In 1997, according to the National Business Travel Association, U.S. corporations spent $165 billion on business travel, including airfare, lodging, car rental, traveler support and administration. This figure has significantly increased since the information was first tracked in 1982; at that time, the annual figure was $70 billion. Clearly, videoconferencing can reduce travel costs. No wonder then that in March 1998, 52 percent of NBTA member companies reported using videoconferencing, up from 27 percent in 1996.
And as our contributing editor David English wrote in the May issue, some companies are actually making money via videoconferencing. His story, "Money Talks," discussed the new system installed by Credit Suisse First Boston in its offices around the world. Just one month after videoconferencing capabilities were in place, the bank closed a $600 million deal that it attributed to having the new facilities. So why has videoconferencing been so slow to gain widespread acceptance in corporate America?
That is the question English tries to answer this month in his Special Report on the current state of videoconferencing. Not surprisingly, the Internet is beginning to play a bigger role in videoconferencing for consumers and businesses. What is surprising, however, is that human nature could be standing in the way. - Nick Dager
Videoconferencing is always poised to take hold "next year." Although its use is increasing steadily in corporate markets, it could become much more widespread. "Everyone can see that it will happen eventually," says Mark Kirstein, vice president of research for Cahners In-Stat Group of Scottsdale, Arizona. "The problem is that the companies that are competingor looking at the opportunity to competeare anticipating a very dramatic, exponential type of growth, as opposed to steady, incremental growth."
What is preventing companies from adopting videoconferencing as a pervasive method of doing business? "The corporate market is struggling to grapple with the current speed of technology and hasn't gotten to the stage where it is ready for video, except for limited applications," says Kirstein.
By contrast, consumer videoconferencing is taking off. PC-based video cameras have become impulse buys. Intel's $75 PC Camera Pack has a maximum resolution of 640 x 480, while Logitech's $49 QuickCam Express has a maximum resolution of 352 x 288. Both can achieve frame rates as high as 30 fps when paired with a cable modem or DSL service. They connect to the computer's USB port, making it easy to plug them in and unplug them as needed.
Pairing inexpensive video cameras and high-bandwidth access is proving to be a winning formula. "The people who are pushing the high-speed service, such as cable-modem, benefit tremendously by any application that enables consumers to use the bandwidth or that demonstrates why the bandwidth is good," says Kirstein. Now that manufacturing costs have dropped below $25, Kirstein expects manufacturers to start bundling cameras with their desktop and notebook PCs.
The result could be rapid growth in consumer videoconferencing, which could gain strength fromand help feedthe rapid growth expected in broadband modems. Cahners In-Stat Group forecasts the sale of 17 million PC-based video cameras in 2002, compared with 1.3 million in 1998. In-Stat is also forecasting an installed base of 45 million digital modems (cable and DSL) in the year 2002, compared with an installed base of 1.5 million in 1998. That figure is somewhat misleading, because it tracks the cumulative number of installed digital modems, as opposed to the number of units shipped each year. But "it's the relevant number if you're trying to figure out the market for video at that bandwidth," says Kirstein.
The question remains: What about corporate America?
Bandwidth has been a constraint in the corporate world, although the issue has been more about cost than availability. The expense of ISDN service has limited corporate videoconferencing to specialized applications, but that is changing. "We're starting to get to a world where bandwidth is a lot cheaper," says Charles Rutstein, an analyst with Forrester Research in Cambridge, Massachusetts. "DSL, cable modems and even more traditional networking technology are being driven down in price because of the new fiber baronsfolks like Qwest and Level 3who are making huge capital investments to make bandwidth available."
A second constraint has been interoperability. "For years, if you wanted to do videoconferencing with someone else, they had to have the exact same brand of equipment that you had," says Rutstein. "This made it terribly inconvenient, because there were several viable vendors in the market." Now we have standardssuch as H.320 for ISDN, H.321 for ATM and the emerging H.323 for IPand multi-protocol gateways that can bridge the standards, so just about any videoconferencing system can talk to just about any other videoconferencing system.
