Telecom Tips - Building A Virtual Telephone System

by Brian McConnell

One of the most expensive (and least upgradable) pieces of office equipment you'll ever buy is a telephone system. I've spent countless hours advising clients who've regretted spending tens of thousands of dollars on a phone system, only to discover that it didn't do what they wanted it to do.

The process of selecting a telephone system, much less buying and installing one, is confusing, frustrating, and more often than not, a real drain on the wallet. If you're a Fortune 500 company, you've factored this into your staffing and budget for decades. If you're a small business, you probably just assumed telephone systems were as inexpensive as desktop computers, and developed a bad case of sticker shock when you were told a 20 person intercom system would cost you ten or twenty grand.

Hosted Telephony Services

If you have 20 or fewer people in your office, and especially if you have a mobile or decentralized workforce, you should take a close look at hosted telephony services. These services provide nearly all of the features that a permanently installed telephone system does, with nearly zero capital expenditure except for telephone handsets.

These services come in two basic flavors: circuit-switched services (delivered via existing telephone lines) and VoIP based services (delivered via your broadband connection). Each has strengths and weaknesses.

Circuit Switched HTS

Circuit switched services, such as Virtual PBX and AccessLine, provide a full range of features found on conventional office phone systems, including:

  • Extension based dialing

  • Call transfer

  • Automated Call Distribution (e.g. for queueing calls to customer service agents)

  • Voice mail/unified messaging

  • Smart call forwarding (the systems hunts for you at several phone numbers, e.g. office line, then home office, then cell phone)

  • Music/message on hold

  • Web based system and user administration

These services answer all incoming calls to your organization via a toll-free (800/888/877) number or via a local telephone number in one or more geographical areas, and then reroute calls back out to your employees via the public telephone network. No on-site equipment is required. No special telephone service is required. All you need to receive calls are plain old telephones on plain old telephone lines. These services are a great fit for businesses that are not especially high-tech, an accounting firm for example.

The only rub is that they typically charge for incoming calls on a per minute basis (usually 10 cents/minute or less). If your employees spend a lot of time answering incoming calls, such as in a customer support call center, these charges can add up quickly. If you don't spend a lot of time on incoming calls, these services are generally cost effective.

VoIP Based HTS

Broadband phone companies such as Lingo, Vonage, and others are beginning to offer small business packages that provide similar features, except that telephone calls are delivered to the user via a broadband TCP/IP connection.

To use these services, the user must install special customer premise equipment, either a terminal adapter (which makes the TCP/IP network look like an analog telephone line to an attached telephone handset), or a VoIP telephone handset that connects directly to the TCP/IP network via Ethernet or 802.11b (WiFi).

VoIP is attractive because VoIP networks provide more features, such as the ability to ring many handsets concurrently (forking), and because of lower call transport costs (toll charges). However, these benefits and savings are offset by the fact that VoIP is still somewhat of a bleeding edge technology. If you know what you're doing with TCP/IP networks and devices, VoIP is definitely the way to go. If you have a lot of non-technical employees, the circuit switched services are easier to deal with since they ride on the tried and tested public telephone network. Most of these companies are migrating to VoIP, and if they are not already offering VoIP service, will soon offer it as an option.


You can also order Centrex service from your local telephone company. Centrex has been around for a long time, and if all you need is a really basic service that allows you to transfer calls between extensions, basic voice mail, etc, it might also be a good fit. Be warned, local telcos generally overcharge for Centrex, and it is very hard to find salespeople who know anything about it. You'll generally be better off to go to a company that specializes in providing small business telephony services.

Try Before You Buy

There are many advantages to outsourcing your business telephone system. One of the main advantages is the ability to test drive a high end system without making a substantial investment in hardware. If you don't like the service, you can always cancel it and go back to your basic phone service, or if you want to bring it in house, you can invest in on-site equipment later on. Either way, your upfront risk is minimal.

Another advantage is that these services are automatically upgraded whenever the vendor adds new features. With customer premise equipment this typically involves expensive hardware and software upgrades, whereas many upgrades with an outsourced telephony service are automatic. You'll just log in to check voice mail one morning and discover that they've upgraded the web interface for example. This alone is a good reason to seriously consider outsourced telephony services as your system will be evolving with the industry rather than frozen in time at the moment you bought it.

Know of a good small business telephony service? Post your remarks and suggestions here...