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Buyer's Guide

by Daniel Harris,
Market Research Associate
Last Updated: March 20, 2017

The complexity of the business telephony market is nothing short of staggering. With hundreds of differences—some minor, some major—in technology, features and usability, buying a new VoIP phone system can get very confusing very quickly.

We’ve written this buyer’s guide to make business telephony a little easier to understand, and to make the buying process a little more palatable. Here’s what we’ll cover: 

Traditional Business Phone Systems
VoIP Phone Systems
Software Applications
Pricing Considerations
Recent Events You Should Know About

Traditional Business Phone Systems

Traditional business phone systems use the traditional landline telephone system, often called the Plain Old Telephone Service or POTS. VoIP phone systems, discussed below, use the Internet instead of the POTS. Overall, the technology is in a state of transition from traditional to VoIP, and many businesses have phone systems using elements of both.

Private Branch Exchanges (PBX)
In a PBX system, every office phone is connected to a single, centralized router within the office, which then assigns a unique line (called a trunk) to the public telephone network. A PBX allows internal calls to be routed without connecting to the public phone network at all—translating to significant cost savings, particularly in large offices.

The term "PBX" originates from the days when a live operator manually connected lines (exchanging branches) at a company’s internal switchboard. Though today’s technology is wildly different (there aren’t always branches, nothing’s being exchanged and the business phone system is often managed remotely, which means it’s not even private anymore), the term is so widespread in the industry that it is still used to describe any in-house office phone system. Related acronyms you might hear include:

  • IP PBX: Internet Protocol Private Branch Exchange
  • PABX: Private Automatic Branch Exchange
  • EPABX: Electronic Private Automatic Branch Exchange

Key Systems
In a key system, the user selects the line manually, with lights indicating which lines are in use. Though this is a useful feature for small office systems, it quickly becomes impractical as the number of users grows. (Imagine a key system with 50 lines.)

As technology has improved, a hybrid model has emerged that routes keyed phones through an electronic system, similar to a PBX. This has allowed for the rapid merging of keyed and PBX features, plus the development of new features such as:

  • Monitoring the system from a remote location
  • Caller ID
  • Voicemail
  • User- or office-specific limitations (e.g., no international calls)

Though this description drastically oversimplifies all that goes into the technology, what’s important to note is that most keyed systems today operate through some form of hybrid model.

Choosing Between a PBX and a Hybrid Key System
Though these technologies have converged over time, their usability and features make them very different at the user level. Since a modern PBX control unit is essentially a specialized computer, it provides automated call distribution and many more features associated with computer telephony integration (CTI, described in more detail below). The behavior of a hybrid key system, however, may be far more preferable (and more cost-effective) for smaller businesses that don’t need those features or more than a dozen or so lines.

BehaviorKey/Hybrid SystemPBX
Line selection User selects the line, or the system defaults to the first available line. User dials an “escape number” (usually 9, in the U.S.) to access an outside line. (Note that modern systems can often bypass this step through software that recognizes how calls should be routed based on the first number or numbers.)
Inbound calls Can be answered by multiple people. Often, the phone will ring simultaneously at multiple endpoints, and whomever answers first gets it. Calls are routed to a specific user, often automatically to the first available user of a specified type.
Ideal for >50 employees and/or call centers

VoIP Phone Systems

Voice over Internet Protocol, or VoIP, sends communication data through the Internet rather than through a traditional phone line. The biggest benefit of VoIP telephone systems for businesses is that they provide more features and usability at a fraction of the cost: Rates on long distance and international calls, in particular, are much lower. They're also more expandable than traditional phone lines, since they're limited by digital bandwidth rather than by the number of physical lines.

VoIP has further blurred the distinction between key systems and PBXs, since there are now business telephone systems that can perform the functions of both. Here we’ll look at three examples of business VoIP phone systems, starting simple and moving to the more advanced.

A Simple Business VoIP System
The most basic business VoIP system is telephone software run on an office computer. This phone software, also known as a softphone, can receive and make phone calls to any phone number over the Internet. Remember, VoIP calls can be placed to any type of phone; they aren’t restricted to calling other VoIP phones. (If you’re new to VoIP, check out our beginner’s guide.)

The business using the system pays its VoIP provider for a single telephone number. Any calls made to that number will be received by that softphone. Calls made from that account’s softphones will display the company’s own Caller ID information. Customers won’t know if they’re called from a softphone at the office, or a softphone running on a laptop on the road, as long as both are on the same account, a benefit to some.

