Is Your Business Ready for VoIP?

Dan Hoffman, president and CEO of M5 NetworksEditor’s Note: We’re very pleased to bring you this guest column from guest writer Dan Hoffman. I had the pleasure earlier this year of hosting Dan Hoffman on my radio program, and the show got a lot of interest. Dan explains the benefits of VoIP and when it makes sense for your business.

By Dan Hoffman

VoIP, short for Voice over Internet Protocol, is a technology that translates speech into small data packets, sends these packets over broadband data connections rather than traditional phone lines, and translates them back into voice once they reach their destination. The Radicati Group recently predicted that 74 percent of all corporate phone lines will use VoIP in the next three years. For business owners taking the leap to VoIP from traditional phone system services, the ability to send voice traffic over data networks translates into major benefits.

What’s So Great About VoIP?

Many business owners equate VoIP with cost savings, largely because of widespread advertising campaigns touting consumer VoIP offerings. However, cheaper calls are only a small part of the story for the business market, which demands quite different phone system capabilities. For the business market, the upfront equipment investment and ongoing technical resources required to successfully install and manage an IP-based phone system can be substantial and costly, depending on the deployment. Fully understanding the impact of VoIP beyond monthly long-distance savings requires a comprehensive assessment of the benefits, costs and choices associated with VoIP.

Besides the upfront investment, many small and mid-sized businesses are reluctant to deploy VoIP phone systems because they have limited internal technical resources and expertise, and lack access to the extensive IT staffs enjoyed by larger enterprises. In addition, small and mid-sized businesses often cannot risk the reliability and quality issues that plague consumer VoIP phone service delivered over the public Internet.

Nevertheless, many companies agree that VoIP’s benefits substantially outweigh its costs. With VoIP, you can easily reconfigure your phone system on a computer without contracting an outside technician to manually reprogram the phone system and accommodate employee moves, adds or changes. Adding new employees and moving workstations becomes a simple, cost-effective process, creating a nimble, more streamlined organization.

Remote workers, telecommuters, and traveling executives also appreciate VoIP’s remote usage capabilities. Whether they’re at home or in an airport, off-site workers can use virtual extensions to connect to the office phone system from any remote location with broadband Internet access. Remote and traveling workers can also use an IP-enabled phone, or softphone (special software installed on a laptop or PC to allow it to function as a telephone) to place and receive calls as if they were working at their office desk.

“Just like a PC, I can plug and play phones both inside and outside the office and perform moves, adds and changes with no service dispatch required,” says Jeff Edelstein, vice-president of information technology at Lazare Kaplan, a premier diamond cutting company. Edelstein switched to an IP-based phone system when his company relocated its corporate headquarters in New York City.

VoIP also allows seamless connection between a company’s multiple offices through a single receptionist, auto-attendant, and voice mail system. Companies with multiple offices can also use internal four-digit calling between locations. For example, Lazare Kaplan has offices around the world – in places like Israel, Japan, Belgium and Africa – and using a VoIP phone system, employees avoid expensive international charges. These features help give companies a coherent presence to both external and internal constituents.

Additional benefits of IP phone systems are consolidated voice and data networks. While analog phone systems require separate voice and data infrastructures, VoIP allows for a single converged network to run both types of applications which lowers bandwidth costs for organizations.

What Are My VoIP Options?

Business-class VoIP comes mainly in two flavors: premises-based and outsourced. Like a traditional PBX or key system, a premises-based IP phone system resides at the client’s site. In this setup, clients are usually responsible for purchasing, installing and maintaining all necessary equipment and negotiating local, long distance, conferencing and Internet service contracts from multiple service providers.

In contrast, with an outsourced model the client has no physical hardware on-site other than the handsets on each desk and a managed router. A single vendor provides service via a shared-tenant, hosted PBX over private IP connections, which are usually T-1 or DSL lines. Outsourced providers typically offer all-inclusive services for a flat monthly fee, providing the dial-tone, local, long-distance and international service, conferencing, maintenance and support and Internet access.

