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What Is An IP Phone System

Supercharge your business communications with 8x8 internet phone systems.

Mask group.svg
IP phone systems offer advanced features like voicemail-to-email, call forwarding, and auto-attendant.
Mask group.svg
Integrates with other communication tools like video, and messaging.
Mask group.svg
Reduce long-distance charges and eliminate the need for on-premises hardware.

What Is An IP Phone System

Supercharge your business communications with 8x8 internet phone systems.

Mask group.svg
IP phone systems offer advanced features like voicemail-to-email, call forwarding, and auto-attendant.
Mask group.svg
Integrates with other communication tools like video, and messaging.
Mask group.svg
Reduce long-distance charges and eliminate the need for on-premises hardware.

What Is An IP Phone System

Supercharge your business communications with 8x8 internet phone systems.

Mask group.svg
IP phone systems offer advanced features like voicemail-to-email, call forwarding, and auto-attendant.
Mask group.svg
Integrates with other communication tools like video, and messaging.
Mask group.svg
Reduce long-distance charges and eliminate the need for on-premises hardware.

What Is An IP Phone System

Supercharge your business communications with 8x8 internet phone systems.

Mask group.svg
IP phone systems offer advanced features like voicemail-to-email, call forwarding, and auto-attendant.
Mask group.svg
Integrates with other communication tools like video, and messaging.
Mask group.svg
Reduce long-distance charges and eliminate the need for on-premises hardware.
You’re not alone if you’re asking yourself, “What is an IP phone system?” Businesses are exploring and adopting this communication solution to stay ahead of the curve.

With remote work becoming increasingly popular, internet-based phone technology has become the go-to option for businesses of all shapes and sizes. Not only does it give you the option to operate from anywhere, but it also offers cost savings, accessibility, and reliability.

In this guide to understanding business IP phone systems, we’ll tell you everything you need to know about how this technology works and why your business needs it. We’ll cover:

What is an IP phone system?
IP phone vs traditional phone
How do VoIP phones work?
Types of VoIP business phones
VoIP vs IP telephony
Types of IP business phones
On-premises vs hosted VoIP
VoIP business phone system essential features
How do I set up a VoIP system?

What is an IP phone system?

An IP phone system (also sometimes referred to as a VoIP phone system or IP PBX) is a business phone system that functions using Voice over Internet Protocol (VoIP) technology. This allows users to take incoming calls and make outgoing calls using an internet connection. It’s a popular alternative to landline phone systems that traditionally dominated communications for business.

Traditional phone systems rely on the Public Switched Telephone Network (PSTN), which uses copper phone lines to transmit analog voice signals. These systems require on-premises hardware, such as desk phones, and dedicated office space for the private branch exchange (PBX). They're also often referred to as Plain Old Telephone Service (POTS).

Unlike these legacy systems, which lack the flexibility modern businesses need, IP telephony offers a more adaptable and efficient solution. This is why IP phone systems have become the preferred choice for organizations looking to enhance voice-based communications.

A person using an IP phone system while comfortably sitting at their desk.
A person using an IP phone system while comfortably sitting at their desk.

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Hand dialing a number on a VoIP telephone
Hand dialing a number on a VoIP telephone

What is the difference between an IP phone and a traditional phone?


You might be thinking that VoIP phone systems are only accessible to large enterprises. That may once have been true, but now it’s affordable for any size of business. In fact, it can save you money in terms of the initial setup, the ongoing costs, and the phone calls themselves.


You’ll also get more advanced features than you would with a traditional phone system. VoIP is usually part of a UCaaS (Unified Communications as a Service) platform that offers other communication tools, such as text messaging, video conferencing, etc in one convenient platform. This unified service will help streamline your business communications and improve the overall efficiency of your team.


Just make sure you choose a vendor that provides high uptime, good call quality, and top security.



Report

Set up your next business phone system—on the cloud.

These days, great customer experiences and employee communications are a must for business success. Learn how moving to the cloud gives you the flexibility you need to thrive in an increasingly competitive world.

VoIP phone being dialed
VoIP phone being dialed

How do VoIP phones work?


