Catching their breath - IS managers waiting for standards before implementing videoconferencing - Technology Information

Software Magazine, Oct, 1997 by Lawrence J. Curran

Prospective users are digesting a proliferation of standards and networking options. Wait until next year.

Look out, they're back. Remember in the mid-1980s when an aggressive horde of market researchers, product managers, and other business people demanded personal computers? When your IS manager balked at authorizing an invasion of non-standard machines and software, the users went out and bought the equipment on their own, creating a technological nightmare that some organizations are still trying to resolve.

A similar scenario is beginning again. This time, though, the horde wants videoconferencing capabilities. The ability to conduct face-to-face meetings using PCs, digital cameras and microphones connected via high-speed data circuits has captured the fancy of business managers trying to speed decision making without having to waste time and money traveling. Furthermore, as telecommuting and the virtual organization become more prevalent in industry, gathering the team for a meeting requires more than a conference room and a table with coffee and muffins.

Nevertheless, IS managers say they are resisting the purchase of lower-cost videoconferencing gear. A proliferation of confusing videoconferencing standards, incompatible equipment and interminable delays in getting high-speed communications services deter many IS managers from authorizing purchase of the devices. Most videoconferencing systems depend on circuits using the Integrated Services Digital Network (ISDN) protocol, which is expensive and notoriously difficult to install.

"We've been holding off the masses" from buying additional videoconferencing equipment until prices come down further and some of the confusion about standards and networking options are resolved, says Glenn Miller, director of worldwide video and satellite communications at the Kalamazoo, Mich., offices of Pharmacia & Upjohn Inc., the Windsor, U.K.-based pharmaceuticals company, where videoconferencing is an established tool.

Miller's view is shared by managers elsewhere, including some at videoconferencing system vendor companies. They're aware of the benefits of videoconterencing, but would like to see some clear directions emerge from the confusion before they approve more equipment purchases. Currently, videoconferencing gear for conference rooms costs at least $45,000, while the systems mounted on a cart and rolled from room to room are priced at around $24,000.

The confusion stems from the emergence of a new class of "workgroup" systems that cost around $10,000; questions about interoperability of different classes of equipment; and uncertainty about how readily new International Telecommunications Union standards will catch on. H.323 is a new standard that supports videoconferencing over local area networks. It joins more established standards -- H.320, which facilitates videoconferencing on ISDN lines, and H.324, for videoconferencing over standard telephone lines. And there's a subset of the H.320 standard, T.120, for cable modems.

As a result of the confusion, and IS managers' reluctance to authorize purchases during these uncertain times, sales of group videoconferencing equipment are flat this year compared to 1996, and are not expected to grow that much over the next several years. Nevertheless, sales of low-end systems and peripherals that attach to existing desktop PCs are exploding. Forward Concepts Inc., a consulting firm in Tempe, Ariz., that closely follows the market, predicts 119% compound annual growth rate of unit shipments of systems priced at $10,000 and below. The desktop PC add-in business is booming, too, as individuals circumvent IS restrictions and hesitancy and buy their own cameras, circuit boards and microphones. These components are available for less than $2,000.

Clarification of the standards issues, growing numbers of high-speed data circuits, and falling prices will help propel the worldwide videoconferencing equipment industry. It will grow at an annualized rate of 40% from $1 billion last year to more than $5 billion by 2001, according to Forward Concepts. This year, vendors of the big systems have been rocked by IT managers' unwillingness to buy their wares.

Video Stream, Revenue Stream

PictureTel Corp., the industry leader with roughly half of the overall videoconferencing market, reported Q1/97 net income dropped 59% compared to the prior year's first quarter, to $3.1 million, on revenue of $118.2 million. The company said the earnings drop-off stemmed from lower than expected volume in low-end unit sales, and a change in the mix of systems sales -- more customers opted for PictureTel's $8,995 SwiftSite system instead of the firm's higher-priced group systems.

"The industry is taking a breath because there have been so many new things coming on stream in the last couple of years," especially in standards and networking possibilities, explains Peter Masucci, vice president of PictureTel's industry business unit in Andover, Mass.

IS staffers say that the confusion over new standards and lower-priced products is exacerbated by inflated vendor claims. "There is certainly confusion about standards. A vendor may say his product is compatible with a standard when not all elements of the standard have been approved," says Harold Stocker, senior engineer for technology integration at Cinergy Corp., a gas and electric utility with facilities in Plainfield, Ind., and Cincinnati. "Vendors sometimes imply that their products will be compatible with anything coming along." Stocker, who works at the Plainfield site, says Cinergy uses videoconferencing systems from VTEL Corp. to cut down on travel for the frequent meetings involving staffers from both locations, which are more than two hours apart by car.