Telepresence, Effective Visual Collaboration and the Future

Telepresence, Effective Visual Collaboration

and the Future of Global Business at the Speed of Light

By Howard S. Lichtman

Human Productivity LabAugust 2006

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© 2006 Howard S. Lichtman

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Telepresence, Effective Visual Collaboration and the Future of Global Business at the Speed of Light

Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Understanding the Hard, Soft, and Opportunity Cost of Physical Travel on Senior Executive Time: . . . . . . . . . . . . 5

Why Traditional Videoconferencing Fails to Deliver the Goods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Telepresence — What is it and Why Does it Cost so Much Money? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

So Why Does Telepresence Cost So Much Money? . . . . . . . . . . . .9

The Importance of Creating Social Connections . . . . . . . . . . . . . 10

Types of Telepresence Solutions . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Delivering Telepresence and Effective Visual Collaboration: The Telepresence Tool Kit. . . . . . . . . . . . . . . . . . . . 15

The ROI of Telepresence and Effective Visual Collaboration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Measuring and Understanding Telepresence and Effective Visual Collaboration Usage . . . . . . . . . . . . . . . . . . . . . . . . 24

Business Effectiveness — Increased Utility, Greater Productivity, and Improved Outcomes . . . . . . . . . . . . . . . . . . . . . . 24

Hard Dollar Travel Avoidance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

Summarized Hard and Soft Dollar ROI and Intangible Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

Telepresence Buyers Guide . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

Understanding the Total Cost Ownership and Acquisition Scenarios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

End-to-End Managed Services. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

Custom Integration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

Capitalize or Lease? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

The Future of Telepresence and Effective Visual Collaboration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

Effective Inter-Company Business . . . . . . . . . . . . . . . . . . . . . . . . . . 31

The Interconnection of Effective Visual Collaboration Networks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

Publicly Available Telepresence Systems . . . . . . . . . . . . . . . . . . . . . 33

Small Office/Home Office (SOHO) and Consumer Telepresence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

The Rise of the Virtual Organization . . . . . . . . . . . . . . . . . . . . . . . 34

Better and Cheaper Telepresence Solutions . . . . . . . . . . . . . . . . . 34

Distance Learning Will become a Key Telepresence Application . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

Headends- Content Will be King . . . . . . . . . . . . . . . . . . . . . . . . . . 36

Accelerated Adoption for Economic and Geopolitical Reasons. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

Outsourcing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

The Higher Costs and Reduced Convenience of Physical Travel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

Dramatically Higher Oil Prices — Peak Oil, Natural Disasters, Terrorism, Expanded War in the Middle East or All of the Above. . . . . . . . . . . . . . . . . . . 38

The Decline of the Dollar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

About the Author . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

About the Human Productivity Lab . . . . . . . . . . . . . . . . . . . . . . . 41

Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

Appendix A: Telepresence Company Profiles . . . . . . . . . . . . . . . . 44

Appendix B: Sponsoring Vendor Marketing Material . . . . . . . . . . 52

Table of Contents

HP Halo Collaboration StudioTeliris Global Table

2

Preface

Preface“The future is already here. It’s just not very evenly distributed.”

— William Gibson

Over the next decade, virtually every major Global 5000 company will adopt a technology allowing them to interact with people, no matter how far away, as if they were in the same room. The technology is called telepresence, and a variety of Fortune 1000 organizations already use it, reporting both satisfaction and a strong return on their investment.

Telepresence meetings make remote participants life-size, with fluid motion, accurate flesh-tones and flawless audio. The experience feels remarkably natural and comfortable for almost any size meeting from two people to large classrooms.

Telepresence solutions are easy to use and surprisingly handy for collaborating on spreadsheets, slide decks, documents or even physical objects with minute details. Specialized telepresence solutions for specific industries already exist for settings as diverse as pharmaceutical research labs, movie and television studios, university-level distance learning, and neurological operating rooms.

