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Switching to Internet Phoning Not for Everyone

Switching to VoIP depends on the size of your business, what you do and how you work.

CHICAGO (TheStreet) -- Add another acronym to the long list of techno-terms business owners are expected to throw around confidently. VoIP, or Voice Over Internet Protocol, is the next big thing in office phone systems, and many small businesses are wondering if they should make the switch -- leaving behind their standard phone network in favor of Internet calling.

The answer? It depends on the size of your business, what you do and how you work.

To start with the basics: Traditional phone systems carry sound through analog telephone lines, while VoIP systems break sound into digital data transmitted over your company's computer network. In some cases, switching to VoIP means buying new hardware. If your phone setup isn't too outdated, though, you can probably keep it (you can probably use your existing phones too) and simply buy new software.

VoIP phones aren't exactly new -- even Oprah has been using Skype to chat with guests from around the world -- but their initial quality wasn't clear or consistent enough for business use. The technology has leaped ahead in recent years, though, and VoIP now is a booming segment of the telecommunications industry. According to consulting and market research firm Frost & Sullivan, the VoIP market gained 40% more users and saw revenue rise 22% last year. About 25% of small to medium-sized businesses (up to 500 employees) have transitioned to Internet phone services.

In large part, that's because sound quality has improved. Telephones are also increasingly seen as part of a company's larger communications strategy. When the phone service is part of the office network, spoken conversations can be easily integrated with applications such as Web conferences.

"Information technology is becoming part of a company's competitive advantage," Frost & Sullivan analyst Vanessa Alvarez says. "A lot of small companies are trying to leverage different technologies and tools to extend their reach. You can use these platforms to enhance communication with your partners and customers."

Does that mean you should make the leap? Not necessarily. The prime candidates for a VoIP system are companies that require frequent collaboration between employees in far-flung locations. In those cases, Alvarez says, "The cost savings are undeniable."

Take a PR company with offices in New York and Los Angeles that coordinates events cross-country frequently and racks up hefty long-distance charges. Making calls and running Web conferences through the company's computer network would eliminate the expense of those long-distance charges.

VoIP can also boost customer service. Wireless IP phones allow warehouse workers to quickly check if an item is in stock and transmit that information instantly to a sales representative in another location. If you run a retail website, you can add an instant chat option for customers who have questions while browsing.

If you decide to make the change to VoIP, make sure you choose a provider that understands your specific needs. "The small- and medium-sized business market has always been coveted by the larger players in the telecom industry, but they've never been able to capture it," Alvarez says. "They've been stripping down a large enterprise solution and selling it as a small-business solution, but you need a different mentality to sell to small business."

If, like most small businesses, you don't have a dedicated IT department, you'll want to make sure that whatever company you contract with has a local service rep who is available for troubleshooting as necessary. Also, the provider should check your network capacity and upgrade it if necessary to accommodate voice service. One advantage of VoIP systems is that users can be easily added or deleted, but make sure you're given adequate training how to do so.

Switching systems won't make sense for every business. If most of your communication takes place between employees in one office, Internet phones won't reduce your expenses or make your company any more efficient. Integrated communication solutions may be the hot trend, but old-fashioned, in-person conversations can be just as effective.


Tech reviewer Jonathan Blum looks at business-class, VoIP-ready desk phones, including the Belkin Desktop Internet Phone for Skype.

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Elizabeth Blackwell is a freelance writer based in Chicago. She is the author of Frommer's Chicago guidebook and writes for The Wall Street Journal, Chicago and other national magazines.