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The 21st Century Meeting

Beam them up, Scotty: The latest gear may finally deliver on the promise of videoconferencing

Business Week Online - 2/26/07

We've all been there: You're sitting at a conference table staring at a black phone box. After months of 12-hour workdays and sleepless nights, the fate of Project Breakthrough hangs on this one conference call. Nervous as a schoolkid before his first spelling bee, you bark out your best pitch. Silence. In these awkward seconds of quiet, you're left only to imagine what's happening on the other end: Furrowed brows? Turned-up noses? Or heads nodding at your trenchant wisdom?

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This is when you wish you had sprung for that $2,500 ticket on the red-eye. Because even the most effective conference call can't convey everything you need to say or hear or feel in a do-or-die business meeting.

Take it from the scientists. Thirty-seven years ago, the late anthropologist and professor of communications Ray L. Birdwhistell demonstrated that less than 35% of the message in a conversation is conveyed by spoken words—the other 65% is communicated with facial expressions and body language. Says Matthew Lombard, a professor at Temple University and president of the International Society for Presence Research: "Without the visual, you miss most of the nonverbal cues."

So it was no wonder that hopes soared last year when several tech outfits rolled out new videoconferencing equipment that promised to fill in those blanks. The systems from the likes of Hewlett-Packard (HPQ ), Cisco Systems (CSCO ), and Polycom (PLCM ) seem like nothing less than a conference-room equivalent of Star Trek's Holodeck. Taking advantage of breakthroughs in video, audio, and broadband technologies, they purport to create experiences so lifelike that participants who are thousands of miles apart look (and more important, feel) like they're in the same room. "This is the next big thing," says Craig Malloy, CEO of LifeSize Communications Inc., which produced one of the first high-definition video systems. "It fills the gap between absolutely-gotta-be-there-and-drink-a-beer meetings and a regular old phone call."

BACK TO THE FUTURE

The effect is to create an illusion of seamlessness between the viewer and the viewed. Hewlett-Packard's Halo system and Cisco's TelePresence 3000 use massive 50- to 65-in. high-definition screens to show people sitting behind a conference table that's identical in color and shape to the one used by the viewers. Polycom, a longtime leader in conventional conferencing equipment, started selling in January its own advanced lifelike system, only bigger and more elaborate, with 8-ft.-wide screens. That sense is reinforced by advanced audio that lets everyone talk at once without canceling out any voices. Get up and walk across the room, and for those on the other end your voice travels with you.

But wait. Haven't we heard before that videoconferencing was going to make business travel obsolete? Many times, in fact. Few fields have proved so susceptible to hype. The example that first comes to mind is the Picturephone that AT&T (T ) showed at the 1964 World's Fair, only to quash it a few years later in the face of weak demand. There are plenty of others.

So is there any reason to believe this new gear, broadly referred to as "telepresence" systems by the industry, will come closer to changing the business meeting as we know it—or even replacing a few business-class tickets? To find out, BusinessWeek traveled, virtually and literally, to some of the outfits that have plunged into this videoconferencing revolution and took their systems for a spin.

The first thing to know about the early adopters is that these are no outposts in an office park—they have serious green to spend. While basic systems cost $8,000 per room, the price tag for more elaborate displays can soar to $392,000 for a room, with network management fees that can range from $6,000 to $18,000 a month.

'THIS IS INTENSE'

A typical user is private equity star Blackstone Group. Several times a week, CEO Stephen A. Schwarzman gathers senior managing partners around a polished conference table in the firm's New York headquarters on Park Avenue for a five-way video call to talk about the sale of some real estate in the Northwest, say, or a bid for Tribune Co. (TRB ) On three wide, glistening, high-definition color screens appear executives from Blackstone's offices in such far-flung places as London, Hong Kong, Mumbai, or Paris. Blackstone has 40 video rooms stationed around the world. One executive is so enthralled with the system that he keeps the conference connection running in his office all day long. "We're big proponents of videoconferencing because of the way it enhances the quality of meetings," says Harry D. Moseley, Blackstone's chief information officer.