Soon enough, executives and the affluent will equip their homes with telepresence capabilities, while everyone else will be able to rent a telepresence system in a hotel, mall, restaurant or pub. Within a decade’s time, you won’t think twice about having a virtual business meeting (or virtual dinner) with participants from Baghdad, Tokyo, Milan, or all three cities simultaneously.

While this paper focuses on the current global corporate usage, ROI, main players, and future of telepresence, it barely scrapes the surface of the impact the technology will have on society.

Telepresence will ultimately produce good, bad and unintended consequences as it revolutionizes the way the world communicates. Already it’s made a mark, and that impact will keep growing in ways we can only speculate about at the dawn of its inception:

• It will continue to accelerate commerce, globalization, outsourcing and the creation of wealth

• It will dramatically impact the airlines, hotels, global network providers, financial markets, advertisers and Hollywood

• It will continue to revolutionize, among other things, global corporate governance, gaming, education, entertainment, medicine, diplomacy, home schooling, politics, warfare and pornography

• It is and will continue to expand the places where knowledge workers can live and work while simultaneously shrinking the world around them

It will be a trip . . .

Best,

HSL

Howard S. LichtmanPresident, Human Productivity Lab

IntroductionThis paper focuses on a group of revolutionary visual

collaboration technologies called telepresence. In the spirit of full disclosure the author sits on the informal and unpaid Board of Advisors of telepresence provider Digital Video Enterprises and was the former Vice President of Business Development at TeleSuite Corporation (now Destiny Conferencing). This paper was sponsored by the following companies: ATK Services, Destiny Conferencing, Digital Video Enterprises, HP, MedPresence, Polycom, Telanetix, and Teliris.

Telepresence Conferencing Defined

Telepresence is the science and art of creating visual conferencing environments that address the human factors of the participants and duplicate, as closely as possible, an in-person experience.

Telepresence greatly improves end-user acceptance, which dramatically increases usage and substantially improves demand, ROI and customer satisfaction.

While a variety of methods can be used to deliver telepresence solutions, they typically offer some combi-nation of the following improvements over the “talking heads” experience of traditional videoconferencing:

• Life-size participants

• Fluid motion

• Accurate flesh tones

• Studio quality video, lighting and acoustics

• The absence of visible technology

• True eye contact, or the approximation of eye contact in large group settings

• Immersive and/or mirrored environments where partici-pants feel as if they are in the same physical space

• A consistency-of-quality between disparate locations.

Destiny Conferencing / Polycom RPX 400 Series

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Executive SummaryAt its core, business is about face-to-face relationships. Whether

those relationships are between a board member and corporate officer, salesperson and client, or partners in a joint venture, effective business communication remains a combination of understanding, mutual advantage and trust best exercised eye-to-eye between the main participants.

For decades, business has relied on commercial air travel to bring together the main players. Unfortunately, commercial air service continues to deteriorate (flight delays, mishandled bags and consumer complaints were all up in 2005i), and last year alone a record five airlines declared bankruptcy, including mega-carriers Northwest and Delta.i i Reduced competition and record fuel prices promise more problems in the future.

Compounding the problem, the Federal Aviation Administration forecasts a 45 percent growth of commercial passenger volume to one billion passengers annually by 2017.i i i In the same time period, the FAA estimates that the private aviation jet fleet will double in sizeiv, putting further pressure on an already strained capacity.

An article in the May 21, 2006 New York Times assessed the state of the industry:

“Planes are expected to be packed fuller than at anytime since World War II, when the airlines helped transport troops. Fares are rising. Service frills are disappearing.

Logjams at airport security checkpoints loom as the federal government strains to keep screener jobs filled. The usual violent summer storms are expected to send the air traffic control system into chaos at times, with flight delays and cancellations cascading across the country.

And many airline employees, after years of pay cuts and added work, say they are dreading the season ahead. Those workers — and there are about 70,000 fewer of them than in 2002 — will be handling more than 100 million more passengers this year than they did four years ago.

The friendly skies, indeed.”

