What is an IP phone system?

An IP phone system is a phone system that uses Voice over Internet Protocol (VoIP) to make and receive phone calls.

VoIP (typically pronounced "voyp") is the transmission of phone calls over the Internet, instead of using traditional telephone landlines.

VoIP and IP phone systems:

  • Save money, especially for international and other long-distance calls
  • Reduce IT infrastructure by eliminating the need to maintain separate voice and data networks
  • Offer more capabilities such as chat, conferencing, instant messaging, fax, and much more, all in one system

Click below to watch our free on-demand VoIP Basics webinar where you'll learn all about the benefits of VoIP.

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How do IP phone systems work?

VoIP is sometimes called IP Telephony since it channels voice calls and voice data through IP networks, through LANs (Local Area Networks) and the Internet.

VoIP is a way to make calls across the Internet. More specifically, VoIP services connect through your Local Area Network (LAN) or Wide Area Network (WAN) using your internal internet connection. The technology behind VoIP converts your analog voice into digital packets which are then sent across a network using the Internet Protocol (IP) to their end destination.

With VoIP, instead of having two different types of lines coming into your office - one for phone and one for internet - you now have one network that can support both. So you don’t need analog lines anymore, you can take advantage of your existing internet connection.

How IP phone systems work

There are 3 basic parts of the VoIP “pie”:

  • SIP Trunking - the method by which phone lines are accessed over the Internet
  • Unified Communications - the “device” or phone system that delivers VoIP service and the features it's capable of
  • Cloud Phone Systems - phone systems that exists in the cloud instead of sitting on your desk with physical lines plugged into it

Learn more about IP phone systems To learn more about each of these aspects of VoIP, take a look at our What is VoIP page.

Benefits of IP Phone Systems

Cost savings

IP phone systems tend to be much less expensive than traditional systems for both local and long distance calling.


VoIP services (and IP phone systems) operate over the Internet, which means they are capable of being accessed via a mobile device or most anywhere else there is an internet connection.


VoIP resources can often be added or reduced simply and easily, making growing or downsizing less of a hassle.

Better call routing and screening

IP phone systems can use auto attendants to answer calls and route them to the appropriate location, saving your business time, money, and frustration.

Better connectivity

Features such as “Find Me Follow Me,” voicemail to email transcription, and conferencing make staying connected with customers and team members much easier.

Better internal communication

Features like status indicators, chat, and in-call training tools enable teams to communicate more effectively.

Better data and caller insight

VoIP phone systems allow businesses to get better insights into who is calling and what actions they’re taking before and after calls.

Here’s a short video that helps explain some of the advantages of IP phones over more traditional business phones:

Learn more about the benefits of IP phone systems To learn more about the benefits of VoIP and IP phone systems, take a look at our VoIP Basics page.


Benefits of Upgrading Your Phone System

If you’re like many small businesses, you may not realize the benefits of a new business phone system. Maybe you have a phone system sitting in your back office, or maybe you’re using a key system that isn’t providing you the functionality you need. What you may not realize is you can often get more advanced features for less than you are paying on your current system!

By upgrading an older phone system to a new VoIP system, you can typically expect to save money and improve customer service, all while having a phone system that is easier to use, provides better customer information, and grows with your business.

To learn more about the benefits of upgrading your phone system, take a look at our Benefits of Upgrading Your Phone System page.

How much do IP phone systems cost?

The actual price of IP phone systems depends on how you use (or deploy) it. There are two basic options when it comes to VoIP phone systems:

Hosted IP phone system


With a hosted phone system (or "cloud" phone system), little to no phone hardware is located on-site; The actual phone system components are hosted at an off-site data center instead of at your place of business. Hosted phone systems offer flexibility and scalability, and require less upfront capital than on-premise phone systems. Check out our Budget Calculator below to get a better idea as to what a phone system could cost for your business or organization.

On-premise IP phone system


With on-premise phone systems, all of the system's components and hardware are located at your place of business. While on-premise solutions require more of an upfront investment, they tend to offer more stability and reliability for businesses with more consistent communication needs. Take a look at our Budget Calculator below to get a better idea as to what a phone system could cost for your business or organization.

IP phone system budget calculatorTo get a better idea as to how much an IP phone system could cost based on your situation, take a look at our Budget Calculator

Is your network ready for VoIP?

One of the most important aspects to think about when considering a VoIP phone system is whether or not your existing network is ready for VoIP. There are a few questions to help you determine your network needs:

1. How many users do you have? The number of users you have is important when determining the bandwidth and type of network service you need to address your business requirements.

2. What are your growth plans? You’ll want to make sure your network and phone system investment matches up to your business’s needs both now and in the near future.

3. How many ports do you need per user? The number of switch ports your company has per user determines which phones you can purchase.

4. What kind of internet connection do you have? Your Internet connection will play a significant role in the type of Service Provider you require for your phone service.

5. Do you have any remote users? Having remote users can sometimes cause unforeseen bandwidth and call quality issues with your internal network.

While you’re assessing your network needs, you’re likely to come across the term “Quality of Service” (QoS). This is simply a protocol networks are capable of using in order to prioritize important traffic types.

To learn more about what QoS means and why should it matter to you, take a look at our Quality of Service page.

Next Step:

To learn more about how to prepare your network for VoIP, see our “Is Your Network Ready for VoIP” page or use our VoIP network assessment tool now to see if your network is ready for VoIP.

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