VoIP: What Is it, and What Can it Do for You?

Author: Christina Galoozis Date: June 21, 2010

Along with sleek websites and smartphones, VoIP, which stands for Voice over Internet Protocol, can help you level the playing field between your small company and a bigger competitor, with low cost, Internet-based calling.

VoIP is essentially a telephone service that operates through an Internet connection. You can either make phone calls through your computer or through a regular phone built with VoIP capabilities. In recent years, VoIP, also known as Internet calling, has grown dramatically, bringing with it lots of new features, like videoconferencing, and dozens of competing providers.

If your phone company has you paying out the nose for long-distance calls, consider this: VoIP saves the average small business 20% to 25% of its telecommunications bill, according to Andy Abramson, who writes the VoIP industry blog VoIP Watch.

Pros and Cons of VoIP


  • Much lower international call rates
  • Free features like unlimited extensions
  • “Find me follow me” service—calls are automatically forwarded to your landline, computer or cell phone.
  • Flexibility—service can be tailored to individual needs, like routing to specific employees when you’re not available, Abramson says.
  • Some providers offer Web-based call histories


  • IP phones don’t work without an Internet connection, and some VoIP services don’t work during a power outage unless you have a back-up battery system.
  • VoIP service may be inaccessible in rural or remote areas.
  • If you primarily make local calls, VoIP may not save you any money.

VoIP Systems and Plans

Skype is one of the best-known Internet calling providers and offers several calling plans, including special business plans with accounts for employees and IM functionality. Major phone carriers like AT&T and Verizon recently started offering VoIP calling plans. Cable companies and specialized service providers like RingCentral, OnSIT or can also get you started, and so can well-known provider Vonage.

At about $40 a month, “the cable company is probably the easiest and cheapest way for most businesses” to sign on, says Abramson. Plus you may have more bargaining power—you can get the cost down by bundling VoIP with other services you’re already getting.

The two typical plan options are:

  • On-premise service—Typically, the VoIP provider will send a technician to your office, who installs a small box by your router. Monthly fees may be low, but the initial installation could cost in the thousands.
  • Hosted PBX—Instead of installing the service at your office, some companies can manage your VoIP system off-site. Because you’re not handling maintenance yourself, this option might save you money. “It reduces the need for a resident [technology] geek” and makes future upgrades easier, says Abramson.

Consider other key factors:

  • Additional hardware—You may not need any new hardware at all. VoIP allows you to make calls directly from a computer, a special VoIP phone--possibly with a headset--or a traditional phone connected to a special adapter. Companies that plan to rely on VoIP for their communications and are setting up an office from scratch sometimes invest in IP phones rather than traditional ones. Just be sure to ask the service provider if your existing phones will suffice and what other supporting equipment may be necessary. Also, employees who are going to make heavy use of VoIP on their computers should have good audio processors on them, says Abramson.
  • Additional services—Ask about unlimited extensions, texted voicemail, unlimited voicemail and toll-free numbers, fax-in and fax-out service, call waiting, call forwarding, and other calling services.
  • Features—Features like speakerphone may also vary.

Common Small Business VoIP Mistakes

Finally, when choosing a system, avoid these common pitfalls:

  • Neglecting to calculate the amount of bandwidth needed for VoIP calls. Because VoIP uses your Internet connection to transport calls, it puts greater demands on your Internet connection, which could cause it to slow down. So work with your provider to make sure you have enough bandwidth to support any additional service you get.
  • Buying low-quality phones. Beware of cheap offers, says Abramson, who recommends phones by Phone Gnome, Polycom and Cisco. Just like other aspects of running a business, if it seems too good to be true, it probably is.
  • Not doing a cost-benefit analysis. Like with anything else, research different providers so that what you end up with is right for your company.

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