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UCaaS & Voice
How Does VoIP Work? Your Complete Guide to VoIP Phone Systems

by Kendal Rudolph


4 min


VoIP (Voice over Internet Protocol) is a form of a phone system that enables users to make/receive phone calls via the internet. It has become an increasingly popular way of communication in recent years. The best thing about VoIP is its cost-effectiveness, flexibility, and scalability. In this article, we will share with you a complete guide to VoIP phone systems and how these systems work.

How Does VoIP Work?

VoIP technology is an effective way of converting analog voice signals into digital packets of data that are easier to transmit over the internet. When you make a call via VoIP phone, it first converts the voice signal into digital data using an encoder/decoder, or codec. The digital data further compresses and breaks up into smaller packets of information. All these packets are further sent over the internet through a broadband connection, like DSL or cable. These packets get transmitted in real-time, so there’s very less delay between the sender’s voice and hearing of a message by a recipient.

Whenever the packets get to their destination, they get reassembled in form of a digital voice signal. This signal is then played via the receiver’s speakers. This whole process is termed packet switching and enables multiple phone call transmissions over the broadband connection simultaneously.

Advantages of VoIP Phone Systems

Here are several advantages of VoIP phone systems:

  • Cost-Effectiveness: VoIP phone systems are quite affordable than traditional phone systems. They don’t even need pricey hardware or phone lines. Plus, many VoIP providers give many affordable plans with unlimited call times. Hence, businesses are likely to save a lot of time and money on their phone bills by switching over to VoIP.
  • Scalability: VoIP phone systems are also quite scalable. It means that they are easier to expand or reduce for meeting the altering needs of a business. It makes them perfect for growing businesses or firms with fluctuating call volumes. Thanks to VoIPs, businesses may even add new users or lines as required, without investing in expensive phone lines or hardware.
  • Flexibility: VoIP phone systems are also great to be used from anywhere using a good internet connection. This makes them ideal for businesses in various locations and remote workers. Employees may even use VoIP systems on the go or from home without sitting in one specific location. It makes it easier for businesses to provide flexible work settings, like telecommuting.
  • Advanced Features: VoIP also comes with a variety of advanced features that aren’t available in conventional phone systems. Some of these features are voicemail-to-email, call screening, call forwarding, auto-attendants, and more. Furthermore, VoIP integrates more easily with several other business apps, like CRM software which is great for enhancing work efficiency and boosting productivity.
  • Disaster Recovery: VoIP can also be used as part of a disaster recovery plan. Since calls are easier to transmit over the internet, these are easily rerouted to some other location or device in case of a power outage or any other issue. It ensures that businesses stay connected with their customers even during challenging situations.

Types of VoIP Phone Systems

  • There are two major types of VoIP systems – hosted/cloud and on-premises. Hosted VoIP is hosted in the cloud and third-party providers manage them. On the other hand, on-premise VoIP need businesses to buy them and maintain their equipment on their own.
  • Hosted VoIP systems are great for small, medium and enterprise businesses that have multiple locations, remote workforce, and issues maintaining and managing multiple premise systems. And those that need the flexibility (mobility) to work from anywhere.
  • Premise- based VoIP can be a logical solution for single locations with many resources to manage the phone system.

With that said, cloud everything has taken over, including voice. Read our blog, Premise-based Phone Systems are Becoming Obsolete, to learn more about this topic.

Choosing the Right VoIP Phone System

When looking for the right VoIP for your firm, keep in mind the given factors:

  • Bandwidth: Consider how many calls your business handles on an everyday basis. It helps in determining the bandwidth amount and necessary equipment for your VoIP phone system. Bandwidth is the key to a successful cloud system.
  • Cost/ROI: Consider how much you want to spend on VoIP, ongoing costs of maintenance and service, as well as the upfront cost of equipment and installation.
  • Features: See what features your business requires, like voicemail-to-email, auto-attendants, or call forwarding. Also, make sure the VoIP provider offers all the features you require.
  • Technical Expertise: Most IT professionals do not want to deal with phone systems, because they have too many other responsibilities and issues to worry about like security, etc. You will need to determine whether or not you have the technical expertise for managing your VoIP solution or whether you need help from a third-party provider.


VoIP voice solutions are beneficial for businesses and industries of all sizes – be it startups or large enterprises. They help in improving efficiency and productivity while reducing costs and improving the customer experience. That’s why VoIP is becoming the best go-to communication solutions for businesses across the globe. For businesses seeking a way to stay ahead of the curve, a VoIP phone system is a good forward-thinking move.