Businesses Turn to Videoconferencing After Attacks

Yahoo! News, 9/14/01
By JESSICA HALL

PHILADELPHIA (Reuters) - Indian technology consulting firm MindTree Consulting used videoconferencing to link its U.S. workers to worried families back home after terror attacks reduced New York's landmark World Trade Center to a pile of burning rubble.

Two MindTree employees ran to safety from the crumbling Twin Towers, and the rest were elsewhere. About 20 percent of MindTree's 450-person workforce is located in the United States.

“Parents and wives of our employees were worried. Some of them do not know which place was where in the U.S.,” said Srinivasan Janakiraman, president of technology at MindTree, which is co-headquartered in Bangalore, India and Somerset, New Jersey.

The attacks by four hijacked airplanes on Tuesday sparked a surge in demand for videoconferencing services as businesses and families tried to located friends and loved ones, and emergency workers tried to coordinate rescue efforts. The unprecedented two-day ban on air travel also forced companies to find new ways to hold meetings or tend to clients.

“After the attack occurred, we saw a gigantic spike in demand with people needing to communicate, and set up emergency assurance,” said Ken Hayward, chief executive of VSPAN, which coordinates video, audio and Web-based conferencing services for business meetings, events and training.

The King of Prussia, Pennsylvania-based company, which typically handles about 3,500 corporate clients a day, has seen a 30 percent to 40 percent increase in traffic since Tuesday's attack. VSPAN expects the surging demand will require it to almost double its business in the near term.

“When President Bush left Florida and went to the Midwest and video conferenced with his advisors—those are the kinds of things that cause people to realize that videoconferencing, for price, convenience or security reasons, is a viable option,” Hayward said.

Companies such as VSPAN, MCSi Inc. and merger partners Polycom Inc. (Nasdaq:PLCM - news) and PictureTel Corp. (Nasdaq:PCTL - news) offered free video conferencing services to aid with the disaster relief efforts.

“The tragedy itself, the failure of not being able to get from one place to another, being stranded out of contact, will probably have an impact on use of technology because travel is unpractical or scary,” said Polycom executive vice president Jules Devgne.

Analysts said the video conferencing industry also saw a jump in demand immediately after the crashes of Pan Am Flight 103 and TWA Flight 800, and during the Gulf War (news - web sites). But the cost of video conferencing has fallen sharply since then, and analysts said the recent surge in business could last as this week's disasters and the aftermath cool international travel.

“Americans typically seem to have a short memory span. A month after things happen, they go back to normal, but I think this is different. I think this was sufficient in magnitude that it could change people's behavior,” said Andrew Davis, managing partner at Wainhouse Research, a market research and publishing firm specializing in conferencing.

“There's now a fear factor that didn't exist before. And with new security measures being put in place, business travel will become more painful. You'll need to be at the airport earlier and stand in more lines longer -- business people hate that. Your one-hour trip to New York now becomes a four-hour odyssey that is also more expensive because of the extra security,” Davis said.

VSPAN noted that technology improvements and the growth of the Internet have helped cut prices for videoconferencing rooms to about $10,000 per site from $100,000 just a few years ago. Videoconferencing tools, costing about $500, can be installed on a personal computer desktop for individual use, analysts said.

“The savvy business will realize they will be able to accomplish much of the goals they wanted to handle by traveling via videoconferencing,” Davis said.

The size and growth of the video conferencing industry can be difficult to gauge, analysts said. There are equipment and infrastructure manufacturers as well as service providers who transmit the video traffic, organize calls, run conference rooms and deal directly with clients.

A recent report from Frost & Sullivan said U.S. video conferencing services revenues may climb to $5 billion by 2007 from $1.48 billion in 2000. Wainhouse, meanwhile, expects the conferencing infrastructure sector to grow to $1.25 billion in 2005, up from $375 million in 2000.

In a video conference, each location is equipped with a camera, microphone, monitor, and signal management device. Video calls can be connected over traditional telecom or high-speed broadband networks.

The industry had already seen a boost in demand as the recent economic slump forced many corporations to clamp down on travel expenses. A survey by Runzheimer Reports on Travel Management earlier this year found that about 36 percent of companies seeking to cut domestic travel costs used videoconferencing.

“It's extremely easy to cost-justify this equipment—something costs $5,000 can be paid for in the savings of a few first-class tickets,” Devgne said.