Telepresence is still a small part of the market, but its high margins continue to excite service providers and suppliers, which at the same time are going down market to bring more customers into the fold. Meanwhile, more organizations seem to be seeing the appeal of videoconferencing – including telepresence – solutions, which can help them save on travel costs and carbon emissions while enabling collaboration that can mean faster time-to-market for their products and offer a nice back-up plan in case someone can’t physically make it to a business meeting.
A Rising Tide
Sales of telepresence hardware, software and services grew to $567 million in 2009, according to ABI Research.
Steve Vonder Haar, research Director and founder of Interactive Media Strategies (News - Alert) and a TMCnet contributor, says despite the dampening effects of the recession during the past 18 months, spending on business video equipment and services expanded at a 15 percent rate in 2009, reaching $531 million for the year.
“Based on results from a survey of more than 1,000 corporate executives and on-going anecdotal evidence collected in on-going interviews with industry vendors and corporate end users familiar with the enterprise video market, Interactive Media Strategies projects that growth rates for online video technologies in the corporate sector will rebound in 2010,” Vonder Haar explains. “This year, the market for online business video tools and services will reach $657 million – an increase of 24 percent over 2009 spending levels.”
Frost & Sullivan last year forecast that the telepresence and videoconferencing market would reach $4.7 billion by 2014. The firm unveiled a study this year saying the global market for telepresence, more specifically, last year was $396.2 million and that it is expected to reach $825.9 million in 2015.
“The effectiveness of the latest technologies and the impact of the global economic downturn are impelling businesses to re-assess visual collaboration such as video telephony, videoconferencing and telepresence as viable solutions to facilitate reduced operations costs,” says Frost & Sullivan Principle Analyst Dominic Dodd.
Michael Burrell, senior manager of unified communications and collaboration at Orange Business, says that telepresence recently has gone from a niche technology to “being front and center”.
“When Cisco introduced its telepresence product in the fourth quarter of 2006, it totally changed the market, and the rising tide lifts all boats,” says Burrell, adding that has spread awareness about video overall, whether room- or desktop-based, super high-end or otherwise.
“Really, telepresence has kicked off a video renaissance in the last two years,” he continues. “It’s still a small part of the market; 6,000 rooms have been sold to date, compared to last year in the video market in which there were 240,000 endpoints sold.”
But, he adds, the revenue opportunity per telepresence solution is much larger than for a standard room-based videoconferencing system. Burrell estimates the price tag (News - Alert) of a telepresence solution is about nine to 10 times that of a stand-alone, room-based system.
“A telepresence solution involves a whole room redesign because you’re building an immersive experience – it’s not only about the ultra high quality or high-definition screens and video codecs and CD-like audio, but you’re also paying attention to lighting, the acoustics for sound, furniture, even down to the paint on the wall – to, in a sense, create the visual image that you’re in the same room as the other people that you’re meeting with even though you’re separated by distance,” Burrell explains.
He says a full-blown, three-screen telepresence experience costs in the neighborhood of $200,000 per room. By comparison, he adds, dropping an HD videoconferencing unit into a multipurpose room tends to be more in the $20,000 to $30,000 range.
"Up until the last few years, videoconferencing was done at video resolutions less than standard definition television,” says Bob Romano (News - Alert), vice president of enterprise marketing at RADVISION, which in May launched a new HD videoconferencing room system called SCOPIA XT1000, the first development based on RADVISION's recent acquisition of Aethra endpoint technology. “This provided a less than high-quality experience, with fuzzy images, when the whole point of videoconferencing was to be able to see the reactions and expressions of the people in the room on the other end. With the advent of HD videoconferencing, it was suddenly possible to really see the other participants. The extreme example of that is telepresence, where the remote participants appear to be sitting at the same table and are displayed life size. But even with meeting room videoconferencing systems, HD dramatically improves the experience. Not only does the higher resolution image make the remote participants clearer, but the widescreen format allows more of the conference room to be visible. "Customers have responded to HD,” adds Romano. “The growth rates in videoconferencing sales and deployments has increased in the last several years after being fairly stagnant for many years."
