Forbes talked recently with Marthin de Beer, who leads
Forbes: The eternal question with a system as pricey as telepresence is: Can't you achieve something similar and avoid travel with a much cheaper setup--simply a webcam and Skype, for instance?
De Beer: Well when it comes to communications, it's all about the experience. Can you build a trust relationship? Can you make an emotional connection? And it's only when you can build trust long-distance that you can actually be comfortable to do business that way, to negotiate a deal, for instance. That can only be achieved if the experience is good enough. Telepresence has that great video and audio experience, and as we bring in Tandberg, the products will extend it down onto the desktop with much lower-cost options as well.
A big part of the rationale behind Tandberg was to round out our portfolio. We could've taken another few years to build it out ourselves. But this market is at an inflection point. And we're starting to see that our customers want a complete range of offerings that we didn't have.
So we acquired Tandberg because they have that complete spectrum, both a mid-range solution for multipurpose rooms as well as desktop solutions. In fact, they just refreshed their entire product line to be all HD. That combination--Cisco on the high end and Tandberg in the mid-range and the low end--gives us everything our customers want.
Video: Cisco's Telepresence Adoption Accelerates
During the recession Cisco pitched telepresence as a way for companies to avoid travel and save money. Now that the recession is has largely ended and travel budgets are slowly creeping back, are you still seeing the same kind of adoption for this ultra-high-end, expensive video system?
As you said, we saw people continue to purchase through the recession as they'd look for ways to save money and investment was scarce. But even now we're seeing an acceleration of deployment of telepresence, like the
In other words, customers are still shifting dollars from their travel budget into telepresence. In fact, they don't need an additional dollar of budget as they go through the transition. It's just a shift of existing budget.
At the Consumer Electronics Show last January, Cisco demoed what you'd call consumer telepresence, a kind of set-top box that you put on your television that allows it to be used for high-quality videoconferencing. Skype is doing something similar, integrating their video conferencing into televisions. So when are we going to see Cisco's consumer video product on the market? And how are you going to compete with Skype?
We started trials a month ago and will be in trials through the summer. We do expect to announce a solution and roll it out this year and have it on shelves before Christmas. It should be a very exciting product. We're getting great results back from our early trials. As for Skype, we will be the only high-definition, life-size experience that uses your existing HD TV and your existing broadband into the home. Skype will require you to buy a new TV. And frankly, their experience will be very, very different from Cisco's.
Cisco must still be the world's biggest user of telepresence. How much of your internal IP traffic is taken up by the 700 rooms the company has deployed around the world?
Our rooms are utilized 60% of the time. We do 1,000 meetings a week. From a network perspective, that means more than 50% of the traffic on our backbone is now telepresence traffic.
More than 90% of those meetings have more than three rooms involved. So traffic is not just point-to-point. It's going all over the place, and it's completely unpredictable. So we had to upgrade our backbone from about OC-3s everywhere around the world to OC-24s and OC-48s in many cases. But again, it's paying for itself. And those upgrades also benefit the other applications that run across that backbone network.
Some analysts still see telepresence and video conferencing as sort of a sideshow for Cisco. Do you have real evidence that all these video products boost your core business? When a company buys a telepresence system, do they actually buy more routers and more switches?
Absolutely. We would not have spent $3.4 billion for a company that's $1 billion in size playing in a market that's only $2 billion if we didn't expect, first of all, that telepresence would become a $10 billion market. And that's just part of the bigger $34 billion collaboration market.
But yes, in every transaction, people have to upgrade and think about the network. High-definition video communications is the killer app for any network. If you haven't got the right equipment, it just won't give you that great experience. And so yes, customers are upgrading the networks to deploy telepresence. Customers save enough that both the upgrades in the network and the end systems are paying for themselves. The business case is there.
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