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July 31, 2001

Keeping Watch On the Customer: Video Phones Debut at Bulge-Bracket Firms

By Peter Chapman

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  • Keeping Watch On the Customer: Video Phones Debut at Bulge-Bracket Firms

Talk is not cheap these days on Wall Street. Some of the world's biggest trading houses are betting big bucks on Jetsons-like video telephones to improve internal and external communication.

Deutsche Bank, Goldman Sachs, UBS Warburg, and others have bought software from a small eight-year-old California firm, Avistar Communications, that allows traders, sales people and analysts to see and talk with each other over their computers. A few banks have even installed the technology at customer sites.

In a marketplace that increasingly treats research and transactions as commodities, the bulge-bracket firms are desperate for anything that improves services.

'Vid-phones' help in two ways, according to several of these users. First, better internal communication will translate into improved external communication. If the entire equity "team" is in synch, its pitches will be more compelling. Second, if team members can make eye contact with the client, the client will more likely remember the call.

"We use the technology to make our internal communication concise so we can add the most value to the client," said Jim Mahoney, vice president of institutional research at SG Cowen. "Our need was to better integrate our analysts, our salespeople and our traders so that we're all reading from the same playbook."

Mahoney, based in Boston, said Cowen's sales traders find it useful for resolving problems as well as for pitches. Boston-based sales traders use the phones to work with position traders in New York, the center of Cowen's trading activities. "If there's a miscommunication with a client and the sales trader is on the phone with that client, he can simply bring up the listed guy in New York," Mahoney explained. "So you get two mediums to clear up the miscommunication quicker."

Redwood Shores, Calif.-based Avistar Communications, one of the major players behind the gee-whiz technology, has broken through a crowded field of video conferencing vendors in the last few years to become a big supplier of desktop systems to Wall Street.

Desktop systems make up only a small portion of the roughly $600 million in annual revenues banked by the video conferencing industry, as big room-based systems predominate, but are growing in popularity [see sidebar below].

Success Story

Avistar appears to be on a roll. Its revenues jumped from $3 million in 1998 to $17 million last year. Most of those sales were to the big banks, which found four things to like about the technology.

First, and foremost, they appreciate that Avistar consistently delivers synchronous TV-quality video. In other words, there are no disconcerting delays between what a speaker says and when his lips move.

Second, the system can scale into the thousands. At Deutsche Bank, for example, about 2,000 employees in its worldwide equities group use Avistar. Most systems can handle no more than 50 to 100 users, according to analysts.