Videoconference Vendors Revamp As Buyer Interest Rises

<B>Videoconference Vendors Revamp As Buyer Interest Rises</B>

By Chris Davis

Good news for the videoconferencing industry hasn't been in abundance during the past few years, but the mandate to cut meetings travel that many companies have instituted has led some buyers to reconsider the technology anew. The industry, though, is undergoing tremendous changes, with two of its largest companies merging and a third splitting in two.

Polycom Inc. of Milpitas, Calif., in late May announced its intention to purchase Andover, Mass.-based PictureTel Corp. for about $362 million. The deal is expected to receive final shareholder approval and close this month.

"The merger will help to grow the industry," said Ann Earon, president of Skillman, N.J., videoconferencing consultancy Telemanagement Resources International Inc. "With Polycom able to sell appliances and PictureTel platforms, it becomes more of a one-stop shop."

"There's a number of synergies with platforms and solutions between Polycom and PictureTel," said Jennifer Sigmund, director of product marketing for group video at Polycom. Since the acquisition at presstime had not yet been approved by stockholders of the two public companies, Sigmund said they remain competitors.

The videoconferencing industry's other shoe dropped last month when the former Vtel Corp. of Austin, Texas, split into two companies.

One, holding the Vtel name, will focus on selling videoconferencing hardware and products, and the second, called Forgent Corp., intends to create services and solutions that can function across Vtel hardware, as well as those of Polycom and PictureTel.

The new company plans to release its first products before year-end, enabling corporations to have more centralized monitoring and control capabilities over their videoconferencing systems, said Forgent vice president of marketing Bob Seidel.

But beyond the acquisition and the split, the videoconferencing industry is attracting renewed interest from cost-cutting corporations, Sigmund said. For years, videoconferencers insisted that the goal was not to cut meetings but to increase the productive use of time. That, however has changed.

"Customers used to look to us to help maximize productivity," Sigmund said. "But over the past six months, with the market softening and the cutbacks, our customers have looked to videoconferencing as an alternative to travel. The economy was the catalyst."

Sigmund also said the problems that have plagued many videoconferencing systems, including high cost, poor visual quality, difficulty of use and the need for extensive technological alterations, largely have been eradicated as technology improves. "Three or four years ago, there was a perception that this was expensive and had poor quality," Sigmund said. "But costs have decreased and corporations' capabilities have increased, so it's not a big deal to open up business-quality video over broadband."

The integration of IP services, Sigmund said, is not the province of the future. "It's not down the road. It's implemented now," she said.

"Corporations are taking a closer look at videoconferencing for travel reductions and also to increase productivity, better communication and get their products to the market faster," Earon said. "Long-term videoconferencing users are using it even more, and new users are coming online. It's somewhat the same pattern as in the Gulf War--with the economy as the reasoning this time, instead of threats of terrorism--when people didn't travel anywhere."

But the future of videoconferencing lies in the Internet, Earon said. In a study of 50 large corporations conducted by TRI, 90 percent of respondents indicated interest in implementing video over Internet, or IP, networks, the growth of which has been the industry's lasting hope (Meetings Today, April 24, 2000). Of those interested, 30 percent said they are doing so already and 24 percent said they expected to do so within 12 months.

"The quality bandwidth needed is not yet there, but it is certainly moving in that direction," Earon said. In fact, 44 percent of TRI's responses pointed to bandwidth or infrastructures as roadblocks to IP video implementation, with an additional 20 percent pointing to insufficient service quality. "When videoconferencing really started, it could only be done over T-1 lines," Earon said. "Now there's satellite, ISDN, fiber-optic lines and the Internet. It's very healthy for the industry."

Seidel acknowledged that despite the current cost-containment breeze blowing through corporate meeting programs, videoconferencing still needs to overcome its past. "We see the changes in the corporate meeting industry, but it's been promised that this would be a big business for them and it's not," Seidel said. "It's come down to a few major handicaps, but now we can get into IP, with corporate information services departments comfortable with it, and develop the services to support it."

Many corporate meeting buyers, though, are exploring Webconferencing capabilities and their providers, notably Placeware and WebEx. While the Webconferencers do not support streamed, live video, they do permit still slides or PowerPoint presentations to be displayed to unlimited users simultaneously.

"More and more companies are replacing some meetings with Webconferencing," said Mountain View, Calif.-based Placeware spokeswoman Kathryn Romley. "It's not possible to completely cut meetings travel, but this year there's been more accountability for the cost of meetings and they are starting to be measured more. We're seeing Webconferencing evolve into a new communication medium, and a solution to rising travel costs because there can be instant deployment across the entire organization."

Webconferencing, though, has not yet grown enough to play a significant role in the travel and meeting programs of most large corporations. Instead, most Webconferencers are staged by individuals in marketing, human resources or human resources without the involvement of corporate meeting planners or travel managers. Romley predicted this will change by year-end, with travel managers further involving themselves in the Webconferencing process, due to pressure to reduce bottom-line costs.

The recent turnover in the videoconferencing industry, in Romley's eyes, validates the models of Placeware and its Webconferencing competitors. "Videoconferencing is losing traction," she said. "We're ahead of videoconferencing simply because Webconferencing works. You don't need super-expensive equipment and it's light on bandwidth."

Not surprisingly, Polycom's Sigmund begged to differ. "We look at Webconferencing as a market expander, but people will still miss the real-time video component. There are times when basic telephone audio and slides will do, but there's no real interaction or communication without the missing video component.