Video Communications: Options & Opportunities for the Channel

By Doug Allen

If youre fascinated by the potential of high-end video conferencing and telepresence but arent quite sure what it is exactly, youre not alone. Thats not stopping the runaway predictions for future growth, though; ABI Research pegs the telepresence global market at $568 million last year and $2.7 billion by 2015. Other estimates go higher, as integration with unified communications platforms and the extension of video to laptops and smartphones drives what continues to be one of the few markets to be unaffected by the recession.

And video conferencing is not just about saving on travel costs anymore. Businesses are using video to cut down on executive travel-induced wear-and-tear, so they can better focus on job efficiency, while also reducing their carbon footprint. Video enhances daily remote collaboration, which can be instrumental in bringing together geographically dispersed teams in research and development, especially in industries such as pharmaceuticals, aerospace and electronics.

Its a technology thats maturing quickly, thanks to key vendors like Cisco Systems Inc. via its acquisition of Tandberg, Polycom Inc.and LifeSize Communications Inc. These companies, along with a number of hosted or managed service providers, are offering a wide range of video conferencing systems that run the gamut from client-based desktop video all the way to fully immersive” telepresence suites for businesses of all sizes. And for agents and VARs, the margin on these solutions can run very high indeed up to 50 percent in some cases. Undeniably, video conferencing of some form will become an increasingly attractive sales opportunity for resellers, since most sales are driven by the indirect channel, not the vendor or provider.

Video Conferencing vs. Telepresence

But what is it? And which system desktop or telepresence makes the most sense for businesses? As youd expect, the answer is “both.”

Essentially, video conferencing and telepresence are both live video communications that at one point differed in terms of the quality of the video or meeting” experience, with desktop video at the low end and telepresence the high. As ABIs Dan Shey sees it, Essentially the market is offering a continuum of products between basic video conferencing and telepresence.” The differentiation lies in resolution, degree of eye contact between participants and sound quality.

Ira Weinstein, senior analyst and partner at Wainhouse Research LLC, one of the leading market analysis firms covering video conferencing, argued telepresence is not a product at all. There is no such thing as a telepresence product. Instead, there are video conferencing solutions that provide the telepresence experience,” he explained. We define the telepresence experience as a visual collaboration session during which the remote participants appear to be in the same room. Note that this does not necessarily mean that they are in the same meeting room.”

Frost & Sullivan, on the third hand, defines telepresence as a tightly integrated package of visual, audio and network technologies and services designed to give users a communication experience that attempts to closely reproduce the valued characteristics of a face-to-face meeting. It further breaks down the telepresence market into two segments: ready-built systems from the major vendors and an evolving market for customized solutions, assembled by systems integrators, of standard video conferencing components, especially high-definition video conferencing codecs, into a pre-packaged kit.”

Frost & Sullivan also sets certain minimum requirements for a telepresence offering, such as a minimum of one 50-inch screen, HD audio, conference management capability and other ease-of-use features. The system must also include a services wraparound” that includes management, maintenance, troubleshooting and implementation, so the whole system is as user-friendly as possible.

While the explanations are somewhat varied, generally telepresence is considered to be more immersive” than traditional video conferencing. This means it offers greater visual and audio clarity, a surround-view of the room holding the meeting that accurately captures the full range of human expression and physical cues (hand gestures, body language) of the participants.

But not everyone is on board with that. Some vendors consider HD to be the differentiator between video conferencing and telepresence.

The biggest problem [we see] is the messaging around telepresence,” said Kristin McClune, a VAR selling video conferencing. Most partners feel that at some point, the manufacturers just decided to change the terminology on all video to telepresence whether truly immersive or not. This message has certainly not trickled down to the end-user and understandably so.”

So well try to avoid that semantic minefield the rest of the way, and focus instead on applications for a range of video communications solutions.

Selecting a Video Solution

One determinant of the appropriate video solution is the business application in question. As a general rule, telepresence makes more sense for high-level executive meetings or business-critical meetings with important customers or partners where discerning facial and physical cues can help overall understanding, especially with international clients where there may exist a language barrier.

However, a lower-end (and cheaper) video conferencing system, especially with HD, should be more than adequate for midlevel employees who want to upgrade their day-to-day collaboration capabilities beyond audio. These systems also are more mobile, and can be shared more widely around the company, whereas telepresence takes place in a dedicated, fully maintained meeting room.

If [telepresence] has a downside other than the cost premium over , its the dedicated accommodation space required to house a telepresence suite,” said Dominic Dodd, principal analyst, unified communications and collaboration, at Frost & Sullivan. In contrast, video conferencing systems can be used in any room, from smaller meeting rooms to the boardroom. However, this flexibility is at the price of optimum user experience the environment of the telepresence suite is carefully engineered to deliver the immersive experience that helps sustain long and difficult discussions.”

Analyst Shey said cost is a major driver for choosing video conferencing rather than telepresence. If you are an educational institution and remote learning can be accomplished with a teacher only needing to speak the lessons and not needing any or limited white board work, video conferencing may be sufficient,” he explained.

