What is VoIP?

Last updated on November 25, 2025

What is VoIP?

Voice over Internet Protocol (VoIP) is reshaping how businesses manage phone calls by using your internet connection instead of traditional phone lines. It provides professional call-handling features, flexibility to work from anywhere and on any device, and significant cost savings.

More and more companies are taking advantage of these benefits – a 2024 Research and Markets report estimated that the VoIP market will grow to around $508.7 billion by 2030. But if you’re new to the topic, we’ve got you covered.

This guide breaks down what VoIP is, how it works, and why businesses are making the switch, what features matter most, and how to determine if VoIP is right for your organization.

Let’s dive in.

How Does VoIP Work?

When you make a traditional phone call, your voice travels as an electrical signal through copper wires. The phone company maintains a dedicated line between you and the person you’re calling for the entire conversation.

VoIP works completely differently, converting voice into digital packets and transmitting them over the internet. At the receiving end, they are converted back into audio. You don’t need a dedicated phone line, as the call shares the internet connection with all other online activity.

Here’s a basic breakdown of the steps involved :

Your IP phone or VoIP app connects to the router on your network.

When you dial a phone number, your phone tells your VoIP service provider to start the call.

Your voice is turned into tiny digital packets, and the compressed data is sent over the internet to the other person.

The digital recording is converted back into the analog sound of your voice, letting the recipient hear you speak.

Their voice returns in the same way, and your VoIP phone converts those incoming packets into clear audio in real time.

VoIP systems often bypass the traditional telephone network when calling other VoIP users, but calls to regular phone numbers still connect to the PSTN at the final step.

VoIP is built on open standards like Session Initiation Protocol (SIP), which ensures that different desk phones, conference phones, and VoIP apps can all work together seamlessly.

What Is the Difference Between VoIP and Landline Phones?

The main difference between VoIP and a landline is the underlying technology: VoIP uses the internet, while landlines use a legacy copper line telephone network. Because VoIP is cloud-based, no on-site hardware management is required. Adding a new user is accomplished through a simple call center software change and doesn’t require a technician’s assistance.

Businesses prefer VoIP because it offers a better calling standard and a wider range of features without the need to set up an expensive on-premises private branch exchange (PBX).

Here are some key differences when comparing VoIP vs. landline :

Functionality	VoIP	Landlines
Technology	Digital packet-switching	Analog circuit-switching
Infrastructure Requirements	Internet connection (DSL, Cable, Fiber), VoIP-enabled devices (IP desk phones, softphones, headsets, router or VoIP gateway if connecting to the PSTN)	Public Switched Telephone Network (PSTN), traditional phone jack in the wall, standard analog phones
Cost	Lower overall, with flat rates or per-user pricing	Higher
Nationwide, Long-Distance, International Calls	Cheaper or included as free in the plan	Expensive, often billed per minute
Internet Requirements	Yes	No
Reliability During Internet/Power Outages	Doesn’t work during a power or internet outage unless you have backup power/cellular failover; can be affected by network congestion or bandwidth issues	Not affected by network congestion, internet, or power outages
Portability	Used from anywhere with an internet connection, you can take and forward calls to multiple devices and keep the phone number when you move	Tied to a physical location/address, the phone number usually changes if you move to a new location
Device Flexibility	BYOD (Bring Your Own Device) : works across multiple endpoints, like IP desk phones, computer applications, and mobile apps	Requires a specific, physical handset connected to a copper line or an office PBX
Features	Advanced (voicemail-to-SMS, IVR, call analytics, etc.), cloud-based	Basic calling features (call waiting, caller ID, basic voicemail), additional cost extra
Integrations (CRM, text messaging, surveys)	Easy integration with different types of business software (CRMs, dialers, analytics dashboards, etc.	Limited
Collaboration Tools	Integrates with cloud team collaboration apps to create a unified hub	Can’t natively connect to collaboration tools or digital systems
Setup and Installation	Setup can be completed remotely, within hours, depending on the system’s complexity and integrations	Requires professional installation, can take days or weeks to set up
Call Routing	Advanced, with routing rules, multiple endpoints, queues, IVRs	Basic forwarding to a single pre-set number, often with additional charges and complicated setup
Remote Work Capabilities	Ideal for distributed teams, hybrid offices, and global operations	Remote workers can’t access business numbers without call forwarding or PBX-to-mobile bridges, which can be expensive and inflexible

Advantages of VoIP

VoIP offers first-class phone services at a fraction of the cost of a landline. But those aren’t the only advantages.