VoIP phone systems work by converting analog voice signals into digital signals and sending them over your broadband line as data. Here’s what that process looks like, step-by-step:


When the VoIP phone receives digital data from another device, it splits the data into information packets and assigns each packet to their destination address. From there . . .


  • Converted data is sent over the broadband line to your VoIP router.
  • The router finds the shortest path to its destination.
  • The data packet is received at its destination.
  • VoIP phone users hear the data as recognizable speech.


IP telephony protocols: an important aspect of how VoIP-based phone systems work


IP telephony relies on various open-source protocols to function. These protocols make it possible to transfer data between the IP phone and the service provider. The protocols used will depend on the VoIP provider and how the system is set up. Some include:


Session Initiation Protocol (SIP): This is a signaling protocol that establishes a “session” (or call) between two or more participants.


H.323: Similar to the SIP protocol, this is used to initiate, modify, and terminate a session.


Real-time Transport Protocol (RTP): Mostly used for streaming video conference calls and voice media, this protocol features a packet format for transmitting audio or video across the internet.


Types of VoIP business phones


There are two types of business IP phones used by organizations:


Purpose-built hardware device      • Software-based softphone

Types of VoIP business phones


There are two types of business IP phones used by organizations:


Purpose-built hardware device      • Software-based softphone

Types of VoIP business phones


There are two types of business IP phones used by organizations:


Purpose-built hardware device      • Software-based softphone

Types of VoIP business phones


There are two types of business IP phones used by organizations:


Purpose-built hardware device      • Software-based softphone

Purpose-built hardware device (SIP phones, VoIP phones, etc.)

Software-based softphone

man_calling lp.svg

Purpose-built hardware device (SIP phones, VoIP phones, etc.)

Software-based softphone

man_calling lp.svg

Purpose-built hardware device (SIP phones, VoIP phones, etc.)

Software-based softphone

man_calling lp.svg

Purpose-built hardware device (SIP phones, VoIP phones, etc.)

Software-based softphone

man_calling lp.svg

Is there a difference between Voice over Internet Protocol and IP telephony?


You’ll often hear the terms VoIP and IP telephony used interchangeably. Even VoIP service providers tend to use them to refer to any phone system that uses a local area network (LAN) to connect to and make calls through the internet using a modem or router. However, there is a difference between them.


IP telephony is a term used to describe any system that comes under the umbrella of internet-based telecommunications.


VoIP, on the other hand, is a more specific term that refers to the technology that allows you to make and receive voice phone calls over the internet.



On-premises IP telephony
Hosted VoIP

Types of IP business phones

Two co-workers talking to clients using IP business phones.

On-premises IP telephony

With an on-premises IP system, all the equipment and hardware required to facilitate VoIP calls resides in your office. The IP phone service connects to a virtual PBX in the office via the Local Area Network (LAN).


You can choose to use phones you originally used with your legacy PBX to a VoIP provider’s system. Using Session Initiation Protocol (SIP) trunking, you can course your internet-based calls through the PSTN and connect with people who are still relying on landlines.


This option originally became popular because it offers more cost savings than traditional phone systems. Long-distance calling fees with VoIP are typically much lower than they are with traditional telephony, for example, while still more or less functioning like a regular phone system from the user’s perspective.


There are other perks to going with an on-premises solution. For one thing, IP phones provide businesses with HD call quality, and a range of advanced business phone features that you won’t be able to expect from old-school telephones.


This type of internet-based phone system also gives you total control over how your communications operate. For example: you can add lines and phone numbers from within your office.


However, there are some challenges associated with this setup. Among other things, it requires you to invest in physical hardware (IP phones, handsets, etc) and Ethernet ports. It also makes an on-site IT team that can expertly manage the system a necessary expense for your organization.


That’s why these business phone systems aren’t the top choice for small businesses anymore. Instead, more businesses are opting for hosted VoIP solutions for the increased flexibility and scalability they provide.


Hosted VoIP

Hosted telephony is a setup where a third-party VoIP service provider handles the initialization and maintenance of the IP system on behalf of your business. This means you don’t need to rely on an in-house IT team to install and take care of the solution on-site.


