What you should know about the best VoIP features to meet your company’s demands and become a cost-effective solution.

By Matt Edelson

That communications is the lifeblood of any business isn’t exactly a revelation. One can imagine Oog’s House of Clubs taking their first over-the-boulder order and sending it via carrier pterodactyl to the quarry, only to discover that the dinosaurs hadn’t bellowed ahead to let the boss know their ride-share had gotten stuck in a tar pit. Since Triple-A hadn’t yet been invented, they wouldn’t be coming in that day and the order couldn’t be filled. Back at Oog’s, curses were exchanged, the client left in a huff (as this was before the wheel, it was a long walk anywhere, so huffing was common), and Oog couldn’t help feel that there had to be a better way to keep tabs on his business.

Flash forward an Ice Age later and inefficient, insufficient communications is still a major headache for many a small business. Yet, strangely enough, many small businesses express more concern than conviction when it comes to fixing the problem. They are too comfortable with the status quo: Analog phones, customers being dumped into voice mail, employees out of touch at critical junctures, long-distance bills higher than a caravan of RVs gassing up for a cross-country trip.

Push ‘1’ if you’re fed up with that nonsense.

The telecomm solution for many small businesses may be something called Voice-over Internet Protocol or VoIP. VoIP—which in its simplest form moves a company’s phone service to an internet network by digitalizing voice to data—is growing at a rate of 60 percent annually. That’s according to Sanjeev Aggarwal, vice president of SMB IT Infrastructure Solutions for tech analyst AMI Partners. One reason for the growth, says Aggarwal, is that “a VoIP solution lends itself well to making small businesses appear more professional and larger than they really are.”

While VoIP has been around for some time—computer geeks created free, cranky shareware in the early ‘90s that allowed savvy users to plug headsets into their 286s and call Madrid at midnight for bupkus—its commercialization has only recently exploded. Vonage, with its rather offbeat ads, sold VoIP to the residential market as a cool way to beat high long-distance charges. One flat rate and you could call all over the world cheaply. VoIP was to phone service what e-mail was to snail mail; by utilizing different routing, costs dropped dramatically. As its niche in the residential market place grew, and, more importantly, as larger bandwidth became available and affordable (small bandwidth=poor data flow=poorer VoIP call quality), business became the next logical target for VoIP.

Now, it’s a rare week that a small business isn’t approached by a VoIP provider. The big phone companies, cable TV conglomerates, value-added resellers, small business solution entities, and local outsourced ‘hosting’ firms are pushing VoIP. Their names differ, but

their pitch is pretty much the same: Come out of the dark ages. Unify your office’s many forms of communication. Save money. Increase productivity. Make customers smile.

Your CFO, too.

Small Business Success spoke to VoIP analysts, customers, product resellers and developers to find out what companies should know before they take the VoIP plunge. While understanding the technology is important, it shouldn’t drive the conversation. In many ways VoIP technology is like a highway: It offers connectivity from Point A to

Point B, with many stops along the way that offer services that may make the whole trip more enjoyable. Or not. It’s understanding the features that VoIP offers—not all the bells and whistles, mind you, but specific features that dovetail with your business needs—that determine if VoIP is a cost-effective solution for your business.

Here are some important items to consider:

1. Long-Distance Charges: This is especially true if your business has clients or offices overseas, says Bob Halper, CFO of New York-based Janou-Pakter, an Executive Recruiting firm. They place creative directors in the fashion and advertising industries, and have offices in Milan and Paris. International long-distance calls were killing Halper, as the contract his firm signed with another company prior to his arrival was onerous. Since switching to VoIP, he estimates that his 50 employees now spend $2,500 a month (the average monthly cost per ‘seat’ is $50-60) to make unlimited calls anytime internationally. Halper, who opted for $10,000 worth of top-of-the-line Cisco phones to go with his VoIP transition, says the savings were immediate and obvious. “I started saving between a thousand and fifteen hundred a month,” says Halper. “I figured that after one year I’d be ahead of the game and have a great system. It was a no-brainer.”

Add-on benefit: Elimination of fees associated with conference calls.