How much do these systems run? According to Michael Helmbrecht, vice president of product marketing at LifeSize, telepresence suites can cost $200,000 to $300,000 upfront for the system and room; for managed services (pretty much a must-have with telepresence), tack on between $10,000 to $20,000 a month. By contrast, LifeSizes Conference 200 system goes for less than $100,000. At the lower end, the company offers HD video conferencing systems from $2,499 to $16,999.

And, Helmbrecht added, a portable solution expands the number of people who can use video conferencing, as well as the markets served. We have great success in vertical markets such as health care and education because our solutions are flexible and do not limit the possible uses by tying you to a set conference room,” he said. LifeSize HD video conferencing solutions are also in use in large enterprise as well as small and midsized businesses, local/state/federal government agencies, research institutions and many other industries.”

In fact, the range of solutions for SMBs, enterprises and service providers is one of the drivers propelling growth in the video communications space, according to Maurizio Capuzzo, vice president of global channel marketing for Polycom. The others are improved networks and bandwidth availability and the cultural acceptance of video, he said.

Partner Opportunity

Against this backdrop channel partners have an unprecedented opportunity to get a piece of the video communications pie, which Frost & Sullivan forecasts to grow to a $3.5 billion worldwide by 2014.

Enterprise video conferencing is sold almost exclusively via channel partners,” said Wainhouse analyst Weinstein. The vendors certainly work hard to generate awareness and demand, but sales, implementation and support are handled by distributors/resellers/integrators.”

Partners provide software support and updates, help desk capability and advanced hardware replacement in case of system failure as well as design, implementation and management. Some telepresence partners also offer basic troubleshooting, session initiation and monitoring of the system.

For VARs, managed services are often where margins are made. For example, Solutionz Conferencing Inc. manages a customers existing video network resources, such as media gateway controllers, bridges and endpoints. It also provides bridging services, using a multipoint-control unit to enable video calls between three or more locations, as well as audio/visual room integration, which integrates video conferencing equipment with audio visual peripherals and accessories, such as projectors, plasmas, whiteboards and speakers.

For Solutionz Conferencing, margins for desktop video conferencing hardware are about 20 percent and 40 percent for services, while the same holds for telepresence at about 17 percent on equipment and 45 percent on services. Margins for telepresence and video conferencing solutions vary and are dependent on a multitude of factors, including but not limited to the current market, the type of service(s) needed and how the lead was generated.  

Jill Price, executive vice president of sales at Providea Conferencing LLC, said the margins vary depending on whether the company already is certified on the gear. If we are not certified and rely on the manufacturer services, we make between 10 and 15 percent gross margin,” Price said. Since our managed services video network operations center and conferencing services centers are already built out and we have been certified to deliver these services by each manufacturer, we see much higher gross margins (around 50 percent).”

For agents, desktop video services carry margins of 40-60 percent, said Greg Plum, director of business development at video conferencing provider The Conference Group. When compared to other conferencing solutions, with margins in the 15-25 percent range, its easy to see why adding video to a portfolio makes good sense.”

Even though there is product demand across companies of all sizes, the SMB market is still the low-hanging fruit for many VARs, especially for smaller, lower-cost systems that can be shared more easily and still provide the benefits of video conferencing without the high expense of travel.

On the other end of the market, resellers may find a nascent but potentially significant opportunity in the telepresence room rental market. While large telepresence rooms are very expensive, some of the larger resellers may want to consider purchasing a room themselves and offering it for rental,” said ABIs Shey. They could then use the opportunity to introduce telepresence room renters to smaller telepresence systems, providing a possible upsell opportunity.”

Selling Video Communications

For years, most video conferencing salespeople have stressed savings in travel costs. But thats not really enough to make customers sign off on a new system today. Now its all about how video can improve business processes and applications in terms of productivity, efficiency, time savings, cost control and the benefit of team building, which improves morale and spurs innovation.

VARs targeting financial firms, for example, should highlight how desktop video conferencing enables investment bankers to participate in ad-hoc, face-to-face meetings with remote clients and partners while VARs targeting pharmaceuticals might promote the use of similar technologies by R&D teams to expedite product/development and shorten time to market or by product managers to expedite product training during product launches.

This is the message that resonates with enterprises today,” said Wainhouse Researchs Weinstein. Travel savings are certainly important, but doing more with less, super-charging the global workforce, more effectively leveraging subject matter experts and enhancing customer/partner contact are the real value plays here.”

One way to close the sale is to provide a simple demo for the customer. LifeSize VARs can, for example, set up video conferencing equipment at the customer site in about 10 or 15 minutes, letting the client test-drive the system for themselves, without adjustments to the customer WAN. Live demos and competitive bakeoffs with the competition win for us time and time again,” said Helmbrecht. An anecdotal quote from one of our partners is that if we can get a live demo in front of a customer, we have an 80 percent close rate versus one who does not see the product live.”