Like on-site IP PBX systems or other telecommunications, hosted systems are capable of transporting data via the PSTN, an internet connection, or a combination of the two if the provider supports SIP trunking (most business-focused VoIP vendors do these days). All that’s required is a strong Wi-Fi or broadband connection and a compatible IP device (such as an IP office phone or softphone app on desktop or mobile phone).


Typically, hosted VoIP systems are more affordable for small businesses as they pay based on a monthly pricing plan.


Which is better: An on-premises or hosted VoIP phone system?



This all depends on the resources and budget of your business, as well as your specific business needs. Here’s a quick comparison of on-premises and hosted phone systems:


Which is better: An on-premises or hosted VoIP phone system?



This all depends on the resources and budget of your business, as well as your specific business needs. Here’s a quick comparison of on-premises and hosted phone systems:


Which is better: An on-premises or hosted VoIP phone system?



This all depends on the resources and budget of your business, as well as your specific business needs. Here’s a quick comparison of on-premises and hosted phone systems:


Which is better: An on-premises or hosted VoIP phone system?



This all depends on the resources and budget of your business, as well as your specific business needs. Here’s a quick comparison of on-premises and hosted phone systems:


On-premises Hosted VoIP

PBX system and hardware resides in your office.

Hosted in servers and equipment managed by the service provider

High costs associated with on-premises hardware, dedicated IT staffing, and office space.

Lower cost, as less in-office hardware is required. The infrastructure is managed and maintained by a third-party provider.

Requires multiple phone lines, adding or removing users can be difficult and expensive.

Only requires a broadband internet connection and a computer or smartphone. Business owners can easily add or remove users from their account dashboards.

More suitable for large businesses that have the budget and resources to manage and maintain the on-premises system.

Affordable and customizable for small and medium businesses. Enterprise VoIP systems offer numerous benefits for larger businesses, too.





Although on-premises solutions provide you with more control over your business phone system, they’re typically more expensive and mean you’ll need to rely on in-house expertise to manage the system. You also need to have the office space available to house the PBX and hardware.

Hosted VoIP only requires you to have a high-quality internet connection and compatible IP devices. Hosted VoIP telephone systems can be housed in a cloud environment or physical third-party data centers belonging to the service provider.

Nowadays, Voice over IP providers have expanded their offerings beyond just voice communications functionality. Many of them have evolved to become vendors of Unified Communications as a Service (UCaaS) solutions, which combine phone features with other communication channels like video conferencing, business SMS, and instant messaging—all hosted in the cloud.

Essential features of a VoIP business phone system

Voicemail

Call recording

Call logs

Auto-attendant

Caller ID

Conference bridge

Toll-free numbers

Unlimited calling

Mobile app

SMS text messaging

Audio and video conference calling

CRM database integration

The 8x8 unified communications experience, comprising IP phone systems.

How do I set up a VoIP system?

01

Test your network and internet connection

The first thing to consider when setting up a VoIP phone system is to keep in mind the number of people that’ll be using the system. This will help you to determine whether your internet bandwidth will be able to support the office VoIP system.


VoIP performance can be affected by the quality of your connection, so make sure your wired or Wi-Fi network connection can handle peak traffic.


Not sure how or where to begin? There should be a lot of places where you can test your internet connection. Or you can just take this VoIP speed test.

02

Which hardware do you want to use?

Whether you opt for an on-premises or a hosted system, your hardware setup will require some standard resources. You may need:

  • VoIP desk phones or other calling devices.
  • VoIP headsets (particularly for contact centers where employees need to work on computers and keep their hands free while on a call).
  • ATAs (if you want to connect your regular desk phones to the VoIP network).

If you want to minimize hardware costs, you can choose to use a VoIP softphone app instead. These apps provide increased flexibility and mobility, as your team can access the business phone system on any desktop or mobile device. All you need to do is allow the system to access your device’s microphone and speaker.

03

Choose your VoIP provider

Lastly, you’ll need to choose your VoIP provider. Explore your options to find a solution that offers all the features and functionality you need.


