[May 23, 2001]

Lowering The TCO Of Video Communications

BY DR. SHAHADAT KHAN AND ANGIE HIRATA

The emergence of IP as a core technology and the introduction of improved video compression technologies are setting the stage for video communications to be an integrated network application for the enterprise, rather than cumbersome standalone communications equipment.

Analyst Andrew Davis of Wainhouse Research says video communication has been recognized as an "intimacy and communications feedback mechanism that is simply not possible with voice-only calls."  In order to remain competitive, businesses need to assess how to empower this high level of effective communications throughout their enterprise, without breaking the bank. In assessing enterprise video communications systems, there are two factors to consider: the Total Cost of Ownership (TCO) and the Return on Investment (ROI). This analysis will compare the costs and return on new PC-based software solutions compared to specialized desktop hardware systems and room-based systems.

The elements involved in measuring TCO can vary, and many research firms --  including Meta Group and Giga Information Group -- have models adapted from Gartner Group's original 1987 TCO model to assist administrators in finding where their technology costs exist. Most assessments find that 70 to 80 percent of a TCO is incurred in costs outside the actual technology ticket price, including training, administration, and related processes. Moreover, according to a survey conducted by Compaq, only 4 percent of IT decision makers were aware of this and included such costs in their analyses. Being aware of these post-deployment costs is the first step in controlling IT costs and finding communications solutions best suited to business requirements.

New PC-based video communications systems that use standard USB cameras and packet-switched IP networks enable businesses to implement enterprise-wide videoconferencing while lowering the TCO. With the objective of lowering the TCO of video communications solutions, this analysis will review initial investments in software, hardware, and bandwidth, as well as maintenance, training, and process costs. Moreover, moving beyond the TCO model, we will analyze added benefits and the increased ROI associated with the ease of use of new systems.

Capital Costs
New PC-based video communications solutions do not require large upfront investments in equipment and peripherals, so businesses will see an immediate cost savings. Up-front capital expenditures for room-based and desktop videoconferencing systems can start from $12,000 for equipment, plus the space for the room (a $40/ft U.S. average, according to Frost & Sullivan), desktop peripherals ($733 per user average) and specialized furniture. On the other hand, improvements in video compression technologies in PC-based software solutions enable end users to use standard PC video cameras and headsets (available to users from mass consumer manufacturers such as Intel, Creative Labs, and Labtec). These can be purchased in bulk for an average of $95 per user -- a reduction of $638 per user for accessories alone. The space required for the existing servers that host the IP-based video communications is minimal compared to a room-based system, enabling businesses to save on costly real estate.

In 2000, Frost & Sullivan noted that since new client server software is installed on existing servers and T1 connections, this "significantly reduces the cost of running these systems." Then, in a March 2001 report (Enterprise Videoconferencing Endpoints Market), Frost & Sullivan analysts identified two of the concerns with IP videoconferencing as quality and "concerns about network congestion and bandwidth management (that) stem from lack of easy-to-use and reliable management tools." New technologies available today address these concerns using compression techniques and media delivery technologies that are scalable to available network bandwidth and resilient to network packet loss. In addition, new tools enable administrators to control the amount of bandwidth used for video and audio traffic, so other applications running on the network are not adversely affected.

PC-based solutions also allow businesses to use an incremental deployment strategy where departments or users are given access to video communications in stages. Therefore, companies can work towards enterprise-wide video communications without a large initial investment.

Maintenance Costs
Maintenance costs include the cost of all personnel required to install the system and adequately support users across all offices and home offices.

One of the disadvantages of hardware-specific desktop systems has been the cost involved in installation and maintenance for telecommuters. According to Cahners In-Stat Group's Entering the Access Era: US Telecommuter Demographics survey, 24 percent of U.S. workers (30 million) will work at home at "some time during the week" in 2001. This number is expected to grow to 28 percent (40 million) by 2004. New PC-based video communications systems enable end users to install peripherals and software, and use the system with a pre-configured network connection, so administrators don't have to visit their locations. Enabling end users and administrators to easily maintain accounts from a Web-based interface further reduces the TCO. As new employees join the company, even in a satellite office or as a telecommuter, the administrator sitting in the head office can create new accounts and maintain the users' settings.

IT departments can realize further administrative savings by reducing or eliminating costly support contracts from vendors. An administrator with knowledge of standard server platforms, Windows environments, and IP networks will be able to maintain the system.

Analyst Davis states in a comparison to room-based videoconferencing systems, "the big and overriding advantage is that [these PC-based] systems are easy to set-up, easy to operate, and easy to maintain." These factors play a large role in calculating the overall decrease in the TCO of video communications for the organization.