Here are the key benefits of VoIP that make it an essential upgrade for businesses :

Lower Overall Costs : There are reduced initial setup, maintenance, and operating fees, especially for growing teams. Many VoIP providers offer unlimited calling plans or per-user subscriptions, replacing unpredictable telecom bills with fixed monthly pricing.

Cheaper Calling Rates : International long-distance calls are significantly less expensive because they travel as data rather than through expensive circuit-switched networks.

Advanced Features : VoIP offers enterprise-grade features like Interactive voice response (IVR) menus, call recording, auto dialers, AI-powered call analytics, and call queues, without having businesses install expensive add-ons.

Seamless Scalling : You can add or remove users, extensions, or features in minutes without installing any physical wiring or calling a technician. This is especially useful for seasonal businesses or those with fluctuating call needs.

Seamless Integrations : VoIP connects directly with your CRMs, helpdesk software, marketing automation, ticket systems, and other business tools, creating smarter workflows and less manual data.

Remote Work Friendliness : VoIP is location-independent, allowing globally-distributed or hybrid teams to log in from any device and access company phone numbers anywhere with internet access.

Unified Communications : VoIP can integrate into CCaaS (Contact Center as a Service) or UCCaaS (Unified Communications as a Service) platforms like Squaretalk, merging voice, messaging, SMS, email, and other channels to simplify collaboration and eliminate tool switching.

Improved Customer Experience : VoIP helps you deliver faster and more personalized customer interactions with omnichannel communication, intelligent call routing, IVR, and real-time agent performance dashboards.

Enhanced Security : VoIP systems have call and data encryption, role-based access controls, two-factor authentication, etc., ensuring privacy and compliance.

Reliability : Cloud-based VoIP is very redundant and resilient, with a typical uptime guarantee of 99.99%. This makes it an excellent fit for disaster recovery and continuity planning.

Disadvantages of VoIP & How to Overcome Them

While BoIP offers significant benefits, it’s not a perfect technology and has its drawbacks. Most of them can be effectively mitigated with the right setup and following best practices.

Here are some roadblocks you can hit with VoIP and how to address them :

1. Internet Dependency

VoIP relies entirely on your internet. If the connection is slow, unstable, or goes down due to outages or router malfunctions, for example, call quality suffers – inbound calls start dropping, outbound calls don’t connect, there’s latency and jitter, leading to lost revenue and customer frustration.

How to Overcome VoIP’s Dependence on Internet Connectivity

Ensure sufficient bandwidth:
- Allocate at least 100 Kbps per call for stable HD voice.
- Use fiber or business internet to guarantee consistent performance.
Prioritize VoIP traffic:
- Configure Quality of Service (QoS) on your router to give VoIP packets priority over other internet uses (like web and email).
- Don’t make calls when downloading or uploading large files.
Use wired connections when possible:
- Ethernet is more stable than Wi-Fi.
- Adopt a cloud-based softphone or mobile app so employees can instantly switch to other devices if the office loses power.
Add redundancy:
- Have a backup internet provider or 4G/5G failover modem for emergencies.
- Ensure automatic failover forwarding calls to mobile numbers using cellular data.
Use an Uninterruptible Power Supply (UPS) – Install a battery backup for your modem and router to maintain service during short power outages.

2. Call Quality Issues

As VoIP transmits data in packets, delays can occur if packets arrive late or out of order, causing echo, choppy or robotic-sounding voices, one-way audio, and words cutting in and out. This can lead to miscommunication, longer call handling times, and customer friction.

How to Address VoIP’s Latency and Bad Call Quality

Use quality Headsets or IP Phones :
- Invest in VoIP-specialized headsets to minimize static and echo problems.
- Use noise-canceling microphones instead of laptop mics.
- Leverage IP Phones that support wideband audio codecs to deliver better sound quality.
Keep your VoIP apps, softphones, and firmware up-to-date :
- Regularly update them to fix bugs related to audio codecs, jitter buffering, and NAT traversal.
- Restart routers, switches, and VoIP devices occasionally to clear cache or stuck packets.
Optimize VoIP provider settings :
- Implement jitter buffering in your softphone to smooth out variations in packet arrival times, leading to clearer, less choppy audio.
- Adjust codec preferences to your internet stability level – prioritize HD codecs with a stable connection and high-compression codecs (like G.729) if you have limited bandwidth or frequent network issues.
- Partner with a reliable VoIP provider to leverage advanced routing and redundancy.