The right solution will allow your team to communicate and collaborate effectively both internally and externally. It should be affordable and scalable so you can grow it as your business grows while eliminating workplace silos and enhancing productivity.


The solution you choose should also have appropriate security measures in place to ensure the safety of your business communications.


Can IP phones be used at home?


VoIP softphone apps can be used to work remotely if you want to do business at home or on the go. It’s also possible for the organization to assign IP handsets to employees who primarily work from home offices. When you use an IP phone at home, you can:

  • Keep the same business phone number.
  • Use your IP phone in the same way you would at an office location.

Access all of your business phone features (call transfer, extension calling, video conferencing, voicemail, etc.)


You can do this whether you’re using a desktop computer, a mobile device, or an actual IP telephone using your business phone number.


Can IP phones be used at home?


VoIP softphone apps can be used to work remotely if you want to do business at home or on the go. It’s also possible for the organization to assign IP handsets to employees who primarily work from home offices. When you use an IP phone at home, you can:

  • Keep the same business phone number.
  • Use your IP phone in the same way you would at an office location.

Access all of your business phone features (call transfer, extension calling, video conferencing, voicemail, etc.)


You can do this whether you’re using a desktop computer, a mobile device, or an actual IP telephone using your business phone number.


Can IP phones be used at home?


VoIP softphone apps can be used to work remotely if you want to do business at home or on the go. It’s also possible for the organization to assign IP handsets to employees who primarily work from home offices. When you use an IP phone at home, you can:

  • Keep the same business phone number.
  • Use your IP phone in the same way you would at an office location.

Access all of your business phone features (call transfer, extension calling, video conferencing, voicemail, etc.)


You can do this whether you’re using a desktop computer, a mobile device, or an actual IP telephone using your business phone number.


Can IP phones be used at home?


VoIP softphone apps can be used to work remotely if you want to do business at home or on the go. It’s also possible for the organization to assign IP handsets to employees who primarily work from home offices. When you use an IP phone at home, you can:

  • Keep the same business phone number.
  • Use your IP phone in the same way you would at an office location.

Access all of your business phone features (call transfer, extension calling, video conferencing, voicemail, etc.)


You can do this whether you’re using a desktop computer, a mobile device, or an actual IP telephone using your business phone number.


Benefits of hosted IP telephony for small businesses

Cost savings IP.svg

Cost savings

Switching from landline to VoIP telephony results in huge savings for your business. With traditional phone systems, you’ll typically be charged for each call. When your business makes thousands of calls every day to customers or team members around the world, costs can quickly add up.

Advanced features IP.svg

Advanced features

Features like auto-attendant and call transfer can boost business operations and team productivity for companies of any shape or size. These features are built into the business VoIP service and can be accessed from a single softphone app on a desktop or mobile.

 Better accessibility IP.svg

Better accessibility

Another huge benefit of a hosted VoIP system is that it offers the ability for your team members to make and receive calls from anywhere. The system is accessible via a softphone app that can be downloaded on a desktop or mobile phone.

 Scalability IP.svg

Scalability

With traditional systems, you have to pay a lot of money for each phone line, along with the amount of time spent on each call—not to mention wait a long time for every extension to be set up. IP phone solutions aren’t restricted in the same way, and you can easily add phones without worrying about installing new lines.

Cost savings IP.svg

Cost savings

Switching from landline to VoIP telephony results in huge savings for your business. With traditional phone systems, you’ll typically be charged for each call. When your business makes thousands of calls every day to customers or team members around the world, costs can quickly add up.

Advanced features IP.svg

Advanced features

Features like auto-attendant and call transfer can boost business operations and team productivity for companies of any shape or size. These features are built into the business VoIP service and can be accessed from a single softphone app on a desktop or mobile.

 Better accessibility IP.svg

Better accessibility

Another huge benefit of a hosted VoIP system is that it offers the ability for your team members to make and receive calls from anywhere. The system is accessible via a softphone app that can be downloaded on a desktop or mobile phone.

 Scalability IP.svg

Scalability

With traditional systems, you have to pay a lot of money for each phone line, along with the amount of time spent on each call—not to mention wait a long time for every extension to be set up. IP phone solutions aren’t restricted in the same way, and you can easily add phones without worrying about installing new lines.