Training Costs
Up to 21 percent of the technology cost associated with enterprise desktop users is in formal and informal training, says Alden T. Coleman II in Lowering the TCO for the Desktop. Costs of training on traditional videoconferencing systems come from local vendors or reseller training, but businesses can reduce these costs with PC-based systems that are easier to use, requiring less administrator and end-user training.

Businesses can also reduce the amount of informal training that takes place when co-workers train each other (taking them away from core tasks) by offering group and departmental training sessions. Simple end user training can be conducted through the video communications software itself. When new employees join the organization, administrators can quickly train them on usage functions within minutes. This level of quick and easy training greatly reduces the TCO of video communications compared to room-based systems, where the transfer of knowledge was expensive, or was simply not taking place.

Procurement And Deployment Process Costs
Coleman recommends some ways to reduce TCO in procurement processes, including developing standard configurations, limiting the number of vendors, and simplifying acquisition of new hardware. With an incremental deployment strategy for a new video communications system, or when accommodating new employees, administrators should standardize on cameras for USB ports, limited to select high-end cameras from major manufacturers. Purchasing or purchase requests can be automated through a Web site or intranet, and with the level of simplicity offered in PC video cameras, employees (particularly telecommuters) would be able to install it themselves. To further reduce costs, administrators can easily electronically automate client software distribution and centralize support processes.

Another advantage of PC-based video communications solutions is the ability to perform across different CPU speeds. In a heterogeneous computing environment, where machines across departments differ, administrators are not faced with the further expense of upgrading to a certain CPU level.

Increasing The Return On Investment
The return on investment with new PC-based video communications solutions is greater, by virtue of the fact that users are more likely to use it because it's simple and quickly accessible. Frost & Sullivan predicts that this type of "non-invasive" video communications tool with PC video cameras and IP networks will "eventually be the norm for all desktop videoconferencing" and an invaluable ubiquitous collaboration tool. Users intimidated by meeting room systems, or those who simply do not use the system due to the inconvenience involved in arranging a meeting in the room, are realities that waste corporate investment dollars in room-based systems. However, with new PC-based solutions, since users can start a video session as easily as they send e-mail messages, businesses will see a significant increase in usage and ROI.

Decreased Travel Expenses
Businesses that currently have high travel costs for executives, consultants, sales personnel and other staff will see a measurable drop in travel costs with simple video communications solutions. Sales meetings, client calls, and technical support -- often requiring long distance visits -- are now made possible from the desktop with simple video communications. For example, video communications recently enabled Texaco to save 20 days of interviewing time and $300,000 in travel costs during their national MBA interviewing schedule.

Enterprise-Wide Access
New technologies are enabling a higher number of employees to work remotely, and new video communications solutions enable all users across the enterprise to talk face-to-face.

Mobile workers who are on the road at trade shows and client site visits can access video communications from their laptop computers with any type of Internet connection. Administrators should calculate the added value derived from improved user productivity and keeping mobile workers in touch with their head office colleagues and other clients.

Contract workers, freelancers and telecommuters currently use e-mail and phone, while some may use high-end desktop videoconferencing systems to communicate with their head office or other contacts. New PC-based solutions enable more outside workers to have video access, due to its ease of installation and use of the Internet. In addition to the added value of effective communications and collaboration with teammates, businesses should assess how it positively affects the morale of remote workers and their colleagues.

Conclusion
There is no doubt about the benefits of video communications in the enterprise. According to Perey Research, video communications "increases the impact of information, improves the retention of complex concepts, and accelerates the distribution of new ideas and innovations." However, in order for the impact to reach all levels of enterprise users, administrators must build their own TCO and ROI models with their own assumptions. After analyzing capital costs, post-deployment costs, and the value of increased usage, businesses should find that new PC-based systems lower the TCO of video communications, making it an affordable tool which can then be leveraged as a competitive advantage for the company.

Dr. Shahadat Khan is director of research and development, and Angie Hirata is a marketing communications specialist at Eyeball Networks Inc. Eyeball Networks is a provider of interactive video communication solutions for narrowband, broadband, and wireless networks. Its award-winning solutions advance Internet applications such as on-line customer service, education, Web communities, games, and entertainment with interactive video communication. The core technology behind Eyeball's solutions is the Eyeball Media Delivery Technology, a dynamically adaptive media delivery technology, giving Internet users the best possible video quality based on available network bandwidth and processor power. This technology is showcased in Eyeball Chat LE, the free video chat software and service launched in October 2000 that enables real-time instant text messaging and video chat through a Web browser, a PC video camera, and a microphone.