A third constrainthuman habitis even more stubborn. "At the end of the day, this isn't just a technology question," says Rutstein. "There's some doubt about corporate America's willingness to accept videoconferencing for all but a few types of meetings." Whether this reluctance to integrate the technology into a wide range of business communications is cultural or simply a part of human nature is debatable.
Corporate acceptance is also linked to the perceived popularity of the technology. "If I have a video system and you don't, it doesn't do me any good," says Kirstein. This is less of an issue for consumer cameras, which are are often sold in pairs to link two individuals who know each other. In business, where companies may communicate with thousands of businesses or millions of customers, user acceptance and critical mass are far more important.
Playing to Strengths
Traditionally, the success of corporate videoconferencing has been tied to its ability to save businesses time and money. Unfortunately, those benefits can be hard to quantify. Fortune-500 companies bought into the technology as a way for CEOs and other top executives to maximize their time. The savings were hard to measure, because the executives didn't want to be tied down by the technology. "If you were a CEO, you were going to get on airplanes and you were going to be flying around, either because that was a perk you demanded or because you knew the way you make your presence felt was by being there," says Michael Leiboff, a principal with Shen Milsom & Wilke, an audiovisual consulting firm in New York City. "Now the technology is being pushed to the lower echelons, and that's where the real savings are. You get the economy of scale, whereas in the early days you never did."
Health care and education are two industries in which videoconferencing is widely used by people who aren't necessarily at the top of the organization. In health care, videoconferencing can give patients access to specialists in distant hospitals, or doctors can consult with with one another and collaboratively review a patient's medical records. In education, a professor's lecture can be distributed to many locations.
Leiboff sees interesting similarities in how videoconferencing is used in health care and education. "It's a single expert being distributed beyond a region, and it's in industries where productivity is very hard to find," he says. "Productivity gains in education have been very slow, because they're people-based, and the people can't be replaced with machines to much of an extent." You won't get very far asking a teacher to teach 50 percent faster. And until videoconferencing came along, there were limits as to how far you could push the student-teacher ratio.
The Wheatbelt Rural Educational Link is an excellent example of how videoconferencing can increase the productivity of an educational system. It is a consortium of 20 school districts in rural Oklahoma that share teachers and classes via broadcast-quality video. The schools use a Unix-based MCS 300 videoconferencing system from Tektronix and are linked by a DS-3 fiber-optic network. "There are three cameras in each classroom," says Gene Benson, superintendent of the Dover Public School System in Dover, Oklahoma. "One is on the instructor, and one is on the students. We also have a document stand with a camera in it. If a teacher wants to send a slide or picture from a textbook or magazine, he or she can put it under the document stand and send it to the other schools, as well as display it on a large screen in the classroom."
Benson explains that many of the rural Oklahoma school districts are quite small. His own school system has only 220 students for kindergarten through 12th grade. By sharing teachers, his school system is able to offer a wider range of courses, including accounting, art appreciation, home economics, music appreciation, physics and physiology.
2000 and Beyond
Just as sharply declining prices have become the major factor in the wide acceptance of consumer videoconferencing, you would expect that a similar decline would be needed for corporate videoconferencing to break beyond the confines of its vertical markets. That is exactly what is forecast by Sujata Ramnarayan, an analyst at the research firm Dataquest in San Jose, California.
Ramnarayan points to the sub-$10,000 systems that were introduced in late 1997 and early 1998 as the primary cause for surging sales and declining revenue. Her research shows shipments of 32,007 group-based videoconferencing systems, with total revenue of $544 million, in 1997. That works out to an average price of $17,000 per unit. For the year 2002, Ramnarayan forecasts shipments of 152,000 group-based videoconferencing systems, with total revenue of $359 million, or an average price of $2,362 a unit. Beyond 2004, she sees videoconferencing becoming more Internet-based and more tightly integrated into business presentations.
Many of the consultants and analysts I spoke with agree that videoconferencing will become IP-based. In a world of high-speed digital communications, there would be many advantages to having voice, data and video travel down one wire. "In theory, all that works today," says Kirstein. "In reality, a lot of fairly expensive equipment is required to sustain video. You have to have a lot of bandwidth on your network, because network managers tend to put data as their highest priority."
David English is a freelance writer in Greensboro, North Carolina.
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