Video for All
Orange Business offers customers a service called Telepresence Connection, supported by MPLS IP VPN technology that prioritizes telepresence traffic in the event of network congestion, to provide connectivity. It delivers 5mbps per screen and 30 or 60 frames per second. The company also has a light version of the service, which offers 2mbps connectivity with still very good quality video, to enable businesses to extend video to remote locations even in far-flung locations such as Africa or offshore.
This is just one example of how companies are trying to make telepresence, and videoconferencing in general, accessible to more users and locations.
“Nearly any size company has access to telepresence and videoconferencing services,” says David Lemelin, director of the enterprise communications research service at ABI Research, which recently released its Enterprise Telepresence and Video Conferencing study. “Suppliers are helping businesses transition to telepresence by introducing personal and room-based HD videoconferencing solutions.”
For example, Vu Telepresence offers Vu Telepresence Pro, which focuses on the home-based business market. Meanwhile, TANDBERG (now part of Cisco) has launched a new personal telepresence solution that extends the TANDBERG Telepresence in-person experience to individuals at their desks or home offices.
Called the EX90, this new TANDBERG solution is designed for executive users and offers full 1080p30 resolution to any standards-based video or telepresence system. It offers the MultiSite feature that allows executives to add two other participants to any call.
“Telepresence isn’t just about the room set up or number of screens,” says Dodd of Frost & Sullivan. “It’s about the ability to reproduce the valued characteristics of a face-to-face meeting or other similar form of direct human interaction. The EX90 does this by bringing the high-quality, natural experience of TANDBERG Telepresence to the desktop in a very attractive solution that makes communicating with other video and telepresence users simple. It also incorporates familiar business collaboration tools and features to streamline the overall experience and help drive efficiencies.”
Dovetailing with the ABI analyst’s comments above, Burrell of Orange Business adds that video is expected to proliferate throughout organizations as various videoconferencing units and services become more affordable and, thus, more widespread. He mentions that Samsung recently unveiled a desktop video unit that sells for list price of $2,000.
“You throw a little discounting behind that, and it’s a no-brainer to justify it for anybody,” he says, adding an organization would just have to save one international trip or a couple U.S. trips to justify that cost.
Lemelin of ABI Research adds that telepresence room rentals also are on the rise.
Indeed, Burrell also talked about the idea of offering “telepresence as a service,” to enable customers to forego the capital expense of creating telepresence rooms.
“We have a pilot in that regard,” he says.
Vonder Haar of Interactive Media Strategies says nearly $379 million will be spent on on-premises video technologies this year. Meanwhile, the event services sector, for which vendors handle the creation and distribution of business Webcasts on a turnkey basis on behalf of corporate clients, will generate $118 million in revenues in 2010 with revenues for hosted software solutions expected to top $100 million for the first time, he adds.
“From now through 2014, spending on hosted solutions are expected to grow faster than any other sector of the business video market,” according to Vonder Haar. “By the end of the forecast period, annual revenues for these hosted ‘software-as-a-service’ offerings are projected to top a half-billion dollars annually.”
Finding the Savings
Travel cost savings are a key force driving the adoption of telepresence and videoconferencing, according to many sources.
“A virtual meeting is a substitute for travel. The business case is very clear. We can tell a customer, by looking at their travel expense over the last 12 months, exactly what the ROI is. So you have the economic factor,” says Burrell of Orange Business, which unveiled its telepresence offer two years ago in May and now delivers such solutions based on Cisco, TANDBERG (now part of Cisco) as well as Polycom technology.
Not only is videoconferencing (whether telepresence or not) a good way to avoid travel upfront, it’s also a nice fallback strategy in case employees can’t make it to an important meeting or other event. For example, several sources mentioned how many business travelers’ itineraries were interrupted recently by the volcano in Iceland, which led to the cancellation of about 100,000 flights and left something like 10 million people stranded.
Of course, other natural disasters, public health-related issues and security concerns also have recently impacted people’s ability to travel easily and without worry, and may have had something of a chilling effect on travel.
Still, there are some who warn that videoconferencing should not be a replacement for business travel, but rather a complement to it.