Outsourced IP phone system solutions are gaining popularity among small businesses, especially those which lack the in-house staff and internal resources needed to operate such a complex system on their own. The anticipated demand for outsourced VoIP phone systems is so strong that advisory services firm, InfoTech Research Group, which concentrates on the IT needs of mid-sized organizations, predicts 48 percent of small and mid-sized business sites will use a hosted solution by 2010. Because a third party supplies installation, upgrades, maintenance and support, valuable internal staff are free to focus on more important, strategic matters – like growing the business.

Companies that consider outsourced VoIP solutions may also work in tandem with IT consultants or system integrators who understand their network and data needs. In these cases, it is important the consultant or integrator work closely with the VoIP service provider so any issues that arise during integration are handled promptly. “We recommend M5’s Outsourced IP Phone System to many of our clients who are looking for a new phone system,” says Jayesh Punater, President, Founder and CEO of Gravitas Technology, an IT services firm specializing in the hedge fund and private equity markets. “Outsourcing information technology and communications allows companies to focus on growing their businesses and meeting the needs of their clients rather than spending valuable dollars maintaining phone system equipment.”

Are You Ready For VoIP?

VoIP phone systems provide increased flexibility and productivity-enhancing capabilities previously only attainable by Fortune 500 companies. Now accessible to a wider audience, the technology can make small and midsize businesses as reliable, accessible, and service-oriented as their larger enterprise counterparts. If it’s still unclear whether your business is ready for VoIP, answering the following questions may facilitate your decision:

  • Do you have plans to move or expand in the near future? If so, how quickly will you need to implement a new phone system?
  • Do you have the necessary resources to manage a phone system in-house, or would outsourcing be a more viable option?
  • Do you have multiple offices that interact frequently?
  • Do you have employees that often work outside of the office? If so, how do you accommodate their telecommunications needs?
  • Does your phone system currently integrate with your business-continuity and/or disaster-recovery plans?

When you’re ready to introduce your company to VoIP, make sure you work with a competent, reliable service provider you trust. Meet all the key players in the organization and speak to existing clients with requirements similar to yours. And if you don’t have the in-house resources, consult a qualified third party to evaluate the technology prior to making your selection.

* * * * *

About the Author: Dan Hoffman is President and CEO of Manhattan-based M5 Networks ( The company currently provides its Outsourced IP Phone System to over 450 small and mid-size businesses in the New York metropolitan area. Dan can be reached at


8 Reactions
  1. I listened to your podcast, Dan. It was a great show that really helped me to understand VOIP and this is a nice post. Thanks!

  2. Very true, we use VOIP extensively, to communicate with our branches in UK and India. Without the technology we would have gone bankrupt. Now communications is so easy not only for us but also for our clients who can contact our international branches without paying international charges.

    Our making money tips for businesses can be found at

  3. I was interested in this approach and looked at the M5 website. Apparently they don’t work with firms with less than 10 employees and my firm has about half of that.

    Anybody know of similar reputable offsite VOIP providers who work with smaller firms?

  4. jeroboambramblejam

    We tried several residential VOIP providers and had very poor results. While we used the best technology on our end, the audio quality and line noise were atrocious. Nothing yet available beats conventional land lines, and at $20 a month for unlimited national long distance, it’s a real bargain!

  5. I tried it when it first came out maybe now it’s better….

  6. A great post on VOIP.

    Regarding building moves and new space build-outs, note that cabling costs can often be cut in half with the use of a VOIP system as you don’t need special phone cabling. As with any new system, it is also great to be able to set it up at the new site and get it tested before the move. However, the system may require better networking equipment than you are used to. Even if you don’t currently plan to implement VOIP, I would suggest that any new networking equipment purchases be able to support it so you are prepared for the future.

    Outsourcing VOIP can be a great option for small and mid-sized businesses. Be cautious that you understand pricing and service levels. I’ve seen situations where some of the benefits of VOIP went not realized due to a lack of responsiveness on the vendor’s part. In addition, some vendors charge for each move/add/change. Organizations that make frequent on-going changes should take this into consideration as they assess the benefits and costs of the VOIP models.

  7. VoIP is definitely the way to go in my opinion when you do a lot of international calling.