Cisco takes the live demo approach another step, recommending VARs deploy the technology in their own company and create their own case studies based on real-world, personal experience. This creates an educated sales force and a new way to communicate with customers,” said Jean Rosauer, vice president of marketing, Cisco TelePresence Technology Group. In addition VARs who encourage customers to develop case studies and in turn educate the market on applications have greater success. Also the ability to demonstrate the latest technology with an internal Center of Excellence allows the VAR to show the customer the possibilities with todays collaborative solutions.”

Financing and leasing options can be important sales tools, especially for the pricier systems. Cisco offers financing options in partnership with their VARs, and Providea extends leasing terms to all system components (service, network and CPE). Solutionz customers have several ways to lower upfront costs; they can rent on a bi-monthly basis with a one- to three-year contract or lease with the option to buy at the end of the contract.

Obviously, the hosted model eliminates much of the initial capex costs, but the Conference Group goes one better, offering free trials accounts for select services so customers can test drive” the offering. The hosted option can be all the more attractive if the provider doesnt require a long-term contract or new CPE purchases. The Conference Group, for instance, signs customers to a monthly service agreement for a pre-set number of conferencing seats; the agreement can be altered month-to-month.

Consultative Selling

Right-sizing the solution to a customers business needs and budget is crucial, especially because its also complicated. Partners will find many customers want a customized solution designed to fit their existing set-up. For instance, some clients want a down-sized telepresence system with fewer screens so that it fits into an existing meeting room that is too small to accommodate a larger deployment. Others may want to use their own furniture or fixtures instead of those provided by the vendor. Some will base their purchase on the business application, such as lawyers taking depositions or telemedicine. And most will base their decision on price; Frost & Sullivan estimated that customers will forego a truly immersive” experience for a lower-end system at half or two-thirds the price.

Its also crucial to give customers a baseline understanding of just what a particular video conferencing system can do, as well as its limitations. The biggest barrier that we face daily is managing customer expectations with regard to the type of service they are looking to buy,” said The Conference Groups Plum. Our introductory level service offered in our ReadyShow suite provides 10 frames per second video at a resolution of 320×240. This is accomplished with no download for the conference participants. To achieve a higher quality result, we offer other services that scale to 30 frames per second at high-definition resolution. This service does require a download to participate in a conference of this caliber. Keeping the options as simple and straightforward as possible for the customer and helping them determine the best solution for their specific needs often proves to be a challenge.”

With definitions between various types of video conferencing increasingly blurred, its helpful for channel partners to offer a full range of products from desktop video conferencing to full-blown telepresence suites since customers may be unaware of each systems merits or which is best for them and consequently make the wrong purchase, either in terms of functionality or price point. Most customers prefer a mix-and-match approach, deploying multiple systems as the business application demands possibly full immersive telepresence for C-level executives, high-end HD video conferencing for more mid-level executives and standard and no-frills video conferencing for less business-critical tasks.

Doug Allen is a freelance journalist and analyst with 12 years of experience covering telecommunications.

Interoperability Issues

Interoperability is a core concern for video communications, where different businesses often use different systems. Some vendors like Polycom Inc. and increasingly Cisco Systems Inc. support open standards as much as possible, but this is still a work in progress across the industry. The very term interoperable” can mean different things; some consider two systems connected by a gateway to be interoperable, while some insist on direct native” interconnection. True end-to-end interoperability beyond audio-visual coding/decoding and call signaling compatibility is still years away, according to analyst firm Frost & Sullivan.

But this will become an increasingly crucial requirement for video conferencing systems, as customers look to integrate all their video services, including multiple iterations of ISDN-based video conferencing, proprietary telepresence and standards-compliant video conferencing, into something Dominic Dodd, principal analyst, unified communications and collaboration at Frost & Sullivan, calls video estates.” Eventually, customers will want to incorporate these estates into their unified communications systems, which could be a tricky task for any partner or systems integrator, due to the sheer number of disparate products, technologies and systems  involved never mind enabling the customer to monitor and manage the resulting solution.

Ensuring QoS With Big Bandwidth

Video conferencing, especially telepresence, is a big bandwidth hog, so much of a partners consultation comes down to ensuring the LAN and WAN connections are up to the job. Bandwidth requirements are typically not well understood depending on the telepresence system used,” said ABI Research analyst Dan Shey. By one estimate of a large telepresence room vendor, only about 15 percent of companies WANs are sufficiently robust to support telepresence. However, regardless of the system, companies need to be aware that the addition of even smaller telepresence systems will drive up bandwidth usage on the internal LAN and WAN connections, possibly affecting QoS for other applications.”

Of course, capacity requirements depend on the codec used. Polycom Inc., for instance, recently introduced its High Profile technology, which can cut bandwidth requirements by up to 50 percent. Since its standards-based, similar codecs may catch on with other vendors and providers.

In the meantime, partners can expect a telepresence deployment to take up about 15mbps for each telepresence room, while HD video conferencing requires roughly 5mbps per endpoint.

Not enough bandwidth can present another sales opportunity for channel partners. If a prospects WAN cant support the necessary QoS for telepresence, Providea Conferencing LLC recommends an overlay network to deliver the service, along with custom scheduling software and concierge video services. The provider also monitors each video endpoint, the customers LAN infrastructure at the switch interface level and WAN performance.