Tech Know – Video conferencing enters new era
By Alan Breznick
Two decades after videoconferencing made its commercial debut to somewhat underwhelming reviews, the technology is starting to enjoy big-screen fortune and fame.
Faced with soaring travel costs, a slowing economy and growing concerns about climate change, more businesses and institutions are turning to videoconferencing for help in reaching their far-flung customers and employees more cost-effectively. Instead of constantly flying executives around the world, these organizations are increasingly relying on new high-tech systems that can seamlessly integrate voice, data, and video communications on life-sized screens with crisp images and sound to enable virtual, interactive, 'face-to-face' meetings between people in different locales.
In the past few months, for instance, hotel giant Marriott International Inc., staffing services leader Manpower Inc., and office furniture maker Herman Miller have all stepped up their use of videoconferencing to cut travel expenses as well as carbon emissions. So have such other major firms as AT&T Inc., IBM, News Corp., and Procter & Gamble.
"There's a tremendous amount of pressure to reduce costs," notes Arun Saksena, MEng '91 and MBA '91, the high-tech manufacturing practice lead in the Internet Business Solutions Group, the global strategic consulting arm at Cisco, which is a top player in the video conferencing market. "You can't fly your highly skilled people all over the map. ... You can't fly to China all the time."
With the rise of globalization, companies and institutions are also making greater use of videoconferencing to spur collaboration among workers in disparate locations and boost their productivity. In addition, they see the technology as a way to support the growing numbers of full-time and part-time telecommuters who still need critical "face time" with their managers and colleagues.
"Video conferencing is becoming the substitute for personal interactions," argues Vibhu Ranjan, MBA '03, marketing manager for the worldwide midmarket unit at Microsoft, another top vendor in the space. "There are a whole bunch of new and innovative ways in which videoconferencing is being used."
As an example, Ranjan, who was formerly the director of Microsoft India's Unified Communications Group, points to NIIT, a large training firm in Asia. Working with Microsoft's unified communications software, NIIT now uses videoconferencing to conduct employee performance reviews across its Indian offices. The company also uses videoconferencing for interviews of prospective employees.
Thanks to these developments, videoconferencing equipment sales are now surging after years of steady but slower growth. "The numbers are going up," says Stephen Demmings, videoconferencing manager for Cornell Queen's Executive MBA Program. "More and more systems are being purchased."
Indeed, in its latest quarterly earnings statement, leading videoconferencing equipment maker Polycom reported that sales of its high-end "video communications solutions" jumped 24.6 percent from $113.3 million in spring 2007 to $141.2 million in spring 2008. "Soaring travel costs are becoming an increasingly important driver for the adoption of our unified collaboration solutions worldwide," Polycom Chairman/CEO Robert Hagerty declared. Polycom's high-definition TV (HDTV) videoconferencing systems for corporate conference and board rooms cost as much as $300,000 to $700,000 apiece.
Likewise, Cisco reports that sales of its high-end TelePresence systems, which typically cost $250,000 to $300,000 apiece, have shot up in the past year. In late April, Cisco boasted that it had sold more 500 TelePresence units to over 100 customers across the globe since introducing the systems in October 2006, making videoconferencing its "fastest-growing emerging technology."
"Year over year, we've had more than a 100 percent rate of growth," Saksena says. "It's been taking off exponentially."
Besides selling more TelePresence systems to other organizations, Cisco has also increased its own reliance on videoconferencing. The company estimates that it has now installed TelePresence units in more than 200 company conference rooms in about 30 countries, generating heavy employee use of five hours per day per room.
While they decline to discuss sales figures, Microsoft executives say they also have seen strong growth for their videoconferencing systems. Most recently, the company, which focuses on much cheaper, less elaborate desktop systems, introduced its Microsoft RoundTable device for smaller meetings. The device uses a 360-degree camera to provide panoramic, side-by-side views of everyone sitting around a conference table; however, it lacks some of the features of the high-end systems, such as HD images and finely tuned sensors to capture every movement.
"In the last two years, demand has gone up," Ranjan notes. For instance, Del Monte Foods is now making extensive use of Microsoft's videoconferencing tools to boost employee collaboration and reduce travel expenses.