Many VoIP providers offer softphones and come bundled with basic features like customizable voicemail.

A Typical Business VoIP System
An example of a more typical VoIP system would be found in a small business of 10 employees, each with their own VoIP desk phone. Called “hardphones,” these look like traditional office handsets but connect directly to the office’s computer network. VoIP hardphones can be purchased separately or included as part of a service provider’s plan.

Since the office has multiple phones, calls need to be directed and managed between them. This is the job of a central switchboard or Private Branch Exchange (PBX). While there are many feature-rich hardware PBXs available, there are also free software PBXs that run on small computers. A third, and increasingly popular, option is to have a cloud-based PBX. This is a service offered by many VoIP providers and requires no on-site hardware.

Most PBXs also provide the company’s Interactive Voice Response (IVR) system, the automated voice directory that greets and directs outside calls.

An Advanced Business VoIP System
An advanced business VoIP system would be one for a business with hundreds of employees and several remote offices. Here, all employees have hardphones, which connect to the company’s on-premise or cloud-based PBX using their local office’s computer network. Through the PBX, any employee in any office can connect directly to, or transfer calls to, any other employee.

These employees may also have softphones on their cell phones and laptops, which they use while on the road. The softphones also connect to the company’s cloud-based PBX, but connect via whichever data service is available (e.g., 3G/4G or WiFi). These softphones function exactly like the hardphones in the offices.

Most large corporations with multiple offices maintain PBXs in each office which act as one system by coordinating over the Internet, often via SIP trunks and/or using mobile SIP clients.

Benefits of VoIP
A business VoIP system can replace a traditional analog phone system, reducing costs and adding communication functions that help the business operate more efficiently.

Sophisticated functionality. A business VoIP system improves internal and external communications with a variety of real-time tools, such as text messaging, video conferencing and remote collaboration.

Increased efficiency. Apart from adding functions that make communications run more smoothly, a VoIP system brings other efficiencies such as the ability to expand and upgrade a system with relative ease.

Easier redundancy. Digital systems are much easier to back up than analog systems. There’s no easy way to have a backup of the telephone lines outside your office, but you can have your Internet service delivered by several independent means. 

Cost reduction. The flat-rate and tiered plans offered by VoIP providers are generally more competitive than the service plans offered by traditional phone providers. You can also save money on hardware by using cloud-based switchboards and inexpensively adding phone extensions.

Software Applications for Business Telephony

Many of the more basic features below (e.g., call recording or Internet faxes) are common to almost all office phone systems. More advanced functionality like CTI, ACD and auto-dialers will usually be add-ons as part of a more advanced PBX system.

Computer telephony integration (CTI) CTI primarily describes the integration between telephone functions and a user’s desktop computer (including with your CRM or ERP software, if applicable). Common functions of a CTI include the ability to use a computer for phone control (placing, answering, terminating or transferring calls); to show call information (from caller ID, data entered during the routing process and tracked information like call time); to control your active state (ready, busy, away etc.) and, at the server level, to route calls appropriately.
Softphone Rather than having a dedicated phone line, a headset is plugged into the user’s computer, which is then used as the phone source.
Mobility One main advantage of modern phone systems for businesses is the ability to connect any user into the system, even if they’re not physically in the same building. This allows companies to incorporate mobile devices, home offices and multiple locations.
Auto dialer/predictive dialer The system places an outbound call automatically; when someone answers, he is connected to an internal user.
Automatic call distribution (ACD) ACD queues distribute inbound calls according to the desired routing selections. ACD might include: routing calls to the appropriate person; ranking callers so they can be answered in a certain order; or automatic ring-back (giving callers an option to receive a call back rather than wait on hold).
Interactive voice response (IVR) The ability to use vocal or keypad inputs to interact with the phone system. Allows the company to set up how calls are routed, what buttons can be pressed at what time and where calls go.
Call recording Record phone calls and upload the recordings to a secure server and/or deliver them through email. Note that CTI allows for enhanced data to be included as part of call recordings—e.g., a report of caller information, customer complaint, how the call was routed or how long the caller was on hold.
Conference calling The ability to link multiple phone lines together on a single call.
Video conferencing Audio and video conference technology can usually be incorporated directly into all users' workstations, allowing them to lead or join conferences from their own desks.
Internet fax Faxes can be sent and delivered electronically through email or through the company’s document control system. Note that when you’re buying a system, it’s helpful to your provider if you let them know how you use faxes, since there are many different ways to perform this function.

Pricing Considerations

Pricing for a business telephony system will be based on a number of factors.

