In the last two months, Cisco Systems, Nortel, Tandberg and Polycom used their earnings reports to trumpet telepresence as a key growth factor in the coming quarters. Major systems integrators INX and Dimension Data did the same.
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If they've bet correctly, the technology that sends high-definition video over IP networks to provide life-sized video conferencing in high-tech conference rooms is apparently poised for mainstream acceptance.
But the number of truly immersive telepresence rooms that have been launched still remains in the low thousands. What's more, myriad problems could stall widespread uptake -- keeping telepresence accessible only to the Fortune 5,000.
First, there is a lack of industry-wide interoperability that prevents enterprise customers with disparate technologies from interacting. Then there is pricing -- fully immersive rooms from companies like Cisco, Hewlett-Packard (HP), Tandberg and Polycom can run between $200,000 and $400,000 depending on how many screens and endpoints are deployed. That's not to mention the monthly cost of bandwidth required for some systems -- that can run in the tens of thousands -- particularly for enterprise users that don't have their own wide area networks (WANs). Then many users pay thousands a month for managed services related to the room.
And while less expensive "personal" telepresence systems with smaller screens have been released -- one from Cisco and another from Teliris last week alone -- they are not the immersive, full-screen experience that defines telepresence. They do, however, weigh in far above traditional jerky, jittery videoconferencing. One analyst dubbed these smaller telepresence systems "video conferencing on steroids."
In the middle of it all, IT-oriented value-added resellers (VARs) have their own slew of problems. They are facing off against audio-visual (AV) shops that sell telepresence, as well as a brand of channel partners calling themselves conferencing systems integrators. That's in addition to telecom service providers with global networks that make a natural fit for capacity-hungry telepresence applications.
"There is a need for bandwidth, so telecommunications companies are natural, but the challenge that they have is they haven't had commercial success with videoconferencing," said Jeff Prestel, senior vice president of sales and marketing at Dayton, Ohio-based Wire One Communications, a Cisco channel partner that offers video conferencing and telepresence. He added that telecom providers and other channel partners have a difficult time architecting high-tech conference rooms with AV equipment and then maintaining them.
"There will be more attention from IBM and other large integrators, but they'll look to acquire that capability," Prestel said. Wire One was recently purchased by BT Conferencing.
Companies like Cisco that have systems implemented according to specific standards and are not necessarily customized can be easier to work with. Still partners are required to undergo a stringent certification process.
"Telepresence requires a commitment, but once organizations understand the power of collaboration, it will find its way," said Mike French, vice president of marketing for INX, a Houston-based Cisco partner that offers telepresence.
But the telepresence learning curve can be steep.
Providers have to build rooms with multiple high-definition cameras, special lighting, sound-dampening devices, microphones and speakers, matching furniture and usually three to six life-size, high-definition screens to facilitate six- to 12-person meetings. Each piece of equipment is architected meticulously so that eye level matches up from room to room and sound is positioned to link speakers to their voices. The immersive systems aim to make both sides of the room match environmentally in every way.
Behind that there are vendor proprietary platforms with codec devices that read and send video and audio signaling. In addition, an immersive telepresence room means users can walk in and have the meeting running without ever hitting a switch. That happens through a virtual network operation center (VNOC), which remotely manages the equipment and in some cases interplays with software to keep interactive scheduling and other applications for the meeting rooms. Partners generally manage those services, but in some instances, like with Polycom, they have the option of allowing the vendor to take over. That generally happens when partners are not prepared to find themselves as managed service providers (MSPs).
As for the network itself, if channel partners sell into a major Fortune 5,000, the customer is likely to have its own WAN, but in other situations, partners must either overlay a dedicated IP network by spinning a deal with a network operator, or resell network capacity patched together by the vendor.
"The one issue across the board for all vendors is that there is no global carrier," said IDC analyst Nora Freedman. There are affiliations between British Telecom (BT) and AT&T, she acknowledged. "You don't have something to take you from New York to Mumbai to London."
Most major vendors ended up patching together extensive networks.
"We have our own network utilizing multiple carriers," said Mack Treece, president of high-definition video pioneer Teliris, naming Global Crossing and Orange Business Services among them. "We also offer our customers the opportunity to use their own networks. About 90% of customers choose our network."
Interoperate or bust?
Cisco moved to ensure widespread network availability by partnering with AT&T to provide managed telepresence. In April the two companies said that the AT&T Telepresence Solution would combine Cisco's technology with AT&T's global IP network -- enabling varying companies on the network to interconnect. One big complaint about telepresence has been its inability to transcend company borders because of disparate networks and protocols. The partnership enables users to buy telepresence as a service from AT&T.
BT also joined the fray in early May, saying that it would employ Cisco's technology over its own network, enabling intercompany telepresence. The affiliation between AT&T and BT extends the global network extensively.
But those networks still don't connect users across different vendor technologies.
"In telecom, if I call a 10-digit number, I get you. The network is fully part of the application," said Gerald Tozin, CEO and founder of Vectus Media LLC, a Jersey City-based Telanetix partner. "Right now if you take a look, every player is concerned with building their own distinct footprint, but what happens when a partner wants to help clients talk to each other?" he asked.
When that happens, it may encourage vendors to get over using proprietary technology in their codecs with different protocols for signaling -- preventing interoperability and possibly mainstream uptake.
