Thirty years ago, starting a business meant wrangling one of the Bells to your office or store to install a landline. Today, a small business can choose to go with a traditional copper landline or sign up for one of the many IP telephony solutions available. Experts agree, it’s not when the case for IP telephony makes sense for a small business, but when doesn’t it?

Historically, small businesses would opt for a key telephone system. This offers a few extensions for businesses that don’t need more than a few lines, or a private branch exchange (PBX) system, which lets users share several lines and manages internal and external communications. PBX systems are those that require you to dial 9 to get an outside line. They require on-site or strong vendor technical support, as well as a significant capital investment. But then came voice over IP (VoIP), also known as IP telephony – and the Internet’s answer to PBX.  Some VoIP systems are basic, like the offerings from cable companies and internet service providers. Others are so robust that they can completely replace a PBX system and offer a variety of features not available on PBX. So when does IP telephony make sense over traditional copper?

You need more flexibility

IP telephony is more flexible, according to experts. “For example, if you’re looking at a cloud-based VoIP service, all the require is an internet jack to plug into, and you could be at your office, home, or anywhere your network connects, and your phone system will go with you,” said Allen Rittscher, president of Jacksonville, FL-based consulting company Virtual C-I-O.

IP telephony offers a host of features: automatically transcribed voicemail, freeing up an administrative assistant to concentrate on more strategic projects, sending faxes directly to an email inbox, or sending calls to a home or cell phone to allow employees and executives to work remotely, but as if they’re right in the office. Some will even route calls to a call center as the business grows. That’s what makes it perfect for businesses who want to look big and who plan to expand but aren’t necessarily there yet.

You have a high-quality, high-speed internet connection – and the infrastructure to back it up

Another reason to choose IP telephony is if you have a very reliable, high-speed internet connection, as well as enterprise-class routers and infrastructure. “A poor internet connection is the number one reason for call quality problems,” said Michael Bremmer, CEO of Moreno Valley, Calif.-based consultancy Telecomquotes.com.

For example, if the internet connection is being shared among a lot of devices, the call quality can be slow and choppy. “Someone could be playing Pandora over the internet and affecting phone calls,” said Virtual C-I-O’s Rittscher. “The Quality of Service (QoS) is a factor of how it is installed, not necessarily a factor of the IP telephony system.”

In fact, having the right hardware is the second critical component to making IP telephony work. “If you have a poor quality DSL or cable modem and just one or two people on it, you’re probably ok,” Bremmer said. But if there are a lot of users, Bremmer likened the results to the scene in Chevy Chase’s “Christmas Vacation,” when Chase plugs in a host of lights into one outlets – and the power goes out. “It’s the same thing with VoIP for companies with a poor network design,” he added.

You want to manage your account easily

Add a user, add a line, and place an order through the web – that’s what many IP telephony companies offer their users, according to Hyoun Park, principal analyst at Boston-based Nucleus Research. “Using a PBX is always going to be a bit challenging. They’re wedded to what phone systems have done to the past rather than intelligent ways of using phone services,” he said.

Meanwhile, IP telephony opens the doorway to more unified communications, according to Park. “Being able to just do those basic things ranging from click to call, to transferring calls, messaging capabilities, and the presence to know whether someone’s on or off is a stepping stone toward additional capabilities,” he said.

You can calculate the cost per employee and come out on top

Depending on the company’s needs, IP telephony may give more bang for the buck for businesses that plan for expansion and need IP telephony’s robust feature set. However, for an organization with just a few users that isn’t growing and doesn’t have remote workers, it might be better off purchasing a quality phone system outright from one of the larger vendors, said Telecomquotes.com’s Bremmer. “A good phone system is good for 10 years. It may not have the latest sexy items, but it’ll work,” he added. Therefore, companies should weigh the cost of installing a traditional copper landline versus the cost per employee for an IP telephony system, as well as what features are needed.

“If you start with a cloud-based service, you’re generally not constrained to any term agreements,” said Virtual C-I-O’s Rittscher. “If you find it doesn’t work, any of the equipment you buy can transition to on-premise if you find you need that based on your business model. Traditional phones don’t convert as nicely,” he added.

However, IP telephony isn’t for every small business. It may not be a fit if:

You don’t have a tech-savvy person on site

When a copper landline fails, it’s easy to detect the source of the problem: the handset or the provider. Not so with IP telephony. “If you don’t have anyone onsite that is used to handling applications and network performance on an ongoing basis… you just don’t know whether the signal is stopping at your endpoint or somewhere between the endpoint and router – or stopped between the router and the outside world,” Nucleus Research’s Park said. However, this can be overcome with managed services, Park said.

You only have one location, stationary workers, and no plans for expansion

If your workforce is concentrated in just one location, IP telephony may not be a fit for your business, Telecomquotes.com’s Bremmer said. “I just took away city of Banning, Calif. from Verizon. Verizon wanted to sell hosted VoIP for the entire city, and Banning would have spent $10,000 per month for hosted VoIP. They’re a city, working in a city hall. People aren’t moving around,” he said. “We’re going to put in a new phone system for $80,000 when it’s done, and it will last 10 years. It’s simple math: the phone system will do everything you want to do and more, but you’re not paying forever.”