What Is IP Telephony? How It Works & How It Helps Your Business

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IP telephony is becoming increasingly popular in business communications, replacing the good old public switched telephone network (PSTN). We’ve tried to outline the basics of this technology and how your business can benefit from it.

The definition of IP telephony

IP telephony is a telephone communication via Internet Protocol (IP). The signal is transmitted digitally and is significantly compressed, which reduces the load on the data transmission network.

VoIP and IP telephony. What’s the difference?

Frankly speaking, the difference is very subtle. IP telephony means every system of internet-based telecommunications, including the transmission of voice, fax, and other forms of information that were traditionally carried out via the public switched telephone network (PSTN). VoIP initially meant the technology for making and receiving calls over the internet. But now companies use these terms interchangeably. In this article, we also use the terms “IP telephony system” and “business VoIP system” as synonyms.

This figure shows how the composite model of how IP telephony works.

IP telephony scheme

The source: Cisco IP Telephony Network Design Guide, p.24

What businesses can benefit from IP telephony?

An IP telephony system can be useful for different types of business: small and medium businesses, big companies with branch offices across the world, call centers, and so on. Why? Because of pros, listed below.

How can your business benefit from it?

Better call quality

You can notice a significant increase in call quality because the business VoIP system provides you with better sound quality than traditional telephony. There won’t be any muffled or fuzzy voices you may hear when using a landline.

Cheaper than landlines

It’s a huge advantage both for small businesses and multinationals. VoIP providers charge way cheaper than traditional telephone companies. It really matters when you have to contact customers by phone across the world. IP telephony providers have different call rates for different countries but the pricing is much cheaper than with landlines. Moreover, calls within a company's network are mostly free, which is a huge advantage for companies with many branches.

You can get international phone numbers

VoIP technology allows you to purchase international phone numbers from different countries. This gives you two important advantages. Firstly, you look local for your target audience so you are more likely to turn them into your customers. Secondly, these numbers are portable so you can take them wherever you go. However, there is one thing that you should take into account. In some countries, it is impossible to purchase the local number without presenting evidence that you live in the country or have a business there. There are also cases when you can’t purchase local numbers without choosing a local VoIP provider (some Asian countries). So we strongly recommend checking out local regulations before deciding on the purchase.

It is possible to launch a remote call center

IP telephony systems can be used with cloud-based call center solutions that means you can easily launch a remote or virtual call center with agents working in different time zones. Your employees can work from any place with a stable internet connection.

To learn more about virtual call centers, check out our article Virtual vs On-Premise Call Center. What to Choose?

More functionality without additional hardware

With IP telephony, you can use more advanced features without investing in additional hardware. These may include:

Simpler integration with CRM and other business systems

IP telephony is easier to integrate with CRM and other business tools you use. Your agents won’t need to waste time, switching between different systems and apps during calls. Also, a business VoIP system can be integrated with other communication tools, thus ensuring multi-channel interaction with customers.

Disadvantages of IP telephony

Obviously, IP telephony is not without cons. Its quality strongly depends on how reliable your Internet connection is. VoIP doesn’t require too much bandwidth but you need to have low latency on your network to avoid lags during calls.

Another disadvantage is power dependency. Your VoIP network won’t work during power outages if you have no backup solution. So think about that in advance.

How to Choose VoIP Provider for Your Call Center 

First of all, assess your business needs and define must-have features. What kind of business tasks does your call center have to perform: customer service, technical support, telemarketing campaigns? It will help you to decide what must-have features you need.

Once you have defined your VoIP features and requirements, start looking for a relevant provider. We recommend paying attention to the following:

  1. Trunk capacity. A trunk is a connection that is divided into many virtual channels. The more channels you have the more calls your agents can handle at the same time. The trunk capacity is defined by your VoIP provider. When calculating the number of channels, we recommend taking into account the call volume and your business specifics. For example, if your agents handle both inbound and outbound calls it will be good to have 3 channels per agent.
  2. Good customer reviews, especially from customers who work in your industry. Check out such websites as Capterra or G2Crowd where you can see customer reviews about business services and software. If the provider has experience in your industry you are more likely to get an effective solution.
  3. Quick live support. Time is a non-renewable resource. It’s no use in working with a provider who responds to your issue after several hours of waiting. Pay attention to a service level agreement where the terms and conditions of technical support are specified.
  4. Reliability and security. Top providers use multiple certified data centers to store their customers’ data. That guarantees that your workflow won’t be interrupted if some server or data center fails. Also, it allows you to comply with local regulations that require you to store your customer data within the customer’s country of origin.
  5. Plans and pricing. Think in terms of growth. Some VoIP providers offer quite cheap basic plans but charge for every feature you want to add. Therefore, an affordable solution can turn out way more expensive in the long run.
  6. Scalability. It’s also about growth. Will your provider be able to meet your business needs if you have two times more agents than now? Can they provide any extra features you may need in the future? Try to answer these questions beforehand.


IP telephony system is an efficient technology that can save time and money for your business. Furthermore, it’s a good investment in your company’s future because it can significantly increase your business’ flexibility and scalability.

Tanya Gonchar

Expert in call center process automation, Head of Marketing at Voiptime Cloud. Interested in customer service, B2B sales, marketing, business analysis.

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