VOIP Provides Efficient and Cost Effective Communications for Smaller Investment Managers and Hedge Funds
Verity Wealth Advisors opted for a VOIP outsourced telephone service when its existing phone system would no longer be supported.
By Anthony Guerra
Wall Street & Technology
September 19, 2006
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Out of the gate, Wilkens says he began investigating a replacement PBX solution -- the same traditional phone system that had been supported by his landlord. However, Wilkens soon found that simply getting up and running on such a solution would cost $2,000 to $3,000 and require hardware for which he didn't have space. Wilkens quickly determined that he wanted a remote hosted solution to make the phone system someone else's concern. "We are big proponents of focusing on what we do and trying to get out of all these little ancillary things where we don't have the scale or expertise," he says.
Wilkens began making calls to local consultants about the PBX situation. Recalling a small-business owner colleague who had gone with a Voice Over Internet Protocol (VOIP) solution, Wilkens ran the idea past one consultant, who remarked, "Yeah, I would go with the hosted VOIP route," according to Wilkens.
VOIP sometimes can be the right answer, says Donald Light, a senior analyst with Boston-based Celent Communications. "The strategic business benefits basically revolve around giving customers better access to people inside the firm and giving everyone -- customers and staff -- easier and faster access to information," he says.
Like Verity, other small financial firms also have found themselves shopping for phone service when they have moved or opened new offices. Imperium Partners, an institutional alternative asset management firm based in New York City, and Thesis Capital Management, another New York-based hedge fund, both chose an outsourced IP phone system from New York-based M5 Networks when they needed to open new offices and install a reliable communications infrastructure.
But switching the phone system -- the vital communication lifeline of any company -- to VOIP can be a scary proposition. Somewhat pleasantly surprised at the PBX consultant's moment of clarity, Wilkens says his first step was to Google "VOIP." Seattle-based Speakeasy came on the screen. "It was a name I had heard of. I called them up and got a very quick response and a very thorough proposal," Wilkens says.
However, rather than signing up right then and there, Wilkens says he "put the thing on ice" for a few months and started looking into San Jose, Calif.-based Covad -- the company used by his colleague. "I had a hard time getting them to return my phone calls, and I was thinking, 'Geez, if this is how they treat someone who might become a client, it would only go downhill from there if I were to become one,'" Wilkens contends. "That turned me off."
Once Wilkens became confident that Speakeasy was not going out of business anytime soon, his decision was easy. "I found the client service was far better at Speakeasy," he says. "I got comfortable that any risk we were assuming by going with a smaller provider was more than offset by the client service."
According to Wilkens, Verity got a T1 line, a router, a VOIP converter and six San Jose, Calif.-based Cisco Systems phones with voice mail on each from Speakeasy. The phones were approximately $400 each. After some credits back and a free month of T1 service, Wilkens says the start-up costs were around $2,500, with monthly costs between $700 and $800 -- a similar monthly charge to what Verity had been paying its landlord for PBX service.
However, comparing the before and after monthly charges isn't an apples-to-apples comparison, Wilkens stresses. "We have a T1 now. The hosted solution from the landlord was expensive, and we were overpaying for what we were getting," he says. "We are now paying the same, but we have a more reliable Internet connection, and we have a far better phone system. So for us it was a no-brainer to pay the $2,500 up-front charge to get a phone system that was far more flexible and better suited to what we do. It was really a very easy decision for us."
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