Having followed VoIP closely as an industry analyst since 2001, it’s easy to forget that most businesses are still using legacy-based telephony, commonly known as TDM – Time Division Multiplexing. This is especially true for SMBs – Small and Medium Businesses, and I’ll explore why over the next series of posts on this portal.

To begin, let’s start at the source – what is VoIP? The acronym stands for Voice over Internet Protocol, and there are two distinct ideas here.  First is the concept of voice being sent “over” IP, and second is IP itself.  If your business has never used VoIP, then your landline telephony service is based on legacy technology, which means a copper-based network dedicated solely to voice.  This is the traditional telephony mode you’ve always used, and it tends to work very well.  Not only is the service highly reliable – it’s probably never failed you, right? – but the quality is consistently great.

With VoIP, the call no longer goes over that tried and true copper network, which you will eventually move away from entirely.  Instead, voice calls will be routed over a data network – the same one that provides your broadband.  Internet Protocol has emerged as the new standard for all modes of communication that run over the Web, and voice is rapidly shifting this way.  In order for voice calls to be routed over a data network, they must be packetized just like any other form of data.  VoIP has been with us since 1995, but it’s only recently that the technology has evolved far enough to do this well enough to be considered business-grade.

The underlying technology is complex, and since VoIP quality was initially quite poor, it was slow to gain acceptance among business users.  Combine this with the fact that TDM service was – and remains – so good, and it’s not hard to understand why most SMBs still don’t use VoIP.  This article will start to address what has changed, and from there will discuss what benefits SMBs will realize once they go down this path.

Rather than talk about the technology, it’s more important to understand why VoIP has become so popular.  For that answer, we have to look to the consumer world, where VoIP first took hold. By now, everyone has heard of Skype and Vonage, and many of you have been using these services for years.  Both are VoIP services, with Skype being primarily PC-based, while Vonage is mainly a landline replacement service for the home.

The key attraction for both services is saving money, and being essentially free, Skype has built a user base in the hundreds of millions.  These services are not really viable replacements for your current phone service, but they have created both awareness and expectations that have put VoIP on the radar for businesses.  Even with Vonage, the economics for consumer VoIP are attractive, but some concessions are necessary, especially around reliability and quality.  This is a key reason why VoIP has not taken over for business users, but as mentioned, the technology has improved to the point where these concessions are less of a concern, especially when the cost savings are considered.

Now that businesses have an awareness of VoIP, the opportunity becomes more demand-driven, meaning that providers can focus on the specific needs and deliver a winning value proposition.  The needs of businesses are more demanding than consumers, and today there is no shortage of offerings that are built around what SMBs need.