Friday, May 8, 2009

Affordable Video Teleconferencing

Cisco CEO John Chambers doesn't just talk a good game about telepresence, the videoconferencing technology that creates the illusion you're in a room with someone who's actually thousands of miles away. He's planning to install his company's high-end system in his Silicon Valley home, provided he and his wife can agree on a spot for it.

"I figured we could convert one of the kids' old bedrooms," since they've grown up and left the house," he says. "She told me, 'You do that and you'll be sleeping in there.'"Though he's not done negotiating the location, one thing that Chambers doesn't have to worry about is cost.

As longtime chief at the networking giant, he can surely afford the installation, which can easily run north of $150,000 per room.But can his customers? Even as Chambers and rivals such as Hewlett-Packard, Polycom and Tandberg tout telepresence as the perfect tech tool to reduce travel costs and boost productivity, observers have their doubts. Sure, telepresence enables meetings on three or more huge screens, in high definition with pristine audio quality.But during a global recession, the price tag could prove too rich for many companies.

The telepresence question should get some attention when Cisco reports its fiscal third quarter results Wednesday. Though the fledgling business won't even register as a blip in the more than $8 billion in revenue Cisco likely logged last quarter, according to analysts' expectation, Chambers has highlighted telepresence as one of several ideas he hopes can eventually bring Cisco more than $1 billion in annual sales.And unlike many product lines these days, telepresence has been growing.

Earlier this year, Chambers said Cisco added 65 customers for the HD video technology in the last quarter of 2008, reaching a total of 312. Others are banking on a telepresence boom, too; AT&T sells its own flavor of the Cisco technology to business customers, and expects that to expand despite the economy. "Three years ago the proportion of video traffic on our network was next to nothing," says William Archer, chief marketing officer for AT&T Business Solutions.

"Today roughly 40% of the traffic on our networks worldwide has a video element to it."Despite its promise, telepresence is far from mainstream. And analysts aren't exactly sure how eagerly customers are adopting it, because the companies that sell the technology aren't talking much. "Most of the companies have been pretty tight-lipped" about their telepresence sales numbers, says Forrester Research analyst Henry Dewing. He suspects Cisco has sold the most immersive rooms with three or more screens, at somewhere around 1,000, but he's not sure.

Even if companies are slow to build their own telepresence studios, venues like hotels and conference centers may fill the void, charging customers to rent the service. ABR Research estimates that in 2011, this so-called managed telepresence market could top $360 million.Whether telepresence has caught on or not, early adopters are singing its praises. Erkki Reuhkala, an executive with communications equipment provider Nokia Siemens Networks, says the company is very happy with its Halo telepresence studios, which are outfitted and serviced by Hewlett-Packard. The company's far-flung executives use the system to conduct meetings that would otherwise require long flights. "We are saving on travel more than what we are spending on Halo," Reuhkala says. "We have many studios where the usage rate is around 80%."

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