Meanwhile, business continues to globalize, further increasing the length, expense and hassle of both private and commercial aviation in managing international operations. The 19-hour flight from New York City to Shanghai runs $2,300 for a 21-day advance coach fare; a 7-day advance business class ticket costs $9,500.v

As commercial and executive aviation slows down, the speed of business accelerates. The instantaneous nature of e-mail, webconfer-encing, and instant messaging have reset expectations of turn-around times for decisions. Waiting days or weeks to huddle the team doesn’t cut it anymore. The need to improve productivity and time-to-market advantage becomes even more paramount in the face of nimble international competitors who compete with third world labor costs and first world technology.

Many thought that traditional videoconferencing would solve the problems of establishing face-to-face collaboration. However, the technology has failed repeatedly to satisfy end-user expectations. Though videoconferencing has moved from ISDN networks to IP, displays have gotten larger and better, and video codec resolution has improved significantly. The average usage of videoconferencing remains moribund at an abysmal 15 hours per month during a time of global-ization, increasing costs and inconvenience of physical travel, and the general speed of business accelerating.vi

Many videoconferencing users complain that talking to the “camera-on-the-TV-set-on-the-dessert-cart” is uncomfortable and unnatural. The audio is often poor, the lighting wrong, colors off, resolution bad, format artificial, controls complex, collaborative tools weak and overall experience meager. Consequently, traditional video-conferencing is often the option of last resort, and even then almost always internally, and almost never for important meetings or with customers or partners.

Telepresence has dramatically improved the usage and acceptance of visual collaboration by addressing the human factors of partici-pants to create a more natural, productive and realistic experience. Unlike videoconferencing, telepresence works at any scale, from the desktop to small groups to distance learning classrooms to neuro-logical surgical education. Quite simply, telepresence lets users feel as if they are “present” in the same physical space with others who might be thousands of miles away. The experience is natural, comfortable, easy-to-use, supremely collaborative and as different from traditional videoconferencing as the space shuttle is to a commercial airliner.

Where traditional videoconferencing systems average 15 hours per month, adopters of telepresence group systems report revolutionary usage between 60 and 275 hours per month. Internally, these solutions reduce travel for intra-company business, improve productivity and reduce wear and tear on road warriors.

More importantly, most telepresence solutions provide a meeting experience with a “business-class consistency-of-quality” between different organizations on the same network while simplifying how they connect to and securely collaborate with partners, vendors, investors and customers.

This ability to effectively conduct global inter-company business will be, without a doubt, the “killer app” of the 21st century, and an application with potential for the same exponential growth that char-acterized telephony, the Internet and other communication networks. As more and more organizations join telepresence and effective visual collaboration networks, costs will drop, utility will rise and the benefits of being connected will drive exponential adoption.

The future of business will be the ability to cost-effectively leverage your knowledge workers around the world wherever their geographical location, connecting them instantly with a lifelike experience and providing familiar and contextual tools to easily collaborate with colleagues, partners, vendors and customers. This experience will be as natural and comfortable as if everyone was in the same room.

4

Understanding the Hard, Soft and Opportunity Cost of Physical Travel on Senior Executive Time

The expense of physical travel can be measured in several different ways: First, the hard costs: Airline tickets/executive aviation, hotel rooms, dining, rental cars, car services and taxi cabs. the cost of the executive’s time while in transit, etc..

Then the soft costs: The wear and tear on personnel, the lost productivity of being inaccessible to colleagues and away from information and corporate resources.

And let’s not forget the most overlooked cost: the opportunity cost of doing whatever it is you would have been doing while you and your team are out of the office, in transit and/or jet lagged.

When I was with TeleSuite Corporation we once received a call from a senior technologist at a Fortune 1000 company whose CEO was:

“Sick of Flying Around on his Private Jet”

If you really think about it, it doesn’t matter if you’re relaxing in the sumptuous leather seating of the $25MM Gulfstream IV that this particular CEO is reported to own, or wedged into a middle seat in the steerage section of a commercial 747. Much of the pain of physical travel is the same: Time away from the family and friends, lost productivity, jet lag, delayed/cancelled flights and the opportunity cost of being trapped in a flying aluminum cylinder 40,000 feet above the ground.

