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When creating or upgrading a corporate telephone system, there are two main options: traditional telephone services and VoIP telephone services. Each telephone system has various benefits and drawbacks, and the proper solution will depend on the company’s needs.

How does a traditional phone system work?

Traditional telephone systems are based around an internal infrastructure of telephone lines within the company’s walls. These internal telephone lines link to advanced equipment called a PBX (private branch exchange) system. A PBX system will often be maintained by trained IT personnel, especially in larger companies.

PBX system are programmed directly to allow for internal intercoms, transfers and private lines, and whenever this internal system needs to be modified the company will usually make the changes locally. The PBX system itself links directly to the telephone line and all voice communications directed outside of the company are connected through these telephone lines. PBX systems are usually fairly expensive and need to be upgraded every three to five years.

How does a VoIP system work?

In a VoIP system, each telephone within the company is actually an entirely separate Internet-capable device. VoIP (voice over internet protocol) systems allow each telephone to separately jack into the Internet. The telephone itself is assigned an IP and all of the intercom, transfer and private line services are controlled through the VoIP provider remotely. There is no internal company network; everything is run through the Internet. Consequently, the service can also be easily tailored to the company’s needs. Lines can be redirected and transferred at will, and special rules can be applied to incoming and outgoing calls.

Changes that need to be made to the company’s internal telephone system are often made through a web application and are usually fairly straightforward. The telephone devices used in a VoIP system may be expensive depending on the features required but the actual Internet service is almost always significantly less expensive than a telephone service would be. In smaller companies, the VoIP Internet connection is bundled with the company’s data connection for further savings. Companies that have more significant demands on their telephone system will need to keep separate voice and data Internet connections.

Should companies use a traditional phone system or VoIP?

Both the equipment and setup of a traditional telephone system are more expensive than a similar VoIP phone system. The monthly costs of a traditional telephone system are also much higher. However, a traditional phone system is usually more stable than a VoIP system. VoIP phones will go down any time Internet service goes down, while traditional telephone systems will often remain active even when the power goes out.

However, there are some significant advantages for companies that can transition to a VoIP system. VoIP systems are much less expensive and can be programmed much easier. They don’t have on-site IT demands and most of the changes that need to be made to the system can be done by administrative personnel. Companies can use VoIP systems to transfer calls on-the-fly and create complex rules regarding the way that calls are routed.

VoIP systems are also the best option for companies that are below a certain size. Traditional telephone systems are really only useful for companies that have large internal communication needs. Companies that don’t communicate internally via telephone will often find that a VoIP system offers increased functionality at a lower price point. Which VoIP provider should you use? Read This Article by Fit Small Business.

Are there any other alternatives?

Companies that already have a PBX system in place but want to take advantage of the lower costs of a VoIP phone system have a unique alternative called SIP trunking. SIP trunking allows a company to use their PBX system for their internal company network but connect to an Internet service rather than a telephone service. For many companies, a SIP trunking system may allow them to have the benefits of a PBX system and a VoIP system combined. However, a SIP trunking system is often complex to implement and may carry with it some unique IT challenges later on.

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About Marc Prosser

Marc Prosser is the Publisher of Fit Small Business , a website that helps small and medium-size companies make better business decisions. One of his favorite articles is Free Business Cards: Where To Get Them and The Fine Print where he explores the business model behind this giveaway.