Financial and consulting firms have been particularly avid purchasers. Deloitte & Touche USA is installing a dozen $250,000 video suites made by Polycom so that various business units can collaborate on outsourcing ideas or interview job candidates from India. AIC Ventures, a real estate investment company, has three video rooms: one in its home base of Austin, Tex., another in Dallas, and one in Chicago. They are used for everything from reviewing new Web page designs to celebrating the close of a big deal with a (now crystal-clear) ring of a tabletop gong.

Industrywide, video manufacturers shipped 164,000 whole-room systems in 2006, up 21% from 135,000 in 2005, according to Andrew Davis of researcher Wainhouse. But that doesn't include the new telepresence systems, which in their infancy shipped an estimated 250 units last year, according to IDC (IDC ). The research firm estimates shipments will grow to 1,660 units in 2008.

The new systems have a see-it-to-believe-it quality that sharply separates them from older products. It's like the first time you see a football game in HDTV on a 50-incher in the local consumer electronics store. "Wow!" exclaims Shuichi Ikeda, an NTT Communications (NTT )executive, upon first seeing Cisco's three-screen setup. "This is intense." Ikeda had popped into Cisco's New York office with some colleagues to talk about NTT becoming a telecom partner overseas.

For the massive data capacity that makes such quality possible, you can thank the telecom giants. Over the years they laid more efficient communications lines, bumping up the capacity to handle video as well as voice traffic while driving down the cost. And advances in high-def video displays have improved screen resolution to 10 times sharper than standard color TV.

The tech advances coincide with a sense among many high-powered business people that their travel schedules are reaching the breaking point. As companies grow ever more global, relationships become increasingly dispersed. Today, 91% of all employees don't work at their headquarters, according to Nemertes Research. Life on the road was already no picnic, but September 11 added to the stress.

It was such weariness that drove Jeffrey Katzenberg to think big about videoconferencing. The CEO of DreamWorks Animation skg (DWA ) used to fly from Los Angeles to the company's offices in Bristol, England, once every three weeks. He would leave at 2 in the afternoon to arrive at 7:30 the next morning; work until 7:30 the following night; then take a 10-hour flight back home. Plus he was on a plane almost once a week to the company's Northern California unit. "The wear and tear on me, as well as the handful of people flying with me, was very, very hard," Katzenberg recalls.

CRYSTALLIZATION

In the fall of 2002, Katzenberg challenged his tech team to come up with a way to bring his creative people together virtually. Katzenberg, an experienced producer whose life is all about bringing characters to life on screen, pushed his team to create something that made the technology transparent and the experience nearly real. For help, CIO Ed Leonard went to HP, a longtime DreamWorks technology partner. HP completed the system in late 2005 and rolled it out as Halo last year.

The system that DreamWorks refers to as its B2B room mimics a typical boardroom, with a large conference table. Meeting participants sit on one side of the table, and their remote colleagues sit opposite them, behind a similar wood table reflected, mirror-like, on three giant flat-screen monitors. A fourth screen, situated above the other monitors, allows all participants to view the same drawings and storyboards as they talk through animated movie scenes.

A modified version of the system is on display one February day as Katzenberg and a creative crew work out some scenes with comic Jerry Seinfeld for an upcoming animated film, Bee Movie. Seinfeld has two large, black flat screens arranged in a "V" in his midtown Manhattan office. He sits in a black desk chair, a tan sofa behind him. Katzenberg sits on a couch in his Glendale (Calif.) office, facing a single screen. In a surreal way, it feels as if Seinfeld is in the same room.