I had just joined TeleSuite as a new employee when this company called and had only heard the generalities of the CEO’s pain from the other members of the executive team. Later, I’d learn more of the specifics: The CEO spent hundreds of hours flying between Los Angeles and Bristol, England in a single year to complete a multi-million dollar project and cement what would become a very profitable ongoing collaborative relationship with a strategic partner.

Now he was looking for telepresence solutions that would allow the company to leverage its talent around the world without extensive physical travel. Still, were the costs and pain of physical travel really bad enough to merit betting millions on deploying tele-presence? Let’s crunch some numbers on the situation and see:

Bristol, UK, and Los Angeles, California, are 5,350 actual air miles apart as the crow flies.

• Flying at the G IV’s recommended long range speed of 452 knots or 521 mph makes the flight 10 to 11 hours if you fly non-stop . . .

• . . . but you can’t since the G IV’s range is only 4,350 Nautical Miles, so you’ll need to tack on another 2 hours minimum for landing and refueling.

• That makes the total flying time 12-13+ hours minimum trapped in the flying tube. Each Way!

• Flying commercial would take 16 to 19 hours if the gods of travel smile upon you.

• I wasn’t able to find any flights between Los Angeles and Bristol with less than two stops each way, multiplying the chances of a delay or missed connection.

Understanding the Hard, Soft and Opportunity Cost of Physical Travel on Senior Executive Time

Opportunity Cost

A term used in economics to describe the often hidden cost of choosing one course of action over another. The opportunity cost is the cost of the next best alternative use of the same time and resources. The opportunity cost of physical travel is the value of what could be accom-plished during the time spent preparing for, in transit and/or recovering from a trip.

5


Now let’s look at the money involved for executive aviation:

• While Gulfstream discontinued the G IV in 2002, the base replace-ment cost of its upgraded replacement the G450 is $34 MM.

• The G550 is $45 MM.

• Assuming the aircraft are leased for the tax advantages, the back-of-the-napkin calculations on the monthly payments for a 60-month lease of the $34 MM G 450 with a $1.00 buyout are over $670K a month.

• That $34 MM is the base cost for unpainted “green” planes with unfinished cabins. Completing the exterior and cabin can add $3-5MM depending on the options.

• Even bargain hunting in the “previously owned” section of the lot is almost as expensive. One 2001 G IV in Las Vegas recently listed for a fire-sale price of $28MM with “MAKE OFFER — MUST SELL!!!!” emphasized in the ad.

• Tack on the direct operating costs of the G IV including fuel, airframe and engine maintenance, charts, catering and landing fees (estimated at $2,475 an hour on the OmniJet Trading Website) and the cost of ownership really starts to climb.

• Next, add the Annual Fixed Costs that OmniJet estimates at $540,000 a year including crew salaries, hangar costs, insurance, training and modernization.

• That brings the total estimated annual budget for flying the G IV 400 hours a year (or 16 round trip flights between Burbank and Bristol) not including aircraft purchase price or lease payments to $1,584,000 or $3,935 an hour.

And we haven’t even touched on the direct cost of the CEO’s time . . .

According to the Economic Policy Institute, the average total compensation for a CEO in 2005 was $10,982,000.

Assuming a CEO works 50 hours a week (probably a fair estimate given the responsibilities of running a Fortune 1000

company) and takes three weeks of vacation a year, his direct employment cost to the company is around $4482.44 an hour, or more than the $3,935 an hour cost in Direct Operating and Annual Fixed Costs for 400 hours of flying time.

Let’s assume that physical travel takes the same toll on CEOs as it does on other mortal men. Jetlag, take-offs/landings and the need for food and sleep leaves them with 50 percent of their time in the air for getting any work done. Factor in a loss of 100 hours per year of productive work in the case of our 200 hour frequent flier and the hard cost of the lost time attributable to physical travel in the cost of employment alone in this one example is $448,244 (and we haven’t even touched on the cost for the rest of the executive team, managers, and employees).

