Telepresence industry to pass $1 billion in 2013

Frost & Sullivan predicts that the nascent telepresence industry will reach $1.4 billion by 2013.

Experts say that telepresence is poised to emerge as a billion-dollar industry.

Market research firm Frost & Sullivan is predicting that the industry will grow by 850% worldwide over the next five years, from $145 million in 2007 to $1.4 billion in 2013.

Telepresence is a combination of very high quality audio and videoconferencing technology integrated with management services and especially designed physical environments to create a simulation of in-person meetings. In high-end installations, users can book a telepresence meeting in Microsoft Outlook or Lotus Notes. Then they can walk into a telepresence room at the appointed time, and the meeting will be up and running without any need to dial in or turn on cameras.

It is that tight integration of telepresence technology and services that has analysts optimistic about this newest form of video-based communication, according to Dominic Dodd, Frost & Sullivan's senior industry analyst and program manager for conferencing and collaboration in Europe. Dodd said the service elements of telepresence produce an "immersive experience" that creates an illusion of being in the same room with someone hundreds or thousands of miles away. The lack of this immersive experience has always held back traditional videoconferencing, he said.

"Whereas in videoconferencing, there is a steadily increasing quality of the technology, such as high-definition video and audio, telepresence has this capability that is provided by the service elements, to offer a very immersive experience," he said. "What that means is all aspects of the technology and service -- not only ongoing support given to users but aspects of the design, the integration, and the initial design of a room environment. All of those are brought together to create almost an illusion that you are in the same room as someone else."

Breathless optimism around video-based communication is nothing new; but Dodd says this time it's different.

"Videoconferencing went through a patch of hype in the early 1990s," Dodd said. "The hype crested in the late 1990s, and then there was a period from the late 1990s to 2006 where it was pretty much in the doldrums. It had a reputation -- in some instances a deserved reputation -- for being a technology that sat gathering dust in meeting rooms. It was pushed out of the way for normal meetings."

Videoconferencing was traditionally held back by sound quality, Dodd said. Even with very high quality audio, the ear was still missing some information. That lost sound was sometimes noticeable only on a subliminal level. But if a videoconference user was talking to someone with a heavy accent, the sound quality forced that user to work harder to understand the other person. Users complained that being in a videoconference required a high level of concentration that proved exhausting.

"What this means, with very high quality audio, and room designs where acoustics are optimized … it means that you can work in that environment for many hours at a time and you don't get the fatigue factor that you get with an ordinary conference call, where you find it difficult to have a prolonged discussion with lots of focused discussion over many hours," Dodd said.

Frost & Sullivan's projections are in line with the hopes of some of the leading vendors of the technology.

"Telepresence is one of our flagship emerging technologies," said David Hsieh, senior director of marketing for emerging technology at Cisco Systems. "Emerging technologies are internal startups that we do within Cisco that we believe can grow to be a billion-dollar revenue opportunity for us over the next five or six years."

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Hsieh said Cisco has 117 telepresence rooms globally within the company, and employees have held more than 70,000 meetings with the technology. He said each telepresence room in the company gets about four to five hours of use per day, which is a giant leap over traditional videoconferencing use.

"For most companies that have videoconferencing, they're using it less than an hour a day," he said.

Dodd said adoption of the technology so far has been strongest in multinational companies, given how expensive travel tends to be. He said all industries are adopting the technology, although key vertical adopters have been the financial and pharmaceutical industries, as well as high-end commercial education companies.

He is bullish on adoption because of the success early users of the technology have had. The initial costs of telepresence can be high -- up to $300,000 for a single telepresence room, plus ongoing service charges. But the savings on travel costs with high utilization are promising. Cisco, for instance, says it has cut its travel budget by 20% using telepresence internally.

"They're getting very high utilization [of telepresence], which means the investment period is coming down significantly," Dodd said. "I was talking to one company in Finland last week and they had an experience, albeit in the first few months of use, where they were seeing 100 hours of use per month. That means that the actual [amortization of the investment] was going to [take] less than 12 months if they carried on at that rate. In talking to a number of customers, we found they were getting high utilization not only for the purpose [for which] the application was bought, which is quite often for executive-level communications. They were pushing utilization throughout the organization."

Dodd said there is a wide range of prices for the technology, with low-end installations costing about $60,000 and high-end installations reaching $300,000.

"But clearly you get what you pay for," he said. "In between those numbers is probably a point where you truly get the immersive capability. Some of the lower-cost products that are saying they're telepresence … don't necessarily contain all the features that we would describe as service features that differentiate telepresence from videoconferencing. There's a blurred line down in the $60,000-mark per system where you're getting high-end videoconferencing blurring with bottom-end telepresence."

This blurring at the bottom of the market will actually spur strong growth in the telepresence industry, Dodd said. Service providers and system integrators will start to pick up high-end videoconferencing technology and package services with it, he said, in order to create affordable telepresence-like products.

Hsieh said he has seen videoconferencing vendors trying to upgrade their offerings with high-definition media and larger screens to compete with telepresence technology. But videoconferencing remains a technology-driven experience, whereas telepresence is aimed at creating a meeting room simulation in which the technology almost seems invisible.

"You can put wings on a pig and call it a bird," Hsieh said. "But it still won't fly."

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