With oil prices soaring as high as $147 a barrel in June, many companies report that videoconferencing has already produced substantial savings. In a recent study, Info-Tech Research Group found that 77 percent of firms that have adopted unified communications solutions have cut employee travel and trimmed travel budgets.
Saksena cites one undisclosed customer who recently used Cisco's TelePresence system to spell out corporate policy changes to employees in Silicon Valley, Israel, Taiwan, India, and Germany at the same time. Instead of spending weeks traveling to every location to speak to workers, the executive covered all the bases with an interactive, 90-minute videoconferencing session from the company's headquarters.
For its own part, Cisco figures that it has saved $150 million in travel costs by installing TelePresence equipment in its conference rooms. Similarly, Hewlett-Packard estimates that it has cut employee travel by a whopping 43 percent, largely through the use of its HP Halo TelePresence systems.
Some key obstacles remain. Chief among them is a lack of broadband bandwidth in such emerging countries as India and China for high-resolution video. Another major challenge is that increasingly outdated IP networks are optimized to carry data packets, not more sensitive video traffic. Engineers are now working feverishly to overcome these problems with more efficient video compression technologies, while governments are subsidizing new broadband links.
Nevertheless, sensing the huge market potential for videoconferencing, such large equipment makers as Cisco, Microsoft, Polycom, HP, Sony, and Tandberg Television are developing new hardware and software systems, including life-size HD screens that make it seem as if all participants are in the same room. Saksena says the quality of the images is so good that he's seen people lean forward at the end of meetings to shake hands with their remote counterparts.
"One comment we hear repeatedly is that it's about the experience," Saksena says. "Users should experience the meeting and not the technology."
That's a far cry from just a decade ago, when technical glitches, slow transmission speeds, and a lack of bandwidth made for choppy, blotchy pictures at best. At that time, companies needed to have a technician always on hand to work the systems.
"It's not like it used to be in the 90s, when they rolled the dice about whether it'll work or not," Demmings says. "Now there's a 90 percent to 95 percent chance that it'll work."
Despite such advances, videoconferencing systems still have limitations. Even the technology's most ardent advocates admit that it will never totally replace actual face-to-face contact, especially in cases where companies are trying to woo prospective customers or pitch complicated new products.
Videoconferencing can also be a tough sell when workers are not all that comfortable with new technology. "People are creatures of habit and the technology is still complicated," says Demmings, who would like to see further improvements. "It's not as simple as dialing a number or writing an e-mail. It's not as easy as picking up the phone."
Investing in videoconferencing technology pays off for BR Ventures
Big Red Ventures (BRV), the Johnson School's MBA student-run, evergreen, early-stage venture fund, announced in early November that its portfolio company SightSpeed Inc. had agreed to be acquired by Logitech International for approximately $30 million in cash. The acquisition of SightSpeed, an award-winning provider of high-quality videoconferencing services, represents a significant milestone in the fund's development. The exit comes at an opportune time as BRV prepares to actively participate in subsequent rounds of investments.
In early 2003, BRV's student managers saw tremendous potential in the Internet as a communications platform for multimedia, and invested in SightSpeed's ground-breaking video conferencing technology developed at Cornell University. A prime example of effective partnership among Johnson School and School of Engineering students and the Cornell Center for Technology Enterprise and Commercialization (CCTEC), SightSpeed was cofounded by Brad Treat, MBA '02, also the former CEO of SightSpeed.
"The partnership that BRV has with CCTEC is an important component to BRV's growth as it exposes us to investment opportunities across the scientific community at Cornell" said Steve Peck, BRV's liaison to CCTEC. "In return, BRV's ability to provide CCTEC's scientific entrepreneurs access to capital and direct business feedback early in a company's lifecycle is an integral part to ensuring Cornell technologies such as SightSpeed are successfully commercialized."
"With this acquisition, we are significantly augmenting our current video R&D resources to help us move more quickly toward our goals for video services that complement the way people socialize, communicate and enjoy entertainment," said Junien Labrousse, executive vice president of Logitech's Products group. "According to our research, there is a large, untapped market of people who want to communicate with friends and family using video. But they want it to be integrated into their family lifestyle, which means going beyond the PC. We believe with SightSpeed we can help create the next wave of video communications enthusiasts."
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