The premise behind VoIP is fairly straightforward: instead of using “circuit-switched” technology, where a dedicated path from caller to receiver is reserved for their entire conversation, voice over IP phone systems treat voices as data, turning your words into tiny packets of information that are sent over data networks. As they arrive at the receiving end, the data is turned back into audio.

To set up a business VoIP system, you need several components. A central device manages the calls, the way a private branch exchange (PBX) or key system unit (KSU) does in traditional phone systems. This can be a dedicated piece of hardware such as an IP PBX, a regular PBX that has been IP-enabled, or a server running specialized software.

You'll also need phones and a data network. In many cases, you may be able to use your existing digital phones and computer network, although you may need to upgrade some of your network hardware.

Depending on your setup, internal calls are routed over your existing phone network or your computer network. Internal calls within the same office will typically be conveyed over your phone network while calls to other company locations get routed over your computer network.

Calls to external phone numbers get sent through the network to a gateway, which connects to the public telephone network. All of your voice over IP calls connect seamlessly to any phone user – there are no compatibility issues to worry about.