Videoconferencing Growing Affordable
The dynamics of videoconferencing are changing this summer through a potent mix of factors that could cut costs in half and finally bring long-promised benefits to corporate users.
New drivers of videoconferencing include ease of use, lower costs through Internet channels, improved quality, the ability to collaborate in real-time and corporate pressures to improve efficiency.
The promise of saving money by meeting via the video screen has been stymied until now by costly and unreliable setups that can intimidate users. Bandwidth costs alone run at about $135 per hour over the charged-up telephone lines that carry more than 80 percent of todays videoconferences.
But, with a glut of space on Internet Protocol (IP) networks and a new breed of companies promising ways to ensure private-line quality, fresh opportunities for corporate users are sprouting. The new players are promising price drops of up to 50 percent for connectivity.
Gus Otto, senior systems analyst at Caterpillar in Peoria, Ill., estimated that IP-based videoconferencing will cut his companys telecommunications costs by nearly 70 percent.
Big players that sense a huge market opportunity are jumping in. Last week, Sprint announced a complete IP videoconferencing package for businesses that will not run afoul of firewall or security protections.
One of Sprints partners is Ridgeway, a British company whose software system overcame two of the toughest barriers to IP videoconferencing: security and network address translation. While Sprints bet is the biggest of the major carriers thus far, the company will face stiff competition as AT&T, WorldCom and the regional Bells rapidly add services to their growing IP networks.
Equally significant are advances in videoconferencing equipment. The cost of the gear to run videoconferencing has fallen dramatically: from up to $500,000 a decade ago to about $500 today for PC-based gear from industry leader Polycom.
Polycom this month bought innovative equipment maker PictureTel for $362 million, and together they hold 63 percent of the videoconferencing equipment market, said Andy Nilssen, senior analyst and partner at Wainhouse Research. Sprint is Polycoms latest partner.
Their equipment no longer requires a specialist to set up calls. Using a PC, a conference leader can simply add people to the conference by clicking on their names or phone numbers. Executives on the road can join using their laptop computers and a cheap camera.
At Bristol-Myers Squibb Pharmaceutical Research Institute, the hours of videoconferencing doubled last year after Polycoms ViewStation systems joined the institutes room-based legacy systems.
At Stupp Bros., a St. Louis manufacturer of structural steel components and pipes, Chief Information Officer Mike Bickel was looking for a better way. "I have been frustrated with the inability for our company to be able to realize the goal of having greatly improved communications," said Bickel, who has overseen videoconferencing for four years there. "Its a frustrating technology because it breaks when you need it the most."
Bickel had tried to break away from his videoconferencing scheme over Integrated Services Digital Network (ISDN) by engineering an IP network, but he failed due to complexities that routing video introduces.
Virginia carrier CoreExpress offered to solve some of Bickels problems.
CoreExpress has built an extranet that guarantees different levels of quality for packet delivery by circumventing peering. Peering refers to the bandwidth bartering between IP networks, which tends to prevent assigning priority to traffic such as videoconferencing. Extranets such as CoreExpress can be used for traffic, like video, that is sensitive to delays and jitters. The company is one of just a handful of carriers that can assure quality of service as data is routed.
Access to CoreExpress extranet is available to customers of AT&T, Genuity and Sprint. Late last year, CoreExpress decided to marry its technology with specific applications and started with videoconferencing.
Bickel eventually visited CoreExpress Network Operating Center, and signed up for the service following a demonstration. While Stupp Bros. will break even with the new setup, savings were not Bickels only priority. He also said the telecom carriers that administer ISDN connections have given him poor service.
CoreExpress and other next-generation carriers hope Bickel is among the first of many customers. "Weve got a handful of Fortune 500 customers that I am itching to tell you about, but cant because they wont let us," said Greg Davis, vice president of marketing at CoreExpress.
Internap Network Services is another next-generation carrier that has launched a videoconferencing service to businesses. Internaps last-mile pipe and network are engineered to eliminate peering, by giving customers access to a very large extranet-like pipe. Internaps backbone does not have quality-of-service technology, but the company does have a marketing alliance with Polycom.
With only 300,000 videoconferencing systems shipped to date, the opportunity seems huge. While videoconferencing in the cubicle is still too expensive for most companies, the move out of special rooms is under way.
"We will be growing our videoconferencing significantly, and we will be moving it to the IP network," said Dan Denardo, global leader of e-publishing and videoconferencing at The Dow Chemical Co., in Midland, Mich. Like other companies, Dow is taking its videoconferencing from the conference rooms to the factory floors. When a customer was having trouble with plastic extrusion for an automobile part, engineers at Dow were able to diagnose the problem via video, even though the problem was not visible to engineers on location. "It kind of exaggerated the defect and allowed us to see it more clearly," Denardo said.