can reportedly be improved if the various offices use the same Internet service provider.

Outages
Unlike regular phone systems that get set up and basically forgotten, VoIP systems require more attention. Like any software application, your VoIP server will require occasional upgrades and maintenance.

Since regular phones get all the power they need through the phone line, they continue to work if there is a power outage. In contrast, most VoIP phones need to be plugged into a power source to work. By definition, VoIP phones are also network-dependent. To businesses where phone service is absolutely critical, this can be a concern since computer networks can occasionally be brought down by a server crash or other problem. However a good IT staff can prevent most outages and react quickly when one occurs.

Potential outages are another reason why having a mix of digital and VoIP can be advantageous: it creates a more comfortable level of redundancy. Companies that have backup power systems in place can keep their PBX running, and the digital phone system within the main office will continue to operate even if the data network is unavailable.
Buying Business VoIP Phone Systems

The rapidly maturing business VoIP phone system industry means that there are many manufacturers with feature-rich systems that may be enticing to small firms.

Sales channels
Buying a VoIP system from a local reseller is the best choice for most businesses. Licensed, certified resellers have proven expertise, manufacturer support, and the ability to respond quickly to urgent problems that require a site visit. Checking that the reseller has manufacturer support is particularly important -- this can be critical as upgrades are released or problems crop up.

Keep in mind that some vendors, particularly those whose background is in data networking, sell VoIP-only systems. This can drive up your costs unnecessarily when a hybrid traditional/VoIP system might be fine for your needs. Also watch out for vendors that simply add VoIP to your existing network whether or not it is fully ready to support voice traffic. They may later charge you for upgrades if you decide the call quality falls short of your expectations. Make sure you get a thorough analysis of your current network and the impact VoIP will have on it to get a true sense for your phone system costs.

Pricing
VoIP phone system prices vary considerably based on the features you require, your existing telephony infrastructure, and the state of your data network. A complete 16-phone VoIP solution with all the features you would expect in a typical business phone system can run from $10,000 to $30,000 or more, installed. That is considerably more than a similar digital phone system would cost, but the long-distance savings on interoffice calls and the reduced administrative costs will offset some of the difference. A 64-phone installation including a dedicated server, voicemail, and more, could cost $50,000 to $75,000 and up.

Whatever you do, do not be tempted to do it yourself – setting up and maintaining a business phone system of any type requires specific expertise. There are many resellers and service firms that customize, install, and maintain VoIP systems.

Choosing a system
Once you have decided that VoIP is right for you, the next step is to determine what of your existing telecom equipment you can keep. Many PBXs can be IP-enabled with software upgrades and minor hardware additions, and you may be able to use digital phones you already own. The potential cost savings are significant, and you can also increase the overall reliability of your phone system.

When comparing phone systems, make sure you investigate the details carefully. Many systems say they include “everything” but may not include the specific features you require. Exactly what makes up a “complete” system varies from vendor to vendor, so be sure you are comparing equivalent systems.

You may also want to learn whether the phone systems are built on open standards. While all VoIP systems use the industry standard Internet Protocol (the “IP” in VoIP) to route calls, some use proprietary technology for administration or integration features. Having a system run entirely on open standards can allow for greater flexibility in integration and customization. However, you may not be as concerned about flexibility as long as the features and costs match your requirements. The technology used in a particular system may impact whether you can leverage your existing equipment, so be sure to inquire about compatibility issues.

Lastly, remember that some common business devices require analog phone lines – notably fax machines, but also credit card processors, some security systems, and other devices. Make sure your vendor knows and accommodates these types of uses when planning your phone system.
VoIP Phones Buying Tips

Before you commit to VoIP, evaluate the potential savings of toll-free calling between all locations. If it is only $200/month, think twice before making such serious investment. Do not buy just for the sake of having the latest technology.

Plan for the future. The cost difference between including extra capacity at the beginning of a project and adding more hardware later is significant - build in room for growth.

Do not try to save money buying used VoIP equipment. VoIP technology is so new that even last year's hardware is extremely dated. Plus, the installation cost does not change whether a system is used or new, which is a significant portion of the price. You also set yourself up for shorter lifespans, higher upgrade costs, and more maintenance - in short, the deferred costs will almost certainly wipe out any upfront savings.

Investigate your vendor. Do not take a chance on unlicensed or unauthorized vendors. Your state board of electricity can tell you if a vendor is licensed, which verifies that they are bonded, covered with insurance, and generally in good standing with the state. Authorization comes from hardware manufacturers, and means that the vendor has passed competency exams and committed to ethical practices. This gives resellers the ability to access the manufacturer directly for upgrades or tricky installation problems.

Some vendors will take your system's documentation with them when they are finished, leaving only the user guides. Make sure you get all the administrator documentation and the passwords! Most VoIP systems today have web interfaces for making simple admin changes like adding users, but you will need the documentation and the admin password.
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