In Phase 1 of a pilot program that is being managed by the Securities Industry Association, some of Wall Street's largest players are testing systems from five Internet Protocol network vendors. The goal of the pilot is to find one or possibly two Voice over IP vendors that best meet the industry's needs for everything from disaster recovery to communicating on the trading floor. Once a provider (or providers) is selected, the industry will receive a group rate for services, greatly reducing the cost firms would pay if they contracted with the vendor independently, according to Art Trager, vice president and managing director, technology, for SIA.
The project began a year ago, after the SIA heard from its members that they would be interested in some direction as to which vendor to contract for VoIP services, as well as a group rate for those services. At the time, the SIA sent a request for information (RFI) to eight to 12 vendors, notes Trager. The list then was narrowed to four providers: New York-based IPC; Reston, Va.-based TNS; Fairport, N.Y.-based Paetec Communications; and Peekskill, N.Y.-based Lexar. Recently, the SIA added a fifth vendor to the pilot - Verizon. Trager declines to name the financial services firms piloting the systems.
Many securities firms want to replace their ringdown service and enhance disaster recovery capabilities, Trager relates. They need improved means of communicating, he says, adding that IP technology seems to offer an enterprisewide solution. But, he continues, "Gone are the days that financial services firms are using one vendor and one technique - it's now necessary to use many diverse routes."
Trager declines to estimate the expected savings from any industrywide deal. "I don't know what the savings would be because the vendors aren't sure what members need," he says. "Things keep changing as we test."
Marianne Leitch, vice president of services development for IPC, says it still is unclear what may lie ahead at the end of the pilot. "We really don't know what's going to happen. There are a number of outcomes that could emerge from this at the end of the pilot," she says. The SIA "may elect to go into a contract with one or more of the service providers to provide ongoing service to member firms." Leitch adds, however, that such a deal may or may not allow SIA members to work with the other vendors. "We just don't know," she says.
The original RFI was written with Align Communications, a New York-based global IT solutions company that the SIA hired for assistance during the pilot and selection process. Earlier this year, the SIA also brought in industry veteran Lenny Goldstein, a former Goldman Sachs executive, to assist with the initiative.
The RFI asked the vendors to articulate an IP solution that could connect SIA-member firms by creating a resilient disaster recovery-ready architecture (see sidebar for more information). Such an architecture would need to allow member firms to make and receive calls from multiple locations in New York and the surrounding area, allowing a New York-based firm, for example, to access the private lines of its New Jersey backup trading floor.
Prepping for the Pilot
The SIA's goal through the RFI and pilot processes is to audition vendors that potentially could offer upgrades to financial institutions' voice networks, allowing firms to move their ringdown circuits from either analog or digital technology to a point-to-point IP environment.
An IP environment, experts say, is preferable to traditionally organized phone communications, especially when it comes to disaster recovery. In an IP environment, the same circuit is delivered to multiple locations simultaneously, eliminating the need for carrier redirect - a highly intensive process required to reroute traditional phone circuits to a secondary location.
Alan Schwartz, senior vice president and general manager of TNS's Financial Services Division, says that functionality already was in production with some of the firms that he was asked to pilot. "It was kind of weird," he says, "because about 50 percent of the firms we have in the pilot were already doing business with us."