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10/12/2007
03:37 PM
Melanie Turek
Melanie Turek
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Telepresence Case Studies: Real-World Applications (And, Is It Right for You?)

I recently got an update on Cisco’s telepresence initiative, and some of the facts are interesting. Clearly, there’s plenty of value in telepresence. At Frost & Sullivan, we expect the market to grow from $27.6 million to $610.5 million between 2006-2011, with a compound annual growth rate (GAGR) of 55.6%.

Not surprisingly, then, Cisco says telepresence is one of the fastest-selling products in the company’s history—Cisco has 50 new customers since introducing its telepresence systems 11months ago, and “huge” quarter-over-quarter growth, according to David Hsieh, Cisco’s CMO for Emerging Technologies. The company won’t report the number of sites per customer, but Hsieh says that most customers deploy two to five units initially, and that at least five customers initially deployed 10 units or more. Large customers are not hesitating to buy the product, he says, but the cost of bandwidth does determine deployments (and may explain why the majority of customers are US-based). “Seed, adopt, expand” is the typical deployment model.

Cisco itself has deployed 113 rooms around the globe, and Metcalfe’s Law s is at work here. Within Cisco, the average usage for each telepresence room is five to six hours, but the company sees that average go up as it deploys more units. Also as more units are deployed, more people are using the technology for internal collaboration. Initially, 60% of usage was for customer-facing sessions; now that’s down to 30%.

The sale is to executives, not to IT. But they’re not looking at it for executive meetings—they’re looking to solve issues around business process change. There is a business case to be made on travel-cost reduction, and they use that travel budget to pay for telepresence, but what they really want it for is to shorten decision making and cycle times, and open up opportunities for new business and growth. Hsieh wouldn’t confirm the prices customers are paying ($250,000 per unit is often quoted in the market), but he insists customers are paying for it. “Cisco is a highly capitalist company, there are no loss leaders,” he said. “We have a huge number that we’re shooting for this year. [John Chambers] gives fellow CEOs a try-and-buy program, but they do need to buy it eventually.”

On a personal note, UC VP and GM Rick McConnell says he’s cut his own travel by almost 40% thanks to the company’s telepresence solutions—going from 200,000 miles in 2006 to around 120,000 this year. He hopes to get that down “way below 100K” in 2008. (Which begs the question, is Cisco now competing with United Airlines et. al.? Hmmm…)

Cisco has lots of customer examples, but it focused on two at its recent analyst conference in Toronto. Wachovia, the fastest growing bank in the U.S., is using telepresence to manage communications between what are effectively two headquarters locations, and for M&A activity. It’s now looking at a third location in St. Louis after the acquisition of AG Edwards. It is reporting significantly faster decision making as a result, a strategic advantage given its high-paced growth.

Media Saturn, a large electronics retailer in Europe, has initiated a new corporate strategy to expand into emerging markets in Eastern Europe. It’s a clear opportunity, but speed is everything—if they get there before their competitors, they could effectively win those markets, as footprint is everything. But entering new markets with stores is a complicated process. The company used to parachute a project team into the new area for a few months, then send them somewhere else. Now, they’ve deployed telepresence into the country HQs and draw on the best experts on a inter-league basis, no travel required. That lets the experts work with several new markets, in multiple countries, at once.

Telepresence is a completely strategic move for Media Saturn, and it could enable millions or even billions of dollars in revenue over the next several years. Of course, as with all new technologies, in some countries people were resistant to using telepresence—so its use was mandated from the top down.

Interestingly, jealousy also reared its head when the company implemented one-screen systems instead of three-screens, so now everyone gets a three-screen system.

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