Travel is hard physically, stressful, and especially inconvenient for families. Many CEOs are already wealthy and if they ever tire of hauling themselves around the world, they can take all their chips, go home and leave the board of directors to deal with investor uncertainty, loss of momentum and an expensive Heidrick and Struggles search.

So, while road warriors suffer the physical and mental pain of physical travel, shareholders pay an even higher price in addition to the hard and soft costs of executive aviation and the employees’ time. The hidden cost of physical travel is that often overlooked opportunity cost of keeping the executive team, managers and employees trapped in an aluminum tube for hundreds of hours a year. Potential lost revenue to the company: staggering.

Put quite simply, the true cost of keeping employees up in the clouds are the lost profits from the products and services that don’t get researched, developed, tested, project managed, manufac-tured, inventoried, transported, distributed, sold, billed, recognized, and generally moved along through the process as quickly when the team is airborne, jetlagged or in-transit between locations. Steve Reinemund, the CEO and Chairman of PepsiCo and an HP Halo customer, has announced a goal of replacing the time that employees spend traveling internally with time spent meeting with customers and prospective customers. The example seems starkly illustrative of the opportunity cost concept and the benefits of reducing avoidable internal travel.

6

Why Traditional Videoconferencing Fails to Deliver the Goods

“It can’t be done, Tom! It can’t be done! I admit that you’ve made a lot of wonderful things — things I never dreamed of — but this is too much. To transmit pictures over a telephone wire, so that persons cannot only see to whom they are talking, as well as hear them — well, to be frank with you, Tom, I should be sorry to see you waste your time trying to invent such a thing.”

— Barton Swift to his son Tom Swift in Tom Swift and his Photo Telephone, 1914

The first mention of electronic visual communications I’ve ever seen is in “Tom Swift and his Photo Telephone,” published in 1914 by Victor Appleton. The book’s alternate/subtitle, “The Picture that Saved a Fortune,” seems especially apropos given the multi-billion dollar stakes in the coming battle to connect the conference rooms, desktops and living rooms of the world.

Videoconferencing has been around since 1956, when AT&T built its first Picturephone test systemvii. It has steadily improved in capability and functionality, but users haven’t exactly universally embraced it. Traditional videoconferencing systems have seen dramatic improvements in screen resolution, audio quality, reliability, security and ease-of-use, while the cost of group videoconferencing systems have declined dramatically. According to Wainhouse Research, an analyst firm that follows the conferencing industry, usage of traditional videoconferencing group systems averages 15 hours per month per end point. While some organizations do see higher usage, it pales in comparison to the demonstrated usage of telepresence and effective visual collaboration solutions.

Instantaneous, not limited by geography, and allowing communication between multiple parties in multiple locations, videoconferencing should be a “slam dunk” for business communi-cations. So why does it fail to deliver year after year in connecting the world? Why are only a small fraction of meetings done over videoconferencing, especially important meetings where relation-ships are formed, where body language is as important as what is said, and meetings with partners, clients or prospects? Why has

videoconferencing’s average usage per endpoint per month barely moved even as globalization has increased, travel has become more difficult, the threat of terrorism has grown, and the pace of business has accelerated?

Traditional videoconferencing’s ugly little secret: Many people don’t like the experience and prefer not to use it.

For years the traditional videoconferencing industry produced a variety of spreadsheets, graphs and even interactive tools that promised substantial hard-dollar ROI based on avoided travel between a company’s internal locations. Some companies in the field estimated additional soft-dollar benefits from improved productivity. There was only one problem with the traditional videoconferencing provider’s calculations:

“But our videoconferencing end-points are averaging more than 15 hours per month?”

