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September 11, 2011 4:59 pm
If you can’t beat them, join them, goes the adage. The fact that Sabre, one of the world’s largest travel companies, recently started offering video conferencing as an alternative to flight bookings says a great deal about how much the use of telepresence has grown over the past few years.
A few years ago, the high-end telepresence room, equipped with cameras and big screens, was still something of a chief executive’s toy – a status symbol to sit alongside the corporate jet.
Many of the systems were not bought on the basis of a return on investment calculation, but on a boss’s whim.
“It was often the case that the chief executive had experienced it somewhere and just decided he wanted to install it – a bit like iPads for grown-ups,” says Scott Morrison, analyst at Gartner.
For almost everyone involved, video conferencing was a jerky experience on a small screen that was widely dismissed as unreliable and unsatisfactory. The past few years, however, has seen the technology advance in a way that means users are finally able to experience the possibilities.
“We are in the middle of a fairly major transition,” says O.J. Winge, senior vice-president of the telepresence business at Cisco Systems, one of the leading players in the sector.
“Five years ago, telepresence was in a couple of boardrooms,” he says. “Now we have thousands of systems installed, and people are really starting to build their business models around this technology.
“We have full high-definition video calls, and interoperability all the way from a screen on an iPad to the big screen in a boardroom, and even between the systems of different vendors.”
Interoperability has been one of the key recent developments.
“Even last year, a Cisco-Polycom call would not have worked,” says Andrew Miller, chief executive of Polycom, the Nasdaq-listed telepresence group. “Video conferencing is at an inflection point with broadband, cloud computing, mobility and interoperability all pushing growth.”
The ability to connect calls between different systems was a crucial point at which the mobile phone industry began to take off in the 1990s, and this could be a similar moment for video calls.
Cutbacks on business travel due to the recession, the grounding of flights by last year’s Icelandic ash cloud and the global outbreak of severe acute respiratory syndrome are just some of the explanations for higher video-conferencing sales in recent years. Yet even as business travel has bounced back in 2011, telepresence sales have continued to rise.
According to the likes of Cisco and Polycom, growth rates in the sector are close to 30 per cent a year. John Chambers, chief executive of Cisco, has said that video conferencing is one of the three key growth areas for the business, while Ovum, the research group, has predicted the global video-conferencing market will be worth $3.8bn by 2016 – making it one of the fastest-growing segments in the technology sector.
There is, however, still some way to go on interconnection. Technological wizardry can link the systems – sometimes with complexity – but definitive agreements on how different telecoms networks should handle video calls and bill each other for them have yet to be reached.
In a typical technology-standards stand-off, Cisco and Polycom are both pushing their own consortiums. Cisco operates an exchange system with BT, AT&T and Tata Communications, while Polycom has set up the open visual communications consortium, which includes Airtel, AT&T, BT and Cable & Wireless.
Corporate video-conferencing systems offered by companies such as Cisco and Polycom are also not easy to connect with Skype, the internet video conferencing service now owned by Microsoft.
“The problem is, who can you call on these video-conferencing systems?” says Mr Morrison at Gartner. “There are only a couple of million people connected and they are not on any directory. Compare this with Skype, which has more than 150m registered users who are easy to search for.”
He estimates that about 95 per cent of video-conferencing calls are still between people at the same company. But gradually it is starting to be used for calls with clients and suppliers.
Indeed, he believes a cultural shift is taking place. “Video is still at the social-stigma stage. Doing video calls from a desk at work is still not so common and people can feel strange sitting there in an open office whispering at a screen. But this is changing – in the same way that now people think nothing of taking a mobile phone call in public.”
Big banks, including HSBC, have thousands of video-conferencing systems installed in their offices. The technology is also starting to be a standard requirement on places such as oil rigs, which are hard to reach physically.
“Maintenance decisions on rigs used to take two months, but now it can take less than a week because you no longer have to fly an expert in on a helicopter,” says Cisco’s Mr Winge.
Companies are also making more use of the telepresence assets they have installed. Three of four years ago, the system might have been used for just 45 minutes a day. Now it is more likely booked solidly for 4-5 hours.
“Telepresence has moved from being about travel savings to being about productivity,” says Mr Miller. “The cost of an executive’s time in an aeroplane means [that with telepresence] you are getting productivity at the push of a button.”
A number of deals in the sector over the past few years show companies are also willing to stake big money on the technology. Logitech acquired LifeSize for $405m in cash in 2009, while Cisco paid $3.4bn for Tandberg of Norway. Most recently, Polycom bought Hewlett-Packard’s telepresence business for $89m.
Indeed, many believe telepresence can one day be used far beyond corporate board meetings, such as for home tutoring or consulting doctors.
In South Korea, a new “technology city” being built in Songdo will have video conferencing built into every apartment, with the idea that residents would use this for all kinds of interactions, from education to dealing with government departments.
“The internet changed the way we do commerce, but it didn’t really revolutionise service delivery,” says Mr Winge. “Telepresence might be able to do that.”
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