What Is VoIP and How Does It Work?

Forget about phone cables, handsets, and circuits. Thanks to VoIP technology, you can make calls whenever and wherever you want, as long as you’re connected to the internet.

But what exactly is a VoIP and how does it work? And more importantly: how do you choose the right VoIP provider?

Read on to learn all you need to know about VoIP technology. 

Learn how to choose a VoIP package for your business

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What Is VoIP?

Simply put, VoIP (Voice Over Internet Protocol) lets you make or receive calls over the internet instead of traditional landlines. 

The three main types of VoIP services are Cloud VoIP, On-Premise VoIP, and Residential VoIP. 

In this article, our main focus is on exploring Cloud VoIP technology. It is a business phone solution, hosted on a cloud server instead of on-premise hardware. 

How VoIP Works

VoIP functions like any other data that you send over the internet, such as emails. It turns your voice into a digital signal (data packets) using codecs and sends it over an IP (Internet Protocol) network. You can transmit VoIP packets over any VoIP-compatible network, such as a local area network (LAN). 

On the receiving end, the data packets get re-converted into sound again, making communication between two or more parties possible.

The solution, therefore, allows you to make calls from any computer, VoIP phone, or other data-driven devices, via the internet. 

With VoIP, you can also route phone calls between internet-based solutions and traditional phones. This allows you to reach your customers on their devices as well. 

A VoIP phone system stores all your data in the cloud which you can monitor through an online dashboard. On this dashboard, you can also modify your contact list and apply additional settings and automation. 

Here, you can watch our brief video guide on VoIP technology:

Advantages of Using VoIP over Landline

Why are so many businesses switching to a Cloud VoIP solution – and why do we think you should do the same?

We collected some of the main reasons your business would benefit from a cloud-based Voice Over IP solution. 

VoIP Is Cheaper Than Regular Landlines

Before we get to how you can sell more by switching to VoIP, let’s explore how it helps you cut costs. 

First of all, VoIP uses your existing internet connection rather than requiring a separate system, external hardware, and expensive copper wires to make phone communication possible. 

If your business operates in multiple countries, international and long-distance calls are generally much cheaper with VoIP service. As you don’t rely on phone wires, you pay based on the receiving region’s calling rate, not your current location.

This point alone can lower your bills by over 60%.

But, let’s take it a step further. 

A good cloud-based VoIP solution also allows you to automate, digitalize and optimize your work. By reducing the resources and time wasted on laborious tasks, you reduce your monthly expenses even further. But how do you automate tasks with VoIP? Read on!

VoIP Helps You Automate and Optimize Your Processes

Since VoIP calls happen through the internet, it gives room for plenty of digitalization and automation, making life easier for all team members.

While you can only use one phone number per landline, VoIP solutions don’t limit you to only one VoIP phone number. The technology allows you to handle multiple requests with different phone numbers simultaneously.

VoIP telephony software solutions, such as CloudTalk, also offer a wide range of features to help you keep costs low, train your team more efficiently, and reach new revenue records.

Some of the most popular automation features include IVR flows, Smart, Power, and Predictive Dialing, Automated Call Distribution (ACD), Skill-Based Call Routing or Business Hour settings. 

Call monitoring, Agent reporting, and the Real-time dashboard help you provide quality service at all times. 

Scripts and call note-taking help agents communicate efficiently with clients, and with the help of API, you can connect any CRM or tool you need for your business. We’ve only just scratched the surface here, but you can see the full list of CloudTalk features here. 

VoIP Lets You Take Calls From Anywhere in the World 

Traditional phones use analog wires to carry voice signals, but with VoIP, voice information is converted, sent, and stored in the cloud. You only need the internet to access it, which means that as long as you’re online, you can take and make calls anywhere in the world. 

This location-independent flexibility allows you to hire team members from any country and let your agents work from home.

VoIP also allows you to turn any device into a telephony solution, such as your laptop, tablet, or smartphone, so you can do business from any of them.    

Because VoIP uses the internet, the voice quality stays high regardless of the country you’re targeting, and call rates don’t change either when you cross the border. The cost of the call depends on your target country, not the country in which you reside.

Disadvantages of Using VoIP

VoIP solutions come with some drawbacks. Let’s go through a few of the main objections and discuss how you can tackle them. 

Good Internet Connection Is a Must

Without a strong and reliable internet connection, the call quality will suffer. 

Luckily, in 2022, you don’t need above-average bandwidth. Although using an ethernet cable is still recommended, VoIP solutions now work significantly better even over a regular Wi-Fi connection. 

We recommend a minimum of 5 Mbps upload and download speed for quality VoIP phone calls. You can check your current bandwidth here. 

Though, there’s one situation where traditional phones still tend to win over VoIP. That is an unexpected power outage. While phone lines work during a power cut, the internet typically doesn’t. 

To overcome this issue, invest in a high-speed mobile data plan or have a backup landline phone.

You Might Have To Re-train Your Staff

If your team is used to working in-house with landlines, switching to a cloud-based VoIP solution will involve a steeper learning curve. 

With features such as call monitoring, call whispering, real-time dashboards, and warm transfers, you can hold your trainees’ hands in real-time, so that they can ease into the new system. 

VoIP Phone System Requirements

By now you probably decided that you’re ready to give the Cloud VoIP solution a go. What do you need to get started? 

Reliable Internet Connection

It’s worth repeating: you simply can’t use VoIP without an internet connection. And while VoIP doesn’t use as much data as you might think, a strong and reliable internet connection is still a must.

In general, we recommend users always connect their devices to the internet via an ethernet cable for a more consistent and better-quality network. 

CloudTalk uses up to 100 kbps per phone call, but note that this bandwidth doesn’t include any activity on top of the call, such as the use of CRM. 

As a general rule of thumb, you need at least 1 Mbps download and upload speed per person but ideally, aim for at least 5 Mbps. You can check your current bandwidth at this link. 

For more information on CloudTalk system requirements, check out our knowledge base article. 

Specific Phones and Devices

VoIP offers you the flexibility to use nearly any device you want. Whether you’re using a smartphone, tablet, or laptop, you and your team can make calls from any device anywhere in the world. 

There are three main ways how to use a VoIP service:

• ATA (Analog Telephone Adaptor). ATA is a device that allows you to connect your analog telephone to your computer or your internet connection. It takes the analog signal from your phone, converts it into digital data, and sends it over the internet.
• IP Phones. These specialized devices look just like normal phones, but they are built specifically for VoIP. 
• Softphones. The easiest way to use VoIP. There are several companies offering software and applications that load a VoIP service onto your computer. Common examples are Skype or WhatsApp.

How To Choose the Right VoIP Phone System

With all the different Cloud VoIP solutions available on the market, how do you choose the right one for your business needs? We believe there are 5 factors you need to consider when choosing the right VoIP phone system: 

• Initial and monthly costs. Are there any hidden fees? What do you get for the recurring fees? Can you find out about calling rates upfront? Find out how VoIP can be priced.
• Reliability. How reliable is the software? How is the call quality compared to other solutions? Inform yourself about the typical ratio of unsuccessful calls. 
• Quality of customer service. Can you reach customer support easily? How fast can you find a solution to your requests? 
• Ease of use. The faster you can train your team, the sooner you will be able to achieve success with VoIP.
• Customer reviews. Trust what existing customers say about the software. We recommend checking sites like Capterra or G2. 

CloudTalk meets all the above criteria. Why not see it for yourself? Try CloudTalk for 14 days – no credit card needed.