What is VoIP & How does it Work? (Advantages, Disadvantages & Cost)

August 24, 2021

Over the last decade, India has more than quadrupled its internet penetration rate. It’s now easier and more affordable than ever to access a high-quality internet connection in India. As a result, more and more businesses are eyeing VoIP to power their customer communication. In this blog post, we’ll talk about what VoIP is, how it works, how businesses use it, and its advantages & disadvantages. 

Feel free to jump straight ahead to any of the following sections:


What is VoIP?

VoIP (Voice over Internet Protocol) is a technology that enables businesses to make and receive voice calls over the internet. It’s more cost-effective than any other business communication technology and also delivers higher voice quality. The best part is that these calls can directly be made from a phone or a laptop – no special equipment is required.


How does VoIP work?

For an agent or a customer, a VoIP call works the same as a regular phone call. The difference lies in the underlying technology that powers these calls. 

  1. The voice signal is first converted to small digital packets.
  2. These packets are then transmitted over the internet or the LAN, eliminating the need for physical wires.
  3. At the receiving end, these packets are converted back to voice signals by a VoIP-enabled device (VoIP softphone).


Essential components for VoIP calling

What are the essential components of VoIP Calling? | What is VoIP & how does it work?

While there are many ways in which a VoIP phone system can be implemented – on-prem, cloud, or hybrid – the basic components that drive the whole system remain the same. Here are the most essential components of a VoIP phone system:

1. VoIP Server: This is the backbone of a VoIP phone system. The VoIP server routes all incoming, outgoing and internal calls made to or from an organisation. This can either be hosted on the cloud or it can be on-prem. With Exotel, you don’t have to worry about purchasing a VoIP server.

2. VoIP Enabled Endpoints: These are required to enable VoIP communication. There are different types of VoIP phones:

  • VoIP phone: Specialized phones made for VoIP communication.
  • Softphone: A softphone is a piece of software installed on a computer/smartphone that allows the device to make and receive VoIP calls. The software installed is called a SIP client and it can be installed on any computer/smartphone. Zoiper, Linphone, etc are some of the most commonly used softphones. 
  • Analogue phone with a VoIP adapter: VoIP adapters can be used to enable VoIP communication over analogue phones. This is used when a business already has PBX infrastructure.

3. A Stable Internet Connection: Since all the calls are made over the internet, it goes without saying that a good internet connection with sufficient bandwidth is required for VoIP calls.


Types of VoIP Phone Systems

What are the different types of VoIP Phone Systems? | What is VoIP?

In areas with stable internet connectivity, VoIP phone systems are increasingly being used to power customer communication. There are two types of VoIP phone systems:

1. On-prem VoIP phone systems: These are also called IP-PBX phone systems and are similar to on-prem PBX phone systems when it comes to their architecture.

  • They have a VoIP server that acts as the central point for all communication, and VoIP enabled endpoints are required to make/receive calls. 
  • These phone systems have numerous advantages over on-prem PBX phone systems – lower costs, capability to transmit and receive other forms of multimedia in addition to voice, etc. 
  • On-prem VoIP phone systems are infrastructure-dependent, expensive and bulky.

2. Hosted VoIP phone systems: These phone systems offer all the features and benefits an on-prem VoIP phone system does, without installing the hardware and incurring high installation costs.

  • A VoIP provider takes care of everything on the cloud, and all businesses need are VoIP enabled devices that can make and receive calls. 
  • These are easy to set up and require no maintenance. 
  • With VoIP phone systems, businesses can pay for what they use and scale on the go.


Do you need a VoIP phone number?

How do VoIP Numbers & VoIP Caller IDs work?

It is important for businesses to have a single publicised customer care number. It acts as a sole point of contact for customers, making it simple for them to reach out to you. However, behind the scenes, this single number does a lot. It can be used to route calls to the right team, and help customers pick the option that works best for them from a helpful IVR menu, etc. Think of VoIP numbers as programmable virtual numbers. 

1. VoIP phone numbers are virtual numbers that are independent of area codes, location, etc. 

2. VoIP numbers are not device-dependent. They are assigned to users rather than a piece of hardware, enabling agents to use their number on any VoIP enabled device.

3. VoIP numbers offer high mobility to users, i.e. they are not tied to a location. 

4. VoIP numbers utilise the IP protocol for making and receiving calls.


What are the advantages of using a VoIP phone system?

6 Advantages of VoIP | What is VoIP & how does it work?

1. Cost-efficient: VoIP calls cost less than regular calls on a mobile phone or a landline since the calls are routed over the internet. 

2. No additional infrastructure is required: VoIP phone systems eliminate the need for physical wires and dedicated phone lines  – both voice and data are transmitted over the same channel.

3. Simple to use: Ability to receive calls on the desktop as well as smartphones.

4. Scalable: No boxes and wires. Easy to add agents as the team grows.

5. Remote-ready: VoIP systems are flexible in nature and can easily be used to power a remote workforce in addition to on-premise teams.


What you should know before opting for VoIP

1. Dependency on a reliable internet connection: A stable internet connection is essential for VoIP communication.

2. May not work in areas with low internet penetration: VoIP may not work at all in remote areas with low internet connectivity.


How Exotel overcomes the disadvantages of VoIP

With Exotel’s VoIP phone system, you get the best of both worlds – calls over VoIP when the internet connection is stable, and regular calls as a fallback option for when VoIP fails. This way, you don’t have to worry about missing customer calls in areas with low internet penetration – your agents can always switch to regular calls in such cases.

How do businesses use VoIP?

Businesses can use VoIP for the following:

1. Sales call centre

Use VoIP for driving sales conversations. Improve productivity by leveraging Exotel’s autodialer, dynamic caller ID and automated reminder calls.

2. Support call centre

Craft seamless customer experiences with Exotel’s VoIP call centre. Use IVR greetings, call transfers and other features to personalise communication.

3. Remote work for customer-facing teams

Since VoIP means no boxes/wires, agents aren’t rooted to their desks. They can work from anywhere as long as they have a stable internet connection.

4. CRM & Helpdesk Integration

Integrate Exotel’s VoIP call centre with your help desk/CRM and increase productivity. Empower your agents with the right information to make and receive calls efficiently.


How much does a VoIP phone system cost?

A VoIP phone system allows businesses to save anywhere between 30% to 50% of the overall cost as compared to other phone systems. Reach out to us today to get the best prices in India!


Future-proof your business communication with VoIP

With constantly evolving customer preferences, omnichannel is the way to go. A VoIP phone system fits into the omnichannel contact centre puzzle better than any other phone system. It integrates seamlessly with other communication channels like video, chat, social media, and more, giving your agents & customers a superior experience. Find out how Exotel can help you move your business forward with VoIP – schedule a callback now.



Surbhi Saraf
Written By
Surbhi is a content marketer at Exotel. She is an avid reader and spends most of her time chipping away at historical fiction and non-fiction titles. She also makes the best omelettes ever!

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