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Alphabet Soup: What is VoIP?
 

This new way of routing phone calls over Internet technology is a telecommunications advance that can help save small businesses money.
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Kiss the days of being tied to a desk and watching balance sheets buckle under the weight of crushing telecom charges goodbye.

Voice over Internet protocol (VoIP), a technological advance capable of cheaply routing vocal conversations over the Internet or IP-based networks, now makes commercial activity cost-effective from anywhere worldwide.

Landline telephone services are responsible for a full 45 percent of small and medium-sized business (SMB) telecommunications budgets, says Lisa Pierce, vice president of Cambridge, Mass.-based Forrester Research. Forrester found in a recent survey of SMBs that 10 percent of those executives interviewed said migrating to VoIP is a critical priority this year.

Here's how the service can broaden your business' horizons while also benefiting the bottom line:

How VoIP Works

Unlike traditional (a.k.a. analog) telephone calls, those made utilizing VoIP technology don't rely on the archaic and costly circuit-switching synchronization method. Rather, via broadband connection, vocal communications are instead converted into digital signals transferable over the Internet.

These conversations, routed online, can be initiated from a microphone- or headset-equipped PC. Use of a specialized phone (which looks like its everyday counterpart, yet features an Ethernet connector) or cellular handset for dialing is also possible under some types of service. Alternately, calls may additionally be placed via ordinary phones using an adaptor that plugs into an Internet hookup.

Certain services -- such as some of the free software programs you can download over the Internet -- allow connection only between other VoIP users. Others let you link up with anyone, anywhere, regardless of hardware used (traditional phones included) or physical location. Calls to local, long-distance, international and mobile phone numbers are all possible. What's more, because use of physical telephone providers' infrastructures is avoided, associated savings are vast as well: As much as 40-60 percent or more per minute off standard Telco fees, according to VoIPNews.com.

What's more, VoIP lines aren't tied to physical switches. Calls can be made and received using a single, static number, regardless of where you're situated (e.g. the beach or mountains) so long as a high-speed Internet connection is handy.

"The biggest benefit here is increased productivity," says Pierce. More than 30 per cent of employees are now mobile, she explains. "Why spend $350 for a traditional phone when it's just a brick that sits on your desk?"

  • Advantages: Cost-savings. Portability. Facilitation of inter/intra-office communications. No need to change numbers following moves. Optional integration with videoconferencing, address book, calendar and file exchange functions.
  • Disadvantages: Occasionally poor connection quality. Possible inoperability with 911 emergency services. Computer/ISP outages may sideline systems. Ongoing maintenance, supporting IT staff required.

Potential Uses

According to Forrester, companies in the utilities, finance, insurance, media, entertainment and leisure industries are making the most use of this technology. However, says Pierce, it's a good fit for any SMB operating in a highly communications-driven sector such as manufacturing or retail.

A few practical applications:

  • Cutting costs. VoIP can serve as a cheaper, less technically complex alternative to existing PBX/voice systems or site-to-site communications infrastructures. Unsurprisingly, Forrester reports SMBs are 2.5-3 times more interested in managed IP telephony and VoIP services than larger enterprises.
  • Boosting flexibility. Using the medium, business owners can power faster call routing, integrate vocal communications with instant messaging and videoconferencing services or easily archive and share digital data including notes, calendar entries and sales presentations.
  • Future-proofing. Unlike other telephony solutions, software-based VoIP systems are fully scalable, so you needn't be constantly upgrading or replacing hardware as operations expand.
  • Improving mobility. Employees may now grab the phone off their desk, take it on business trips and make/receive calls from the same handset and number as normal, regardless of where they're situated on- or off-site on a daily basis.

What to Watch Out For

Still in its early stages, VoIP technology does present certain drawbacks. Among the most prominent:

  • A DSL, cable or faster Internet connection is mandatory for optimum performance.
  • Phone service is only as reliable as your PC or Internet Service Provider (ISP). If network access is spotty or electricity outages common, your ability to place calls will be too. (To avoid such issues, consider investing in an uninterruptible power supply or a device that lets you switch between standard/VoIP calls.)
  • Connection quality is continually improving, but may still approach mobile phone caliber.
  • Access to 911 emergency services can prove difficult, impossible or accessible only following registration of a physical address.

Note that maintaining an additional landline is strongly encouraged.

Going Forward

Ultimately though, VoIP isn't just a welcome, hassle-preventing upgrade for organizations ranging anywhere from 1-999 individuals in scope, based on Forrester's findings. It's also a great way to save time and money while maximizing employee efficiency and increasing ROI.

What's more, future improvements to the service will include greater reliability, additional features, better user interfaces and more interoperability between programs, services and carriers, confirms Pierce. Meaning that as much buzz as it's been getting recently, VoIP usage is only going to become more ubiquitous amongst small businesses in coming months.

"It's not a question of if we'll eventually switch over to VoIP," Pierce says. "It's when."

Last updated: Sep 1, 2006

SCOTT STEINBERG is the CEO of strategic consulting and product testing firm TechSavvy Global and the author of “The Business Expert’s Guidebook.” A sought-after keynote speaker and expert witness, he’s among the world’s most-quoted high-tech analysts.
@AKeynoteSpeaker




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