• What does VoIP mean and what does it do?
• How does VoIP work?
• How does IP telephony differ from traditional telephony?
• What are the advantages of VoIP?
• What are the disadvantages of VoIP?
• What does the IP telephony market look like?
• Do Skype and Vonage have anything to do with VoIP?
• What about security issues?
• How are CIOs using VoIP right now?
• Three tips for VoIP rollouts

What does VoIP mean and what does it do?

The term VoIP stands for voice over Internet Protocol. VoIP is related to the terms IP telephony and Internet telephony, which you'll be hearing more and more about during the next several years. VoIP has had a lot of buzz and hype behind it, though recently it has lost a little of its steam.

At the most basic level, VoIP technologies enable analogue telephone communications to be digitally transferred and routed over data networks — whether it's a wide area network (WAN), a local area network (LAN) or the Internet. In theory, the two packets of communications — digitised voice and data — coexist peacefully and move all over a network. Of course, a third packet — video — has become a major network consideration for 21st-century organisations because it's a bandwidth hog. When combined on one network, data, voice and video offer boundless productivity opportunities for users, and potential telecom savings and efficiencies for organisations, but major headaches for IT networking staffers who have to “keep the peace” between the three demanding sets of network traffic. For their part, CIOs, burdened for so many years with legacy telecom and networking infrastructures, will have to spend a tremendous amount of resources on improving their network capability, reliability and flexibility to keep pace.

How does VoIP work?

Right now, there are three distinct ways that consumers and businesses are using VoIP technology. The first is by using a regular phone, some type of fast Internet connection and, for the consumer, an analogue telephone adapter, or ATA. The ATA converts voice signals into a digital packet of data and sends it over the Internet. It's not too difficult to set up and use, and it is common in the consumer VoIP space. For businesses with many users on traditional phones, the ATA becomes a specialised server that can convert the analogue voice signals into packetised data. For example, when an employee in a London office calls a colleague in the Sydney office, the call is routed through a traditional PBX (or private branch exchange, which is the system that directs all the traffic) within the company's physical location, to the organisation's in-house IP-based network, then converted to IP packets and sent via the Internet or the organisation's WAN.

A second way is by using a specialised VoIP or IP telephone, which resembles a standard landline telephone but connects to a router using an Ethernet cable. A specialised IP voice server in an organisation's back office is able to route the calls over the network — from one VoIP-enabled phone to another. This option is becoming more popular, and vendors that specialise in managing this functionality, especially for small and midsize companies who rely on a broadband or DSL connection, have seen steady growth.

The third way is by installing software on your laptop, which acts as a “mobile telephone.” All that's needed is a fast Internet connection, what's called a “soft phone” or a speaker, microphone and sound card, to make and receive the calls that would normally go to an office number — right from a PC. That's an innovative concept and ability for mobile knowledge workers, but in reality, it has yet to take off.