Its deal with AT&T and BT aside, Cisco is the biggest interoperability holdout. It continues to pursue its own technological solutions to the telepresence question, and at times that means it's ahead of standards.
"Standardization and innovation sometimes work against each other," said David Hsieh, senior director of marketing for Cisco. "Interoperability is the lowest common denominator."
Right now systems are evolving and "there is still tremendous innovation," Hsieh said. However, when systems become more mainstream and are implemented among 3,000 or 5,000 Cisco customers, there will be more pressure from customers to change, he added. Until then, customers are willing to "make the tradeoff."
Longtime video technology vendors like Polycom and Tandberg say they are not the problem. If systems are built on H.323 protocol or Session Initiation Protocol (SIP), they can interoperate. Both companies have done that. Rick Snyder, president of Tandberg Americas, said using H.323 enables the company to patch telepresence rooms together, but also to connect them to webcams or any other legacy video equipment if necessary.
"Telepresence shouldn't be an island, but part of a communications fabric," he said.
While HP's Halo system does not follow those standards, the company has worked with Tandberg on a gateway that would enable the systems to integrate with standards-based technology.
Choosing not to wait for industry-wide standards, Wire One Communications set out to create interoperability and intercompany telepresence communication on its own.
"There are two approaches: One is where you schedule a call and then you bridge those different customers like you do with audio," Prestel said. The second approach would be to use a session border controller to make differing signal streams interact on a secured network, he added.
Even if the protocols issue is solved, there remains the problem of telepresence rooms that are not interoperable in architecture. When "room geometry" is off and users don't make eye contact, or the sounds are not positioned correctly, it takes away the feeling of truly being in a live meeting, and that defeats the purpose of spending big bucks on high-end systems.
"If they are using two [screens] and we are using three, it is a very tough concept, and I don't see that being solved," said Rob Arnold, chief technology officer of Telanetix. Some companies are working to make rooms compatible by fitting two frames into one screen in order to make the number of screens match, but ultimately there will have to be more compliance on behalf of all vendors. Telanetix can design rooms in a number of ways and also works to make its telepresence interoperate with other kinds of video systems.
Telepresence pain pays off with profits
The good news for channel partners is that there are multiple revenue streams and strong margins involved in telepresence. Freedman predicts those margins can range from 30% to 50% if the partner is offering the full suite of services after implementation.
"Some of it is a leap of faith," Freedman said. "[Partners] make up for the margin by doing monitoring and setup." She added that they also make money from arranging the dedicated network and reselling what vendors call their "concierge service," which is the remote management.
Mario Macedo, director of product management for telepresence solutions at Polycom, breaks down channel partner revenue streams in four ways: implementation, ongoing maintenance, VNOC services and "professional services," including scheduling and other extra applications still being developed.
Making the sale
Though margins on telepresence solutions are good, selling into the enterprise isn't easy. Partners have to convince buyers of the return on investment (ROI).
Vendors take the reducing-travel approach. And they have a point. The ROI related to eliminating travel between widespread branch offices and unnecessary visits to corporate partners can be huge, especially for multinationals.
"It's more than just travel reduction, it's about protecting and driving revenue," said Hugh McCullen, the general manager of Nortel's telepresence and multimedia business. Nortel is a Polycom partner. When 90,000 out of 140,000 employees are traveling, businesses have to be sure they can continue business the next time there is a "pandemic," another "situation in the Middle East" or "a 9/11."
But that approach doesn't always fly in midsized enterprises, and certainly not in smaller companies that either don't have more than half a million dollars in travel annually or don't believe telepresence should replace travel.
So some vendors are purposely looking away from the boardroom and looking to prove how telepresence could improve everyday business functions.
"Instead of trying to create for and drive the boardroom, we … have been selling systems into real-world companies that are trying to get something done," said Telanetix's Arnold. Telanetix sells less expensive, fully immersive rooms for as little as $40,000 by using less expensive platforms that handle more streams of video and audio. It doesn't necessarily provide the same level of quality in the boardroom, but that's not always necessary for its applications.
One Telanetix customer sent a movie in the process of being edited between the editor on one coast and the producer on the other. Arnold watched as they simultaneously viewed the film "frame by frame" and decided whether to lay music. The group's attorney also attended the virtual meeting, advising them on which scoring could be used. That application didn't require a perfectly constructed matching boardroom, only excellent video quality.
Ultimately, even fully immersive telepresence will have to move to masses of companies and executives or the saturation point will arrive too soon. All of the leading telepresence vendors have released differing levels of telepresence offerings. Beyond the personal options, which can be set up in an employee's office, there are midlevel rooms that enable clients to turn on their own sessions and not receive "the white glove treatment," or in which they can still receive services, but have smaller and fewer screens with less advanced lighting. Those systems run from $80,000 to $140,000.
According to Ken Scaturro, senior vice president of global sales and business development at York Telecom, telepresence will become more affordable "as the cost of bandwidth comes down." At that point it will become more accessible and widely accepted. York Telecom is a solution provider that partners with Tandberg and Polycom among others.
For now Scaturro looks to selling into the larger companies. But, he said, if telepresence isn't driven down to the "rank and file," the adoption rate will eventually slow.