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Video Conferencing Business Soars as Companies Cut Travel; Some Travel Cuts Are Permanent

Milwaukee Journal Sentinel - May 13, 2002

When an Appleton insurance company added 15 video conference rooms in less than a year, the rooms were booked solid with meetings that normally would have required thousands of miles of air travel.

"Now if we doubled the number of video conferencing units, it still wouldn't be enough," said Mike Shetter, media productions manager for Aid Association for Lutherans/Lutheran Brotherhood.

Video conferencing soared after Sept. 11 as companies curtailed travel but still had to conduct out-of-town business.

With the technology, audio/visual information can be transmitted over telephone lines from one location to another. If the sound and image are synchronous, it equates to talking on the telephone while receiving live video images.

The cost benefits of video conference meetings can be huge with savings on flights, taxis, hotels and, not least, unproductive hours spent traveling.

"Every time you fly somewhere, even a short distance, it's a whole day shot," said John Henkel, president of Management Recruiters of Racine Inc., an employment agency that uses video conferencing for numerous purposes, including screening job candidates.

The expanded use of video conferencing at Aid Association for Lutherans was driven partly by cuts in travel after Sept. 11, but mostly by the company's merger with Minneapolis-based Lutheran Brotherhood. Combined, the companies have 3,750 corporate employees and 3,400 sales people.

“With the merger, we needed a communications system that didn't require a lot of travel,” Shetter said. “So we went from one video conference room in Appleton to a total of 16 rooms between Appleton and Minneapolis.”

Renewed interest in teleconferencing is good news for companies that have spent years trying to convince businesses to try their wares. The overall U.S. conferencing services market will grow by 22 percent in the next four years to $9.8 billion, according to a report from Wainhouse Research Inc. and some service segments will grow much faster.

“This is an industry that's still in its early stages,” said David Alexander, a teleconference industry analyst with Frost & Sullivan Research Services in San Antonio, Texas. “Most of the companies are seeing revenue growth every quarter and only a few are really struggling.”

Stock prices for some teleconference companies shot up after Sept. 11 but many have since fallen back to more normal levels. Shares in WebEx Communication, which offers services that let companies conduct meetings over the Internet, hit a 12-month high of $37.87 on November 7, 2001, but has since dropped to $15.44 on Friday. Polycom Inc. stock peaked on Dec. 4, 2001, at $42.60 a share and has since fallen to $20.69.

Some business people have been turned off by video conferences because they had bad experiences 10 years ago, said Jaclyn Kostner, author of "Knights of the Tele-Round Table," "Bionic e Teamwork," and other telecommunications books.

"There was a time when the video looked like it was out of a Charlie Chaplin movie, and the quality of the audio was poor," she said. "It felt like you were talking to a robot."

With new technology, video conference images and audio are close to television quality and there are fewer restrictions on how many participants can join a multiple-site broadcast.

Moreover, the equipment works in conjunction with desktop computers and laptops to show PowerPoint presentations, photos, documents and 3-D images.

“The video conference experience replicates that small meeting room down the hall,” Kostner said. “And you don't have to worry about who sits where, and whether the coffee and doughnuts will arrive on time.”

Management Recruiters of Racine, part of a national chain, tapes video conferences with job candidates for viewing later.

“That way a client can look at the tapes and decide which people they want to fly in for final interviews,” Henkel said. “A video conference costs about $250 for the first hour, and $50 for each half hour after that, but it's a lot cheaper than an airline ticket.”

Following Sept. 11, SBC Ameritech's teleconference business more than doubled and it had been rising steadily before that, said Sharon Cohn, director of Ameritech's collaboration services.

Even as business travel returns to normalcy, many of the recent converts to video conferences are staying connected, Cohn said. What's more, the use of technologies such as Web conferencing has grown at an even faster pace.

With Web conferencing, groups of people can be linked through their personal computers for real-time sharing of documents and other information minus the live images of people making presentations.

“You don't have the talking heads, but a lot of people have found that all they need are Web conferences,” Cohn said.

Metavante, the technology subsidiary of Milwaukee's Marshall & Ilsley Corp., uses Web conferencing on a daily basis to communicate with its clients, said Tom Mezera, senior vice president of sales and marketing.

“It's a great leveraging tool of our employees time,” he said. “With a Web conference, I don't have to ship somebody out to Bellevue, Wash., to make a presentation. That time spent on airplanes alone just kills us.”

Metavante has found that many clients prefer Web-based business meetings over video conferences. In some cases, there's also cultural resistance to video conferencing, Cohn added.

“Some people find that the cameras are very invasive” she said. “They are more comfortable working behind their computer terminals and not having to worry about how they appear on camera or what clothes they are wearing that day.”

A Web conference can be set up in minutes, said Ray Britt, chief marketing officer of InterCall, a Chicago-based teleconferencing company.

“September 11 was a wake-up call for American business,” he said. “Many companies found they could do a lot of meetings without having to travel.”

Teleconferences will continue to take a bite out of the airlines business, which traditionally has counted on the premium fares paid by corporate travelers to augment less profitable leisure travel, according to the Business Travel Coalition, an advocacy group for corporate travelers.

The coalition polled more than 180 companies for its annual 2001 survey.

Among the findings: 74 percent said that some percentage in their travel cuts is permanent. 60 percent said they planned further cuts in travel spending in 2002. Many companies said they were using video conferencing more often as an alternative to flying.

None of the teleconferencing technologies will completely replace face-to-face meetings, said Kevin Mitchell, spokesman for the Business Travel Coalition.

“You have to be there in-person if you are closing a big business deal or if you have a very important problem to solve,” he said. “Beyond that, however, it's a judgment call.”

The typical executive attends nearly 60 meetings a month, one-third of which they rate as unproductive, according to a study by Worldcom Conferencing, a Web and video conferencing service provider.

A typical meeting costs $5,200 when four of the five participants travel by plane, according to Worldcom. The cost of the same meeting—through a conferencing service—is about $1,700 if done with live video and $700 if done with audio only, Worldcom says.

Some businesses, and individuals, are turning to hotels and places such as Kinko's print shops that offer teleconference services.

"It could be a very large company, or someone who wants to do a video conference with their parents," said Mike Taylor, a senior business analyst for Kinko's.

The video conference rooms at Association for Lutherans are used about eight hours a day. The rooms have rolling, portable cameras and 35-inch monitors with split screens so that a presenter and something such as a PowerPoint display can be seen at the same time.

“The learning curve in getting people used to this was a lot shorter than we thought it would be,” Shetter said. “When you get a heated discussion going, though, it takes a little more coordination for people to break in.”

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