Cost savings IP.svg

Cost savings

Switching from landline to VoIP telephony results in huge savings for your business. With traditional phone systems, you’ll typically be charged for each call. When your business makes thousands of calls every day to customers or team members around the world, costs can quickly add up.

Advanced features IP.svg

Advanced features

Features like auto-attendant and call transfer can boost business operations and team productivity for companies of any shape or size. These features are built into the business VoIP service and can be accessed from a single softphone app on a desktop or mobile.

 Better accessibility IP.svg

Better accessibility

Another huge benefit of a hosted VoIP system is that it offers the ability for your team members to make and receive calls from anywhere. The system is accessible via a softphone app that can be downloaded on a desktop or mobile phone.

 Scalability IP.svg

Scalability

With traditional systems, you have to pay a lot of money for each phone line, along with the amount of time spent on each call—not to mention wait a long time for every extension to be set up. IP phone solutions aren’t restricted in the same way, and you can easily add phones without worrying about installing new lines.

Cost savings IP.svg

Cost savings

Switching from landline to VoIP telephony results in huge savings for your business. With traditional phone systems, you’ll typically be charged for each call. When your business makes thousands of calls every day to customers or team members around the world, costs can quickly add up.

Advanced features IP.svg

Advanced features

Features like auto-attendant and call transfer can boost business operations and team productivity for companies of any shape or size. These features are built into the business VoIP service and can be accessed from a single softphone app on a desktop or mobile.

 Better accessibility IP.svg

Better accessibility

Another huge benefit of a hosted VoIP system is that it offers the ability for your team members to make and receive calls from anywhere. The system is accessible via a softphone app that can be downloaded on a desktop or mobile phone.

 Scalability IP.svg

Scalability

With traditional systems, you have to pay a lot of money for each phone line, along with the amount of time spent on each call—not to mention wait a long time for every extension to be set up. IP phone solutions aren’t restricted in the same way, and you can easily add phones without worrying about installing new lines.

Ready to upgrade your business phone system?

If you’re ready to upgrade your traditional phone system and harness the power of IP telephony, there’s no better time than now.

8x8’s cloud business phone system offers an extensive range of features for leveling up your company’s operations. Whether you need to connect remote teams located around the globe or communicate with customers across multiple channels, the 8x8 platform lets you serve anyone from anywhere.

Unify your communications with integrated contact center, voice, video, messaging, and APIs. Empower every employee and delight every customer with a single, scalable platform to manage all your business communications, locations, and users.

Ready to upgrade your business phone system?

If you’re ready to upgrade your traditional phone system and harness the power of IP telephony, there’s no better time than now.

8x8’s cloud business phone system offers an extensive range of features for leveling up your company’s operations. Whether you need to connect remote teams located around the globe or communicate with customers across multiple channels, the 8x8 platform lets you serve anyone from anywhere.

Unify your communications with integrated contact center, voice, video, messaging, and APIs. Empower every employee and delight every customer with a single, scalable platform to manage all your business communications, locations, and users.

Ready to upgrade your business phone system?

If you’re ready to upgrade your traditional phone system and harness the power of IP telephony, there’s no better time than now.

8x8’s cloud business phone system offers an extensive range of features for leveling up your company’s operations. Whether you need to connect remote teams located around the globe or communicate with customers across multiple channels, the 8x8 platform lets you serve anyone from anywhere.

Unify your communications with integrated contact center, voice, video, messaging, and APIs. Empower every employee and delight every customer with a single, scalable platform to manage all your business communications, locations, and users.

Ready to upgrade your business phone system?

If you’re ready to upgrade your traditional phone system and harness the power of IP telephony, there’s no better time than now.

8x8’s cloud business phone system offers an extensive range of features for leveling up your company’s operations. Whether you need to connect remote teams located around the globe or communicate with customers across multiple channels, the 8x8 platform lets you serve anyone from anywhere.

Unify your communications with integrated contact center, voice, video, messaging, and APIs. Empower every employee and delight every customer with a single, scalable platform to manage all your business communications, locations, and users.