“One of the biggest motivators for businesses to implement a corporate-wide telepresence solution has always been and still remains cost reduction in business travel expenses,” says Bob Duggan, B2B Computer Product’s director of sales for its telephony division. “It’s important to understand that this technology will never and should never replace face-to-face meetings with staff and/or clientele. Rather it should be used to provide advanced and or enhanced meeting experiences in between the visits that actually require traveling.
“In most cases within the upper echelon of SMB clients, there is a very fast and considerable return on investment for adapting this technology,” he adds.
In addition to potential travel savings, business video also can help organizations hold down their carbon footprints. That’s particularly meaningful for some European businesses, which are required by law to cap their carbon emissions.
In fact, Orange Business offers its customers a tool that nets out carbon emissions they save by using telepresence.
“This solution will … significantly lower carbon emissions,” says Bas Burger, CEO of BT Benelux. “It is a good example of where sustainability and cost-savings go hand-in-hand. We at BT understand that sustainability.”
Burger noted that point in discussing BT’s recent telepresence win with Tommy Hilfiger.
The designer apparel brand has signed a five-year managed services contract with BT for a videoconferencing solution it jointly developed with TANDBERG.
The contract includes two TANDBERG Telepresence T3 systems, in Amsterdam and New York; a Telepresence T1 system in Tokyo; three virtual fitting rooms, based on the Telepresence T1, in Amsterdam, New York and Hong Kong; desktop units, supporting infrastructure (such as recording facilities) and software. BT also brings to the table its managed services, which include always-available help desk support, automated call scheduling and call launching, on-site maintenance, monitoring and remote diagnostics.
As noted, this deployment involves something that the companies call the virtual fitting room, which leverage BT’s Unified Communications Video solution coupled with Cisco’s TANDBERG technology. The virtual fitting rooms have add-ons such as mobile cameras and recording facilities to enable the design team – based in Amsterdam and New York – to collaborate faster and more effectively with the manufacturing team in Hong Kong. That will enable the teams to discuss the development of every single piece of the collection face-to-face without having to take long-distance flights, according to Tommy Hilfiger.
“Tommy Hilfiger has always been a trend setter, now further illustrated by their innovative approach to virtual design and collaboration,” says Fredrik Halvorsen (News - Alert), senior vice president of the TelePresence Technology Group at Cisco. “Like many other leading companies, Tommy Hilfiger has recognized that high-quality telepresence can make their processes faster and more effective, delivering a distinct competitive advantage.”
Indeed, Burrell of Orange Business adds that telepresence can enable companies in a wide variety of verticals to accelerate their development cycles and get their products to market faster.
This virtual fitting room already sounds pretty futuristic, but it’s already here today.
So what’s next for telepresence?
Well, one of the things is interoperability, not just among users within an organization, but also among users at different companies and with different vendors’ telepresence systems.
Frost & Sullivan in a report last year noted that for telepresence to realize its full potential, customers that use such high-end videoconferencing systems will need to be able to talk to each other no matter what telepresence solution they use.
And Orange Business in May was expected to launch a test with an eye toward enabling just that.
Burrell says Orange Business and another global service provider already have successfully tested interconnecting their telepresence services. Starting in May, he adds, Orange is going to bring in one of its telepresence customers that wants to hold a telepresence with a partner that’s on another telepresence solution.
“It gets back to Metcalfe’s Law – the value of the network is driven exponentially by the number of endpoints that are attached to it,” Burrell says. “The more people you can telepresence with, the greater the value of that service.”
Indeed. Telepresence is just one of the many examples of this.
We’ve also recently seen a lot of action by carrier-class Ethernet service providers to enable interconnection among different providers’ Ethernet services. CENX and Equinix are a couple of examples of organizations offering carrier Ethernet exchanges.
Of course, this follows a long history of exchanges, which started with the early days of telephone systems, expanded to consortiums among cellular operators to enable roaming, and included to the formation of the MAEs and other Internet connection points for the Internet.
However, it should be noted that the Orange example is not an exchange, but rather a test involving select service providers. But, Burrell says, over time as telepresence becomes more widespread and the market matures, service providers that offer this kind of thing may expand beyond one-to-one interconnection negotiations and instead establish an exchange in which all comers can interconnect and do settlements.
Edited by Stefania Viscusi