Building a Better Communications System When it comes to phone systems, the possibilities are nearly endless. Determine which one is right for you.

Small business phone systems used to be extremely basic. You'd have one or two phones, one or two lines and some notepads for taking messages. Things certainly have changed.

With VoIP and other types of IP-based telephony, your phone system can be integrated with your data network, providing advanced features. For example, if a store manager needs to replace a worker who's called in sick, software running on an IP phone system can automatically call every potential replacement employee, one at a time. An employee who wants to accept the extra work shift simply presses a button on his or her phone.

If your phone system doesn't offer much more than a dial tone, a few extensions and voice mail, it could be holding back your business. This month's column provides an overview of small business phone systems, with an eye toward helping you decide what's right for your company. Next month, I'll explain the business functionality to look for in IP telephony (IPT) solutions.

Related: The 6 Best Small Business Phone Systems

Your Phone System Options
Savvy small businesses have traditionally had either a key telephone system or a private branch exchange (PBX). Both systems allow businesses to connect their phones through a limited number of lines to the public phone network.

A key system is typically used in small offices that need only a few extensions. A PBX is a switching system that manages calls between internal users and shares external lines among them. Historically, you could access an outside line directly with a key system, but you had to dial 9 to get an outside line with a PBX.

The introduction of VoIP has changed the landscape completely, allowing small businesses to get phone service exclusively over the internet. When it comes to VoIP-based systems, you have a number of options. You can use a free or inexpensive service, such as Skype or Vonage, in which you make and receive calls over the internet using headset-equipped computers or traditional telephones. Typically, these services are used when only a couple of phone lines are required. Alternatively, you can have a complete IPT solution that integrates voice, video and data. Or you can use a hybrid system that incorporates VoIP capabilities into your existing phone system. All key system vendors have introduced product lines capable of supporting VoIP.

The internet voice phenomenon began with VoIP, which referred to the ability to obtain a dial tone over the internet. Now VoIP has evolved into more advanced IPT solutions, which include dial tone with basic services that lead to enhanced communications technologies, such as unified communications. Today people generally mean the same thing when they refer to VoIP and IPT, even though technically there's a difference.

Related: Business Phone Systems Guide: Everything You Need to Know About Business Phone Systems

Here's a quick rundown of the various options for IP-based phone systems:

• VoIP is the most basic IP voice system , in which phone calls are carried over the IP network you use for data. An IP network that carries data and voice is referred to as a "converged" network. You can get IPT service through such services as Skype or Vonage, as mentioned above. These VoIP services can offer advanced features, such as the ability to receive voice messages as audio file e-mail attachments, in addition to the usual conference, transfer, forward, hold and other functions. These are primarily for businesses with less than five employees.
• IPT solutions offer VoIP plus a number of features similar to those offered by traditional PBXs for both small and large businesses on a converged network. These solutions can be tailored based on your needs.
• IPT solutions can be extended to include additional business applications, such as unified messaging, integrated contact centers, and rich-media conferencing that combines voice, data and video.
• Unified communications can take IPT solutions a step further with technologies, such as presence--the ability to determine the best way to contact others within your company, including voice, e-mail or IM--as well as mobility solutions. A unified communications system unifies and simplifies all forms of communication, regardless of location, time or device. Imagine going to one mailbox to retrieve all your faxes, e-mails and voicemails.

What Your System Can Do for You

Benefits of Converged Voice and Data
An IP phone system can offer the following benefits to a small business:

• Communication costs, such as long-distance toll charges, are drastically reduced.
• Productivity and efficiency are enhanced through capabilities, such as having one phone number that rings on multiple devices simultaneously.
• Phone connections and locations can be easily and affordably moved, added or changed.
• Remote and mobile employees can use the IP phone system and its features in the office, on the go or at home, on various devices. For instance, they can use a softphone (a software interface to your IPT system) and a headset to make and receive calls on a laptop. Or they can use wireless IP phones, allowing them to tap into the phone system wherever there's a wireless network available.
• IP phone systems are flexible, scalable and customizable, so they can grow in step with your business.
• An IPT solution can be tied into CRM software to enhance customer service.

Hosted or Managed?
Even though many IP phone systems are designed and priced for small businesses, you may find they're still too expensive for your budget. Or you may lack the in-house technical expertise to manage an IP phone system. The good news is you don't have to buy an IP phone system to take advantage of its features, and you don't need in-house expertise. Instead, you can use a hosted or a managed IP phone system, depending on your needs.

With a hosted service , the service provider--not you--owns the equipment that supports your IP phone system. And the equipment aside from the phones resides with the service provider, not on your premises. The hosted-service provider is fully responsible for your IP phone system, which is delivered to your business over an IP network, such as the internet.

Because the service provider delivers the same services to multiple customers at once, you benefit from the economies of scale. Also, you don't have to invest capital for your phone system; instead, you pay the hosted provider a fixed monthly fee. You don't have to worry about supporting and maintaining the service, and you have access to technical experts when needed. You also don't have to worry about disaster recovery. For instance, if there's fire or other damage at your office, the IP phone system--because it resides off the premises--won't be affected. Hosted-service providers typically deploy top-notch system security, too.

A hosted IP phone system is a good option for small sites that don't have an existing key or PBX system and don't have the technical capabilities to support an IP phone system.

With a typical managed service , you own the IP phone system, and the equipment that supports it resides on your premises. But the system is entirely managed by an independent service provider. By outsourcing the IP phone system, you don't need in-house expertise to design, deploy and maintain it--a considerable task for any small business. At the same time, you can take advantage of the tax benefits of owning the equipment, while paying an affordable monthly rate for the managed service. A managed service is worthwhile if you already own a phone system but lack the in-house expertise to manage it or need more control over the phone system.

Making Your Small Business Look Big
You may be perfectly happy with a basic phone system, and that's OK. But ask yourself this: Are your competitors relying on the same basic phone systems they've been using for years? Can your phone system easily support your company's goals for growth? And, perhaps most important, wouldn't you like your small business to look bigger than it really is--to your customers as well as your competitors?