2. Mobility: Does your staff work off-site? Do you have satellite offices? Are your employees constantly on the road? VoIP puts them all on one seamless worldwide phone link. The same four-digit exchange you now use inhouse can ring across the world (and, again, usually with no long distance charge). Pat Duffy, sales director for M5 Networks, explains how a mobility feature convinced a doctor to install a VoIP system in his small practice. The doctor chose this even though Duffy told him his office was too small to warrant the VoIP switchover, and that he’d be paying $3,600 more annually than if he stayed with his current conventional PBX trunk system. The feature allowed after-hours patients to reach the doctor no matter where he was. “We can reach out to him in 12 different ways. They can leave a message and we’ll send it as a .wav (audio) file, or transcribe that message and send it as text to his PDA, and we can ring him in four different places simultaneously if he wanted to, after hours. So, from a call-distribution strategy, that was the turning point for him.”

Mobility works both ways: Not only can employees be located, but they also connect with the home office in novel ways. Gretchen Witti, a sales manager with Altura Communications Solutions, recalls accidentally leaving her cellphone charger home on a convention trip to Houston. Without VoIP, she would have been seriously out of touch.

“Thank goodness, I have an IP softphone license on my laptop,” saysWitti, explaining that a softphone headset plugs directly into a computer and uses a licensed program to dial and make calls through the home office’s VoIP network. “I was at the Westin; I made all my phone calls through my laptop. Back to the office and everywhere.”

Add-on benefit: Customers can dial local numbers nationally or internationally and be connected anywhere you wish (call center, procurement, warehouse, etc.) The fixed cost for adding these local numbers is minimal, though calls from international cell phones to local overseas numbers may incur charges.

3. Connectivity: Are your employees always running to the fax or dialing into their voice mail? Does each interruption impair their productivity? VoIP turns voice into digital data and sends it through the internet, traveling the same thoroughfares in much the same manner as e-mail, faxes, and voice-mail. This interconnectivity allows what’s called “Unified Messaging.” By using a dashboard that comes up on the computer, all messages, no matter what their data source, can be viewed at once. “What’s really cool is that when I get a voice mail, I have it set up so that [hisVoIP provider] e-mails me the voice mail,” says Lou Casal, a Long Island security software consultant and developer. “So while I’m working ,my e-mail account gets an e-mail that says, ‘voice mail.’ And I open it up and play it off my computer.”

Add-on benefit: Keep the word “Presence” in mind; this emerging technology allows voice via VoIP to connect with real-time tech such as Instant Messaging.

4. Productivity: Monitoring employee productivity is always challenging. Often it involves asking the employees themselves. They might not be able (or want) to objectively measure their worth to your business. VoIP dovetails well with existing Customer Relationship Management (CRM) applications, such as salesforce.com and other monitors that offer hard data on employee productivity.

“A law firm will say, ‘We want every single call answered. We don’t want to go to an auto-attendant,’” saysM5’s vice president Jeff Silbert. “We’ll say, ‘How do you know they’re being answered?’ ‘Well, we tell the people to answer them.’ ‘How do you really know?’ And they go ‘Well, we don’t really know.’” VoIP applications help solve this, especially in off-site settings. M5’s Silbert noted how a VoIP set-up allowed one business to precisely monitor the call activity of new salespeople. “They wanted to know how many calls their guys were making in the first month, because that can be a leading indicator of whether long-term they’ll perform or not,” says Silbert.

Add-on benefit: VoIP integrates well with measuring call center productivity, especially for staffing purposes.

Note: While many VoIP features are turn-key, linking to other IT applications may involve modest set-up costs.

What’s next?

Once you’ve decided that VoIP could work for your business, the toughest choice may be how to implement the system. Will you want your network on or off-site? Many factors play into the decision, some of them as psychological as practical. We’re talking comfort level here. As in:

5.On-Premise VoIP: This solution usually applies to two types of small businesses. The first are those with very few employees and almost no data processing. These really don’t need to integrate computers into their VoIP system. A hairstyling shop, for example, might want to cut its long-distance bill, but only the owner/receptionist accesses a single computer. For this owner, implementing a VoIP solution can be as simple as going down to Best Buy or Staples, picking up a few VoIP capable phones and a VoIP software package, reading the manual, and installing them herself. The only time this business is likely to use the VoIP internet link directly through the computer (as opposed to just picking up the phone) is to download software updates that automatically load into the existing phone system.

