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Telepresence Is Taking Hold

Improved Technology, High Gas Prices Draw Smaller Companies In

By JUSTIN SCHECK and BOBBY WHITE
The Wall Street Journal
May 6, 2008

Executives at One Communications Corp. found they had a hard time shuttling between new offices in Wisconsin, West Virginia and New York after the small telephone company merged with two other businesses.

The Marlboro, Mass.-based company tried to link remote offices using videoconferencing systems, but the meetings were plagued with frequent outages and poor audio quality. In response, executives decided to spend about $500,000 to outfit two large conference rooms and four smaller rooms with "telepresence" technology, a high-definition videoconference system that simulates face-to-face meetings between users.

"The technology has come so far so fast that it's very easy for anyone to run it," says Russell Oliver, the company's vice president of strategy. Mr. Oliver says the company's six videoconferencing rooms, which use a system designed by Norway's Tandberg ASA, are fully booked on most weekdays.

With prices of most systems ranging from $200,000 to $500,000 a room depending on the number of screens, telepresence has widely been considered a niche technology for multinational corporations. But high gas and travel prices, as well as improving video technology, are causing smaller firms to reconsider the high-end systems.

Suppliers of the technology are trying to encourage the shift, which could expand their market beyond the multinational corporations they have courted in the past. In December, for example, start-up LifeSize Communications Inc. introduced a $6,000 videoconferencing system aimed at small-business users that don't need high-end video or audio. Meanwhile, Hewlett-Packard Co. recently introduced a $120,000 telepresence system that can accommodate just two participants but costs about a third of the price of its larger systems.

H-P has also announced a partnership with Marriott International Inc. to install videoconferencing systems at hotel locations for use by small- and midsize business travelers. Cisco Systems Inc. last year announced a similar partnership, joining with office-space provider Regus Group PLC to offer video systems in 50 locations.

Thus far, standard videoconferencing systems remain a much bigger business. Despite these efforts, only about 1,000 of the 176,000 videoconferencing systems sold world-wide in 2007 were telepresence systems, estimates market researcher TeleSpan Publishing Corp. But unit sales of the high-end systems were up five-fold from the 200 sold in 2006, and the number should triple to 3,000 in 2008, TeleSpan estimates.

Traditional videoconferencing setups are essentially a monitor, camera and microphone, placed in a conventional conference room. Telepresence systems, by contrast, require specially designed rooms with multiple cameras, sound-damping equipment and high-definition video screens. They simulate the sensation of two groups of people at identical tables facing each other through windows.

Participants appear life-sized and move smoothly -- not like small, herky-jerky figures on a TV screen. The sound quality is high; there is little lag or audio distortion. The systems are also designed to allow groups of workers to share documents, such as engineering drawings or marketing plans, or perform product demonstrations. Also, people in more than two locations can participate in the same meeting.

The telepresence market was pioneered by companies that include Teliris Inc., a New York company founded in 2001. In late 2005, H-P introduced its Halo system, which was developed with help from the film studio DreamWorks Animation SKG. The next year, Cisco followed with its offering.

Until such systems came out, videoconferencing was "a backwater" of the IT world, says Ira Weinstein, an analyst with Wainhouse Research, a market-research firm based in Duxbury, Mass. Mr. Weinstein says the heavy marketing by tech powerhouses Cisco and H-P are helping to grow the market.

Cisco also is a heavy user of its own technology, with 200 systems installed. The network-equipment maker says its workers have conducted 97,000 meetings using the technology, 16,000 of which spared them the traveling, saving about $70 million in travel expenses.

To be sure, companies adopting telepresence face high hurdles -- including the stiff upfront prices for the equipment. Many users also have to make costly upgrades to their communications facilities to transmit high-definition video and audio. Some telepresence makers charge $4,000 to $22,000 a month to run the conferencing systems.

"Pricing has to definitely go down to allow for greater adoption," says Rich Costello, an analyst with research firm Gartner Inc.

There's also a compatibility issue. Many systems don't communicate easily with each other. For example, H-P's Halo users can't have a telepresence-style meeting with users of a Cisco system. Alok Das, a senior scientist at the Air Force Research Laboratory in Dayton, Ohio, selected H-P for four telepresence rooms last year. Mr. Das says the poor quality of previous videoconferencing systems pushed him to upgrade to a higher-quality system. Before turning to H-P, he says, "people basically tuned themselves out" during meetings because the quality was so poor.

The Air Force lab recently held an annual process meeting over video for the first time, says Mr. Das. Rather than fly in researchers from around the country, the 20 participants sat in Halo rooms for two days. Since then, the rooms have been in daily demand, he says; "the use has really picked up." End of article.

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