Organizations that use traditional videoconferencing more than 15 hours per month typically do so because:

• They’ve applied videoconferencing industry “best practices”: Dedicated QoS IP networks; higher bandwidths; proper environmentals in lighting and acoustics; good user training/IT support and improved ease-of-use through programmable graphical user interfaces

• Top down mandates curtailing business travel and/or requiring employees to use videoconferencing

• Low ratio of videoconferencing end-points to employees

Since no one really liked traditional videoconferencing very much, they didn’t view it as an alternative to an effective in-person meeting, and didn’t use it nearly as often as the providers projected.

When corporations do use videoconferencing, it is internally, with colleagues only or because there isn’t another option.

Why Traditional Videoconferencing Fails to Deliver the Goods

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The Observant Videoconference Experience

In trying to replicate the experience of a face-to-face meeting, traditional videoconferencing fails the human brain’s smell test (tiny remote participants, jerky motion, poor audio, limited body language visible, no eye contact, etc.). In my experience working with such systems and talking with psychologists, I believe that it also causes fatigue as the brain tries to process and adjust to two different experiences simultaneously:

• The Medium (i.e. the observant experience itself: the obvious TV set, the 8-inch tall remote participants, the visible camera, the delay, the poor audio quality, the unnatural format, etc)

• The Content (i.e. what is being said, the body language of the participants (if visible), etc.)

The brain, consciously or unconsciously, objects to this conflict and, quite naturally, resists the experience. As a result, productivity and ROI suffer.

Traditional Videoconferencing Companies Going in the Wrong Direction

The logo of high-definition videoconferencing provider Life-Size Communications (whose website refers to its set-top videoconferencing solution as “telepresence-like”) unintentionally crystallizes one important way videoconferencing goes wrong. The LifeSize logo seems to suggest that the key to achieving a more realistic experience is by increasing the size of the image in the vertical plane.

However, humans have a forward-facing vertical field of view of between 120 and 135 degrees, and a combined horizontal field of view of about 180-200 degrees.viii In achieving a realistic, immersive “Life Size” visual experience, it is actually more important to address the horizontal field of view and peripheral vision. Telepresence providers achieve this with multiple, large format displays and video walls. LifeSize Communications, which makes a superb high-definition camera and codec, should be focused in the opposite direction:

8

Telepresence – What is it and Why Does it Cost so Much Money?

About a decade ago, while the traditional videoconfer-encing industr y was busily working on commoditizing the “plastic-camera-on-the-TV-set-on-the-desser t-car t,” a couple of smar t resor t developers in the Caribbean, decided to take a different approach. Herold Williams and David Allen wanted to give their well-heeled guests an effective way to conduct business without having to leave their little slice of paradise. They decided to get the human factors of the meeting right (life-size remote par ticipants, superb acoustics, culturally correct positioning, the approximation of eye-contact, to name but a few) and then integrate the electronics around the human experience. They founded TeleSuite, the world’s first commercially successful telepresence company. Backed by a visionary investor, Karl Eller, and suppor ted by innovative, infinitely patient, early adopter customers such as AOL, 3COM, PricewaterhouseCoopers, and Cigna, the company’s product averaged 60-130+ hours per month, per site, four to seven times the usage of traditional videoconferencing.

TeleSuite Co-founders: David Allen and Herold Williams

This end-user acceptance didn’t come cheap. Flying in the face of the conventional videoconferencing wisdom of the time — stack em’ high and sell em’ cheap — TeleSuite Systems cost (and still cost) hundreds of thousands of dollars per room, with thousands of dollars more in monthly charges per location for private network connectivity, support and maintenance.

Telepresence solutions from HP and Teliris can run north of $10,000 dollars per month, per location. Deploying a site to an international location with limited fiber optic capacity can run as high as $40,000+ per month.

Traditional videoconferencing desktop solutions range from sub $100 webcams to $3,000 to $5,000 dollars for a dedicated desktop videoconferencing solutions. Telepresence provider Digital Video Enterprises’ true eye contact displays start at $7,500 a piece and their true eye-contact, high-definition Executive Telepresence Solution is almost $30,000.

So why does telepresence cost so much money?

Answer: Because the human brain is so damn smart!