Altura’s Gretchen Witti recently went to a construction client armed with only three phones and a small switch box, and a six-step installation list. The contractor had insisted they be able to put together the system themselves. “They plugged everything in and figured it out very quickly,” says Witti. “Within 7 minutes they had it up and working on their conference table.”

At the other end are businesses in certain sectors that, for security or compliance reasons, have IT staff available on-site and have particular reasons for keeping their phone system in-house. Financial firms with S.E.C. and other regulatory compliance concerns often fall into this category. Larger small businesses with established IT departments may find keeping their VoIP in-house is cheaper. “Companies with more than 100 employees, I think the cost for a hosted [off-site VoIP] solution becomes more than an on-premise solution. These companies have more IT resources, so they can have a [network] person with some level of voice specialization,” says AMI’s Sanjeev Aggarwal.

That understanding of how voice works over the network is key, as its often foreign to many IT professionals. “Can you guarantee that at 3 p.m. you’re not doing a big data base download, backing up huge amounts of data on a network that’s really creeping, and now you’re trying to put voice over it at the same time?” asks Mark Massingham, Avaya’s production information marketing manager for small business. “You have to make sure you have the infrastructure to handle VoIP. ”That includes switches that prioritize VoIP data packets over e-mail and other data traveling through the network. Otherwise, call quality can breakup, much like what happens when a mobile phone goes through a bad cell.

Add-on benefit: On-premise VoIP networks may qualify for tax depreciation. Also allow immediate access in case of problems.

Potential Problems: If power goes out or the network goes down, phone service is often lost for the duration.

2)Hosted (off-site) VoIP: Just as with payroll and the advent of ADP, hosted VoIP allows companies to focus on what they do best, and not worry about an important part of their infrastructure. “I didn’t want to be in the telephone business,” says Janou-Pakter’s Bob Halper, echoing a sentiment expressed by many. “Get it off my premises.” The prime advantage of going to a hosted system is that the continual technical patches and upgrades that are part of VoIP networking are now integrated invisibly off-site.

It’s also possible to find solutions often impractical in an on-premise situation. M5’s Kelly points to the recent disastrous steampipe explosion near New York’s Grand Central Station. Many businesses were instantly evacuated and shut down for days. “One of our clients was right there,” says Kelly. “While everyone else couldn’t send or receive phone calls, they had a plan in place. They couldn’t get into their office, but we were able to transfer, automatically, their calls to their cell phones. A normal phone system, people would think you were out of business.”

Hosting is also good for companies that are seasonal or experience sales force fluctuations. These often lead to dead extensions, unanswered voice mails, and customers left in the lurch. With hosting, reassignments of extensions by the host occur with one phone call, with incoming calls automatically forwarded to live people. The line itself becomes—and is treated—as a valuable business asset.

Add-on benefit: Hosting works very well with growing businesses that see relocation in their near future.

Potential problems: Insist on guaranteed bandwidth to insure voice quality. This usually means purchasing a direct T-1 or DSL line to the host. The direct links also greatly improve network security.

One last word about security: Many VoIP advocates say security along VoIP lines shouldn’t be a concern if you have either on-site IT people or your host monitoring the network. Some reports appear to severely contradict this. A recent article in Forbes by Andy Greenburg highlighted security experts who systematically hacked into aspects of VoIP that operate over the public internet (another reason why it’s important to keep as much as possible of your VoIP on a private network). Greenburg’s report made mention of one analyst who stole and played parts of VoIP conversations on stage, and another who pointed out that, although conversations may be encrypted, that may not be true of the tones produced by the numbers one uses to pay a bill by credit card over the phone. These are concerns your company should express, and a vendor should answer, before entering into any contract.