First will be the size of your company: typical measures include number of locations, number of phones and number of outbound phone lines. One of the tricks of implementation is balancing cost against coverage; each additional phone line costs more money, and you want to get all the phone lines you’ll need at your highest traffic times—but no more. (If you’re not sure what you’ll need, any company you contact will be able to make a recommendation based on how your phones are used.) Multiple locations adds an extra layer of complexity, since it’s obviously much more complicated to connect two offices (or 10, or a 100) and mobile devices into a system than it is to operate one office independently.

The second factor affecting commercial phone systems' price will be the features, functionality and usage. A system with extensive CTI capabilities or ACD queues or with functionality for large-scale conference calls will cost more than one without. Large numbers of long distance or international calls, 800 numbers, call recording and other features will impact pricing, too. Companies with a large number of mobile devices may need to separately purchase software to manage them.

Finally, your industry and the operational and legal requirements it is bound by will have an impact on the system you buy and the functionality you need. For example, hotels have their own set of safety and privacy requirements; healthcare has HIPAA concerns that limit the type of deployments they can use; businesses in the financial services and government sectors have major security needs; and any company that takes credit cards over the phone will need to take into PCI compliance into account, which requires an encrypted line and halting any call recording that might be taking place during the credit card transaction. (Companies may also wish to invest in a robust, dedicated IT security platform.)

Note that many companies that deal in the business telephony market do it as part of a larger package—for example, you might hire the same company to be your broadband Internet provider, your network administrator and your business phone service provider all in one. Obviously, this will further impact pricing.

Key Considerations

Internet telephony. As Internet technology continues to grow and expand, Voice over IP is becoming an increasingly popular business phone solution. Business VoIP adoption reached 15 percent in 2013 (as reported by the FCC in 2014), with businesses of all sizes jumping on board. As this is clearly the direction the business telephony market is headed, VoIP is an option you should seriously consider.

Outsourcing IT. In the 1990s, a business trend of focusing on core competencies started to take root. Under this principle, even large businesses realized they could produce better results by allowing specialists to come in and manage all the processes that weren’t part of their specific area of expertise. IT and business telephony have both been a major part of that trend. So rather than investing in your own business telephone infrastructure and hardware, you may want to consider letting your service provider bring all that in for you.

Hosted cloud systems. As broadband Internet connections continue to get faster, cheaper and more reliable, cloud-based PBX phone systems continue to grow in popularity. These provide all the functionality of a full PBX or key phone system but are hosted on the service provider's servers. Simpler management and lower upfront cost are two selling points for hosted cloud systems.

Industry-specific systems. There are some industry-specific legal considerations that apply to business phones and business VoIP systems. A clear understanding of how phones are used within the specific industry will also help answer some of the following considerations.

VoIP phones. Business VoIP systems can use hardphones, which look and function just like traditional office telephone handsets. They can also use software phones, or softphones, where a headset is attached to a computer and calls are placed and received via the VoIP provider’s software interface.

Bandwidth. The Internet connection from the Internet Service Provider (ISP) must have sufficient bandwidth. Quality of Service (QoS) measures need to be in place to prioritize bandwidth usage so that voice calls get preference over non-real-time network uses.

Backup. When a company relies on an Internet connection for all communications, as can be the case with VoIP systems, it’s important to have a backup plan for when that connection has problems.

Recent Events You Should Know About

Microsoft expands Skype for Business services. In April 2016, Microsoft released the Cloud Connector Edition of the Skype for Business Server in 17 additional countries. This edition of the Skype for Business phone system enables businesses to connect an on-premises PBX or gateway to Microsoft’s cloud phone system in order to use their existing telecommunications providers instead of Microsoft’s SIP trunking services for connections to the traditional phone network.

Google launches Duo video-calling app to compete with consumer offerings. Google has launched a consumer video calling app called Duo in a bid to better compete with Skype and FaceTime in the massive consumer video calling market. Duo focuses on simplicity and only offers person-to-person calling. The lack of support for conference calling, text messaging, and desktops/laptops means that Duo is not useful for business communications when compared to similar offerings, including those from Google. Google’s communications client for businesses is Hangouts, not Duo.

8x8 unveils next-generation capabilities for global contact centers to optimize customer and agent experiences. Enterprise Communications as a Service (ECaaS) provider 8x8, Inc. launched next-generation capabilities for its Virtual Contact Center (VCC) solution. These new capabilities include native quality management capabilities and customer journey analytics, which serve to give contact center managers full visibility into the customer life cycle for an interaction.

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