If your business phone bills are sky-high, you might consider an alternative that could cut those bills by 30 percent or more.

lores_business_finance_dial_telephone_call_amOne cost-saving alternative is to switch to Voice over Internet Protocol (VoIP), a system that uses a software-based PBX and the Internet. Where traditional phone calls allocate a single phone line to each call, VoIP compresses voice data and transmits it in digital packets over a computer network, using substantially less bandwidth.

VoIP also has a more simplified infrastructure, requiring just one network for phones and the Internet. Moreover, because the system is based on software residing on your company’s servers, there are generally no maintenance fees or lease payments.

VoIP can be particularly cost-effective for businesses with branch offices spread over a broad geographical area, teleworkers, or employees who travel long distances on the job.

But cost and simplicity aren’t the only benefits driving companies to make the switch. Among the other main advantages of VoIP are:

1. Scalability: The fact that VoIP is based on software rather than hardware makes it relatively easy to expand or downsize, maintain, and add direct dial numbers. In contrast, traditional phone systems are supplied in set size ranges so altering the system is more difficult and in some cases requires replacing the PBX hardware and starting over.

2. Flexibility: You can set up a fully functioning office wherever there is a broadband connection, provided your company combines VoIP with a virtual private network (VPN). This can be a boon if your enterprise has remote offices or teleworkers. Regardless where they are located, employees can appear to be based in a corporate office setting.

Moreover, each employee can be registered for a local phone number, adding to the cost savings. For example, you could have a salesperson based in California or Canada who deals with customers in Florida. With VoIP, the salesperson can have a Florida telephone number that would always be routed to wherever the individual is located. To the customer it would appear that the salesperson was in Florida and the call would be charged at local rates. If the sales rep covered several regions in Florida, you could get separate local numbers for each area code.

3. Portability: A VoIP phone can be taken anywhere and plugged into any available broadband network, such as at a hotel or an Internet cafe. If an employee is off in Tokyo, calls are routed directly with no charge for an international call. The same applies in reverse; when the employee uses the phone to return a customer call or to dial into the office, local, rather than long-distance rates apply.

This is not to say that there are no flaws to VoIP. Among the disadvantages are:

1. Service interruption: Because VoIP uses the Internet, power outages can cause service disruptions. If frequent power outages are a problem in your area, be sure that your company has battery or generator back-ups for its VoIP PBX servers.

2. Maintenance: Unlike a traditional PBX that is serviced by a telephone company, managing a VoIP system is your company’s responsibility. If your business lacks the necessary IT infrastructure, seek the advice of a professional to choose a vendor that will support system maintenance or will contract it out to a reputable third-party.

3. Emergency calls: Despite the introduction of E911 numbers, it can be difficult to track the location of a caller with some VoIP systems. Ask vendors how their system deals with 911 emergency calls.

If you decide that you might want to give VoIP a try you may not have to scrap your entire existing system at once. VoIP can easily operate along with traditional phones, so you can start using the new technology in a single department and then extend it to other parts of the enterprise as needed. This would help minimize disruption and stagger set-up costs.

The costs of setting up VoIP can vary widely, so you should talk to a professional experienced in VoIP telephony who can guide you to the system that would best fit your organization’s needs and budget, and help you find a reputable vendor with a history of business experience.

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Most businesses use a telephone system that relies on an outside company to provide a private branch exchange (PBX). This infrastructure can be complex, requiring cabling from the PBX to each desk where an extension is needed. And the costs include not only long-distance and local rates, but also the expense of maintenance and lease-payment agreements.