3. Security Risks

VoIP systems operate over the internet, which exposes them to various cyber threats, like phishing and toll fraud, eavesdropping on unencrypted calls, account hijacking, and Distributed Denial-of-Service (DDoS) attacks. Understanding these risks and implementing straightforward protections keeps your communication secure.

How to Prevent VoIP Hacking or Eavesdropping

Protect your calls :
- Go with a VoIP provider that encrypts both the call setup process and the actual voice data.
- Use Secure Real-time Transport Protocol (SRTP) for voice encryption and Transport Layer Security (TLS) for signaling protection.
Implement access control :
- Change default passwords and add Two-Factor (2FA) and Multi-Factor Authentication (MFA).
- Use role-based and geo-IP login restrictions.
Work with reputable VoIP providers :
- Choose vendors with built-in security features and strong data compliance (GDPR, HIPAA, TCPA).
- Providers actively monitor, test, patch, and update all the underlying software (switches, servers, and platforms) to close security vulnerabilities immediately.

4. Emergency Call Limitations

VoIP is internet-based, which means that unless configured, emergency services might not correctly detect your exact location and delay help. Even though businesses rarely use VoIP for crisis calls, it’s still an important regulatory and operational consideration for safety compliance and liability reasons.

How to Overcome VoIP’s E911 Drawbacks

Register each extension or Direct Inward Dialing (DID) number to a physical address during setup so dispatchers can locate them accurately. This ensures the primary location is always known.
Keep address information updated when someone moves desks, works from home, or relocates to a different office with specific floor numbers, suite numbers, building names, and even specific rooms when possible.
Configure VoIP systems to use the mobile device’s native location functions when calling outside the office.
Educate your staff on the differences in how VoIP handles 911 calls compared to traditional phones, and to use their personal cell phones for genuine emergencies whenever possible.

Best VoIP Phone System Features

Here are the most popular VoIP features, especially useful for outbound/sales operations, contact centres, and distributed teams.

1. HD Call Quality

Thanks to codecs designed for high quality, every VoIP call over a stable internet connection benefits from HD call quality. You have crystal-clear audio, which is vital for sales conversations and customer trust.

2. Auto Attendant

An auto attendant allows you to configure the options callers hear when they dial your business and route them to the right destination without human intervention. For example, press option 1 for sales, press 2 for support, and press 3 to speak with reception.

This feature makes small businesses sound professional and present a large-company image while eliminating the need for a dedicated live operator.

The system captures caller intent and can route calls to specific departments or agents best suited to handle a particular type of query, saving time and enhancing the customer experience. You can set different greetings for business hours versus after-hours, customize the menu options, and update everything instantly through a web interface without recording new audio.

3. Security & Compliance Features

Using VoIP means every call signaling and media is encrypted, protecting conversations from eavesdropping and ensuring data privacy and compliance. You have secure access and audit logs, helping companies in finance, debt collection, healthcare, etc., to adhere to regulations.

4. Multi-Device Support

Mobile, desktop, and softphone apps give your agents the flexibility to use VoIP phone service from laptops, smartphones, and tablets with complete functionality. VoIP apps are ideal for salespeople and technicians who work on the go, as well as remote or hybrid teams, allowing you to maintain continuity.

A downside is that the quality of mobile apps varies between providers.

5. CRM & Other Tool Integrations

VoIP systems can connect with various business software to reduce manual work, save time, and enhance workflows. You don’t need to switch between applications to document each interaction.

Integration with a CRM, for example, enables pop-ups with customer information when calls arrive, automatic updates of logs, and click-to-call from customer records. Sales teams can measure performance by automatically tracking call volume, duration, and outcomes tied to specific campaigns or opportunities.

6. Integrated Communication Channels

Unified Communications as a Service (UCaaS) combines different communication types, like calls, instant messaging, SMS, video conferencing, and email, into a single platform. Having all channels in one platform means your team can switch fluidly between them, enhancing flexibility and customer reach.

7. Call Recording

VoIP offers call recording options, where calls are saved in a cloud-based portal, ready for download later. This provides valuable documentation for measuring KPIs, quality assurance, and dispute resolution.

For businesses in regulated industries, like healthcare and finance, call recording helps meet compliance requirements. For customer service teams, recordings are training tools for studying both positive and negative interactions. Sales teams can review successful calls to identify winning techniques.