In the movie, a bee (with Seinfeld's voice) leaves the hive and discovers, to his horror, that humans have been stealing his honey. In this session, Seinfeld freely suggests tweaks to the script, as if he's pushing paper across the table to Katzenberg and crew. "Can we do that thing with the truck?" he asks. "Just go back to that moment and let me see lines with the pictures," Seinfeld says. His right screen quickly morphs as someone in L.A. types the new language onto the screen. Almost instantly, the applicable storyboard is up on the monitor. Both sides scroll back and forth without much fuss or confusion. "It's been phenomenal," Seinfeld says later. "I wasn't going to move to L.A., so I don't think Jeffrey and I would have made the deal if this wasn't possible."

Such face-to-face encounters allow participants to discover meaning—the understanding of an idea, the crystallization of a concept—in ways that might not have been achievable otherwise. Consider a recent meeting at McKesson Corp. (MCK ), a major supplier of medical equipment and services. Two tech staffers in the San Francisco headquarters are faced off with three others in the Atlanta area offices over a Cisco setup, discussing how to conduct a virtual trade show with vendors. About midway through, the CIO, Randall N. Spratt, walks in and takes a seat in San Francisco.

If the meeting were done over the phone, those on the other side would have had no idea their boss was in the room. But via video, the Atlantans sit up and lean forward upon seeing Spratt. He fires a string of questions at colleague Eric Sugar: "Aren't we telling vendors we don't need your salespeople?" he asks. "Have you talked to vendors about this?" Sugar turns away from the CIO, looks directly at the monitor to address someone in Atlanta, and asks a question without having to mention whom he's talking to—it's clear to everyone in the room. The colleague in Atlanta responds and everyone nods in affirmation. "Great idea," Sugar says.

Imagine how this exchange would go with herky-jerky video and audio. "There would be pauses that stifle creativity," Sugar says. McKesson, which has tested Cisco's system for several months, plans to add 7 to 12 rooms to its existing 2 this year. The company estimates it would spend $1,100 to fly in the same people, so just 2.5 trips per week pay for use of the video room for that week. Says Spratt: "To a person, we would rather use this than travel."

Still, is there any evidence that videoconferencing—no matter how realistic—will put a real dent in business trips? Not yet. At their current prices, telepresence systems are being used mainly by very large corporations and big-time executives, who, as Lee Doyle, IDC's vice-president for networking, puts it, get "sick of being on a plane." But overall demand for corporate travel remains robust, according to American Express (AXP ) Co.'s Business Travel Div. In fact, a survey taken at the end of 2006 by the National Business Travel Assn. found that 68% of corporate travel managers expect their companies to take more trips this year than last.

That could change. With fuel and other expenses rising, the cost of the average business trip—including airfare, car rental, and hotel—is expected to climb nearly 5% in 2007. Analysts say the price of new video systems should drop by 10% to 15% a year.

As technology costs come down, organizations also may find ways to adapt it to their distinct cultures. Not everyone wants or needs a full-blown conference room setup. Consider HOUSE Productions & Casting, a New York outfit that organizes and conducts auditions for movies, TV shows, and commercials. A boardroom setting would make these artists' skin crawl. So in their loft-like offices on the lower West Side of Manhattan, they've installed a system by LifeSize Communications with a single high-def, 50-in. screen used to view participants auditioning from West Hollywood, Calif. Says Adam Joseph, house's creative and casting director: "We're the chill, relaxed videoconferencing place."

At Cisco, CEO John T. Chambers imagines a day when high-quality video technology is so affordable that households will connect to each other via videoconferences simply to "hang out," one living room connected to another. It's back to the '64 World's Fair, but with broadband and high-def TV. But why stop there? In a move that invokes Marshall McLuhan's global village, Cisco announced in January that it is donating complete systems to the governments of five nations: Egypt, Jordan, Lebanon, Turkey, and the United Arab Emirates. The idea is to improve communications and collaboration among those countries by harnessing the capabilities of high-quality video.

In a world fraught with political and cultural tensions, video presents an opportunity to at least begin discussions, says Temple University's Lombard. "Here's an opportunity for [people] to meet on an equal basis and do it more regularly," he says. "It's not going to make people get along, but it allows them not to be isolated."

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