VoIP, the acronym for Voice over Internet Protocol, refers to phone service over an Internet connection. Using this technology, telephone service can be provided to businesses via the company Internet connection rather than purchased from traditional phone companies and using older, more expensive equipment. A variety of functions are offered through VoIP services that have not been available through services for older systems, and the use of VoIP and added abilities that it provides saves money for businesses.

VoIP is controlled by a computerized switchboard system called a PBX, or Private Branch eXchange. Currently available even for small-to-medium sized businesses, PBX systems control switching and connections and avoid the need for every employee to have a separate, direct phone line. This saves a lot of money in the long run. PBX systems can be integrated into existing network and data communication systems. This makes it even easier for a company to switch over to a VoIP-based communication system from an older one.

PBX systems can be premise-based, with all equipment managed and maintained in-house, or hosted, meaning that equipment is managed remotely and less maintenance needs to be done by the company. Premise-based systems can be keyless, portable systems for the smallest companies, key systems complete with central control units that handle extension management and locking of lines in use, and full PBX systems that can provide a small business with the communications capabilities of a large corporation.

Familiar calling features are included in VoIP services, including call forwarding, call holding, and voicemail. Voicemail management systems can store a large number of messages and calls can be recorded automatically. Conference call abilities let many people communicate at once on one call, without extra equipment. A large number of people can talk, from within the company and even from remote locations. A telephone system can even be integrated with email to automatically match a callers' information with records in an email program such as Outlook. These are just some of the advanced functions of a system run by a VoIP service.

VoIP is offered by many service providers. Some of these include AlphaPolo Voice Conferencing, Federal Communications, Flowrout, LLC, Logic Voice, Connect2Voice, and International Bell. More familiar names offering these services include Vonage, Nextel, and even AT&T. For example, the AT&T Business Network for Medium and Large Business consolidates voice, data, IP, and access services under a single plan and can cover up to 24 locations.

Another example is a hosted system offered by Packet8. Many features are available via a Virtual Office phone through a high-speed Internet connection. These include VoIP features mentioned above as well as call park, directory assistance, and sales force assistance features. Other providers can offer multiple service types, offered as packages, or individual features can be selected. Selection of the right service type depends on the features required by the particular business.

There are many things to consider when a company purchases a PBX system from a service provider, such as the number of locations, amount of mobile and remote users, network capacity and bandwidth, types of calls typically made, and details on the existing phone system. While there are other elements of VoIP systems and service offerings than can affect the cost, like the need for an 800 number, auto receptionist, or call center, a VoIP system eliminates many costs associated with older telephone systems, and gives a business more features to increase productivity. Therefore, it gives a company a better chance to grow because of the added capacity to handle a larger volume of communication.