When the bayshore group of companies added an asset-management firm to the mix, it decided to leapfrog a traditional phone system and go directly to “voice over Internet protocol.”

VoIP is at the forefront of telephony convergence, which sees data, voice and video sent over the same lines simultaneously. But that’s only one of the attractions. There are also big cost savings. VoIP reduces the number of telephone lines a business has to lease, can eliminate long-distance charges and reduces the administration costs associated with telephony.

“We were starting clean, and that gave us the opportunity to build a leading-edge platform for customers and staff,” says Sean Church, chief operating officer of Bayshore Asset Management Inc. , an investment-counselling firm with $200 million in assets under management that launched last April. The technology allows Bayshore to send phone calls over its data network, creating benefits ranging from lower long-distance costs to better telephony management and flexibility, especially when it comes to mobile employees.

The financial services sector is expected to be a leading user of the technology, says Gilles St. Hilaire, vice president of Canadian enterprise at Cisco Systems Inc. in Toronto, which makes the special phones needed to run VoIP, because the industry is in hot pursuit of productivity gains. He cites research from Toronto-based IDC Canada Ltd. that predicts that the number of VoIP lines in Canada will surpass traditional telephone lines by 2008, and will grow by 81% annually for the next four years.

VoIP works differently than traditional private-branch exchange phone lines, which rely on circuit switching. A switch opens during a call between two numbers, allowing the parties to speak to one another. It closes after someone hangs up. However, that’s the only information that transfers over the line and it doesn’t operate at maximum capacity, as one caller listens while the other speaks and there are lulls in conversation.

VoIP relies on packet switching, similar to how e-mails are sent over the Internet. It breaks down a voice call into bite-sized information packets or chunks. Instead of keeping the switch open all the time, the information is sent and received as needed, allowing excess line capacity to be used to send other information. When data arrive at their destination, they’re reassembled back into a voice call.

Bayshore — which is recruiting advisors — needed a telecommunications solution that would unify its offices. “We have multiple locations — and we’re going to have more,” says Church.

What VoIP does, he says, is essentially make the telephone an appendage of the computer. Calls are placed either using a stand-alone VoIP phone plugged into a data network or from a computer using a headset. That means voice communications becomes part of the data equation.

Voice and e-mails can be tracked and stored on one device, and calls can be routed from an office to a portable device or home office. Outgoing calls made from home or while travelling will appear as if they come from the main location. “It’s nice to be able to provide a unified face to your customer,” Church says.

The technology was bolstered in early January, when Bell Canada announced it had landed a contract with RBC Financial Group to convert 8,400 phone lines to VoIP at RBC’s downtown Toronto office. It’s a multi-year contract involving IBM and Cisco. No financial terms were disclosed but Bell will be responsible for systems integration, planning, design and implementation of the new phone system, as well as testing, training, auditing and support. Cisco will provide the hardware, software and technical project and advanced network support. Both Bell and IBM will provide telephony support and network monitoring.

Last year, Bell Canada inked Manulife Financial Corp. to a $140-million, seven-year deal to convert 9,000 lines to VoIP. A number of U.S. financial institutions are also adopting VoIP, including Bank of America, which has a project underway involving 180,000 lines.

Bob Matthews, RBC’s senior manager of telecom, says the project will involve the head office in downtown Toronto and include not just the bank, but RBC Capital Markets and RBC Dominion Securities Inc. The large concentration of about 12,000 employees provides RBC the opportunity to achieve cost savings, he says, by reducing the number of lines the company leases. RBC previously installed 5,000 VoIP phones in its Minneapolis operations. “VoIP will allow us to do more things in the future,” Matthews says.

@page_break@Saving money is a primary driver for adopting VoIP, says Bob Egan, director of emerging technology at TowerGroup Inc. in Needham, Mass.: “Savings can be quite big [as much as 25%-40%]. The savings are not just raw telecom transport costs, but reducing the number of discrete systems you need to manage.”

It’s not just big firms taking advantage of VoIP. It’s ideal for small and mid-sized firms, says Renato Discenza, senior vice president of sales in Ontario for Bell Canada: “For financial advisors, it’s all about productivity.”

Stan Eng, senior vice president and chief technology officer at Richardson Financial Partners Ltd. in Toronto, was one of the earliest adopters of VoIP, using it since the firm was launched in the spring of 2003. The VoIP system supports 250 people across eight offices, including 45 teams of advisors who manage $5 billion.

“Our VoIP has been pretty reliable; I really haven’t had any sleepless nights,” says Eng. “It’s a great tool to support our clients.” For example, a client calls a broker and leaves a voice message. It is turned into an audio wave file, which can be played on a computer using Microsoft Media Player. The message can be dropped into a client’s electronic folder file and kept for future reference, like an e-mail. Or the advisor can forward it to an assistant for action. “You have a history of all the things they asked for,” he says.

VoIP also opens the door to better video and audio conferencing. It’s used by many brokerage firms in their “hoot ’n’ holler networks,” says Dino Marasco, global account manager at Cisco. Instead of setting up a long-distance conference call involving multiple offices, advisors can simply access the morning call through their computers.

Richardson is piloting video-conferencing and testing different applications that will help advisors better manage their high net-worth clients. For example, when a call arrives on a VoIP phone, it indicates who is calling. Calls can be linked to contact management systems so that when someone calls, information about the client is automatically displayed on the user’s computer screen.

Richardson also uses a hosted system, which reduces telephony administrative costs. As well, if a new employee joins the firm, he or she can quickly be assigned a phone number. Or if someone moves offices, the phone number simply travels with that person to the new location; there’s no need to call a Bell technician to connect the phone. It’s all done by the person who administers the system.

TowerGroup’s Egan suggests companies plan carefully for VoIP. If they do it right, he says, it will improve productivity and make advisors more efficient. It’s the “next major step to accelerating the heartbeat of money.” IE