The Conference Room Revolution

Written By Brian Hicks

Posted November 29, 2006

For years now, in conference rooms all across the country, the video teleconference has been wanting. The equipment was clunky and complicated. The video was jerky and in reality the entire setup was more of a distraction than a useful tool to conduct business at a distance. As a result, the original conferencing equipment has since not only been gathering dust, but has been relegated to the closet of bad ideas.

But like any new technology to hit the scene, later versions are not just simply better but wildly improved. In fact, they are so much better that in practice they bear very little resemblance to their original forms.

This is the reason why, after so many false starts, the industry finally seems to be on the brink of growing revenues. In fact, after years of uneven results it has now seen double-digit growth over the last three years.

Performance like this has prompted action from tech heavyweight Cisco Systems (CSCO: NASDAQ).

This October the net giant unveiled its answer to the videoconferencing upswing, introducing the "Cisco Telepresence Meeting." It’s an all-encompassing package with a new level of video quality so lifelike that its participants actually feel as though they are all sitting in the same room, though they maybe thousands of miles apart.

It is, in short, a videoconferencing experience that approaches the industry’s hopes of the Holy Grail-a conferencing experience that is actually little different from meeting in person. One industry analyst has even said it is like the difference between riding a bicycle and driving a Ferrari.

All of this marks the beginning of a new (but long-awaited) era in the industry, one that Cisco CEO John Chambers can’t seem to stop talking about. "Video communications is the most effective way to communicate there is," Chambers has said.

Studies have backed up this claim. Roughly 60% of our communication is nonverbal. Those raised eyebrows and slumped shoulders, the company says, make a difference-and its "as if you where there" technology brings it all home.

As you might expect, this transformational system hardly comes cheap. At around $300,000 per room and installation, the price of deployment involves some seriously deep pockets. But that would allow meetings of twelve or more people around a virtual conference table.

On top of that, the system is so bandwidth-intensive it requires a 10-gigabits-per-second connection that itself carries a monthly charge of $5,000.

Despite these seemingly exorbitant prices, however, it is a product with a market that is reachable. In fact, Chambers expects the market for videoconferencing to add $1 billion to the company’s revenues over the next five years.

Cisco will begin the rollout of the system in Q2 2007 and expects to have it installed in all of its 110 offices worldwide by July.

While Cisco has built the Ferrari of the videoconferencing world, Polycom Inc. (PLCM:NASDAQ) leads the industry overall with its more economical versions. Unlike Cisco, they target small and midsized companies rather than massive corporations. Their products cost "only" tens of thousands of dollars, allowing them to reach a wider audience.

This business is certainly nothing new to Polycom. They have been involved in it since its inception. From those early days of the technology the company has now emerged with the type of innovative improvements that could one day make videoconferencing as common as the fax.

That’s because, after spending years investing in research and development to make their products higher in quality and easier to use, the company has created a desktop version that’s moved the conference out of the conference room itself.

Company officials say that it is as easy to use as the phone. And industry analysts agree. Speaking of Polycom, Troy Jensen, an analyst at Piper Jaffray, says, "They just have some of the best videoconferencing technology on the market."

So while Cisco goes after the higher-end market, Polycom should see its revenues increase as these mature technologies drive home to the market that the day of the videoconference has finally arrived.

Regardless of which end the market chooses, this much is for sure-the rationale for its use is as strong as ever. Companies with multiple locations need ways for their employees to collaborate that are both easy and efficient. And every company now needs a Plan B to avoid the business disruptions that could be caused by disaster or terrorism and the subsequent interruption of air travel. Not to mention a way to beat the increasing costs of bring everyone together.

The rationale for videoconferencing is as strong as ever, and the new technologies that are starting to hit the marketplace may make it more of a reality.

Those closets full of old, dusty video equipment are about to go up for sale on eBay. Innovation has assured it.

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