8. International Numbers

Conversion rates in outbound campaigns targeting niche destinations or multiple countries noticeably improved with a local caller ID, local DIDs, and routing logic.

Virtual phone numbers in other countries let you establish a local presence in international markets without the need for physical offices or teams. A UK business, for example, can have a US phone number that customers in America can call locally, with those calls routing to the UK office through the internet at no additional cost.

When to Switch to VoIP

Knowing when to transition from a traditional phone system to VoIP can save your business both money and operational headaches. Consider switching if :

Your team is remote, hybrid, or multi-site

Your call costs and maintenance fees are escalating

You need advanced call handling features

You need call data, KPI tracking, call recordings, and report exports

You’re hiring more employees, opening new offices, or scaling seasonal call volumes

You’re modernizing other business systems

How To Switch to VoIP from a Traditional Phone System

Making the move to VoIP is easier and smoother than you think, but it still requires planning, network checks, and coordinated setup.

Here’s a step-by-step guide to help you get started :

1. Assess Your Current Phone Setup

Understanding which features, strategies and tools from your stack you use and consider essential ensures you don’t lose critical capabilities during the switch. Do you have call forwarding, voicemail, conference calling, or specialized routing? Which departments rely on phone communication? Do some of your devices rely on analog lines (e.g., fax, alarms, intercoms)? Do you require international numbers or a local presence?

The answers will determine what to port over and what to replace or modernize.

2. Check Your Network and Internet

VoIP runs over your internet, so a stable, high-speed connection is essential. Your network must be able to handle voice traffic without compromising quality and provide enough bandwidth for simultaneous calls.

3. Choose A VoIP Provider and Plan

Pick up a VoIP service provider with a good reputation, reliability, and responsive customer support that fits your business size and needs.

It’s essential to know the size of your team and the key functionalities you need, as some providers charge per user, while others bill per line. Compare pricing structures to understand total costs and be aware of potential hidden fees, like setup charges, number porting fees, or equipment costs.

Trials and demos will help you pick a plan that meets your requirements without paying for features you don’t use.

4. Keep Your Business Number (Porting)

You don’t need to change your current business phone number when switching from traditional systems. Instead, your existing business number can be transferred to your new VoIP service. The new provider handles the porting, which takes from one to four weeks, depending on the carrier, so it’s important not to cancel your old service until porting is fully complete. You can use temporary numbers during the transition.

5. Set Up Your VoIP System

Once you’ve chosen a provider and while waiting for number porting, configure your new system – creating accounts, setting up the auto attendant, recording and uploading greetings, configuring routing rules and IVR menu options, and integrating the system with your existing tech stack.

Choose from several options: use physical IP phones with an internet connection, install a softphone app on laptops or smartphones, or use both. Setup is quick and requires minimal hardware.

6. Train Your Team

Although most VoIP interfaces are intuitive and user-friendly, it’s worth walking everyone through the new system (e.g., how to use the softphone or IP phone to dial customer numbers and answer incoming calls; how to check voicemail, transfer calls, log call dispositions correctly, and navigate advanced features). This will accelerate adoption and time to value, while also reducing the number of support tickets.

7. Decommission the Old Phone System

Once everything is confirmed, configured, and tested, you can cancel your PSTN/landline contract and remove old PBX hardware you no longer need.

Many businesses switch over during weekends or slower seasons to ensure a smoother and safer transition that has minimal impact on your operations. During quieter periods, your IT team can dedicate uninterrupted time and attention to the transition, which will lead to fewer mistakes, faster fixes, and a more controlled rollout.

Squaretalk's VoIP Solution

Now that you’ve seen how much your business can benefit from a VoIP phone system, you need to choose the right partner.

Squaretalk provides a comprehensive cloud-based contact center platform with powerful VoIP capabilities. It’s designed to enhance customer interactions and help businesses of all sizes replace traditional phone lines with modern internet-powered communication. We offer :

Crystal-clear HD call quality optimized for global outbound campaigns

Virtual phone numbers in 150+ countries for higher pickup rates and better trust

Predictive dialing tool to multiply agent productivity

CRM integrations (HubSpot, Zoho, Salesforce, and more)

Call recording, voice agent, analytics, and dashboards for real-time performance insight

Flexible multi-device access for agents working remotely

Security and compliance for regulated industries

Thorough onboarding, a dedicated account manager, and 24/7 tech support

If you need a communications platform that transforms your customer experience and empowers your team to achieve more, see what Squaretalk can do for you today.