From the first seconds of life your brain has become accustomed to visual collaboration, with your eyes as “cameras” delivering video to the “display” that is your brain. The retina and optic nerve are actually outgrowths of the brain itselfix, an organ with hundreds of millions of neurons devoted to vision. A full 30 percent of the brain’s cor tex is devoted to vision, versus eight percent for touch and three percent for hearing.x Whereas each optic nerve that carries signals from the retina to the brain consists of around a million fibers, each auditory nerve is limited to about 30,000.xi Over your lifetime, your brain has developed cer tain innate preferences for communication, with “video” being its hands down favorite.

Studies have shown that both comprehension and retention are improved when you see information in addition to hearing it. Most impor tantly, some behavioral psychologists believe that 70 percent to 80 percent of communication is non-verbalxii: facial expressions, gestures, posture and eye contact, which the brain processes quickly, naturally and often subconsciously for a richer understanding of what is being communicated than through speech alone.

To more closely replicate an in-person meeting and “trick” the brain into accepting the experience, telepresence providers address a range of human factors that traditional videocon-ferencing doesn’t. It’s more expensive, but the more natural, comfor table, immersive experience of telepresence improves the quality and quantity of visible non-verbal communication. This superior experience dramatically improves usage, which in turn drives productivity and ROI.

Telepresence — What is it and Why Does it Cost so Much Money?

Visionary Telepresence Investor Karl Eller

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The Importance of Creating Social Connections

For over five years, social scientist Dennis Sandow has conducted social action research for HP. His work documents how dynamic social systems create organizational value that crosses the boundaries of traditional organizational char ts. Influenced by Chilean biologist Dr. Humber to Manurana, who focused on intelligent action in social systems where everyone accepts each other as legitimate par ticipants, Sandow has helped HP understand and map the networks that create value in the organization.

When HP started using the Halo Collaboration Studio, Sandow had a front row seat to observe how the technology could improve and accelerate the collaborative process of key social networks to help the organization. In an interview for this paper, Sandow explained why face-to-face interaction is key to effective social collaboration:

“Brain research using Magnetic Resonance Imaging (MRI) has shown that facial recognition stimulates the emotional regions of the brain where agreement, consternation, joy, play, pleasure and seriousness are found. Up until age 2, children focus on specific facial

features (eyes, ears, etc.). Early in their development, they focus on the whole face and become aware of changes indicating displeasure, joy, excitement, etc. Just as in face-to-face encounters, Halo opens the biological pathways required for conversations.”

In addition, because social network encounters are face-to-face, Sandow believes that the visual collaboration experience provides a level of “stimulus control” where the intensity of the social experience

elicits a greater degree of focus and active partici-pation than could be achieved in a conference call or webconference. In a whitepaper for HP that Sandow contributed to, he characterized the benefits of the HP Halo Collaboration Studio:

While Halo has proven to reduce travel costs, it is also reported to bring new levels of group productivity. As informal social networks begin to meet in Halo rooms, they accelerate innovation, problem solving and project completion. Social capital or group productivity improves for a number of reasons. Face-to-face interactions that occurred quarterly or semi-annually now occur on a daily basis allowing informal social networks to flourish. Travel time and its physical effects on individual productivity are eliminated. Finally, loss of productivity from being away from the home office is avoided, while improved quality of life is realized, both of which contribute to productivity on the job.

HP Social Network Map Showing Social Network Ties Across the Company and Around the World

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Types of Telepresence Conferencing Solutions

Telepresence conferencing solutions can be generally grouped into the following categories:

Continuous Presence Group Systems — Continuous Presence Group Systems generally seat four to eight primary participants, though many providers have solutions that can add a second tier of seating to the environment. I believe the group system is the most important format for business because it most effectively replicates the traditional across-the-table business meeting in the usual and customary format with capacity for a traditional executive or project team.

Providers include: Destiny Conferencing, HP, Polycom RPX, Teliris, and Telanetix

HP - Halo Collaboration Studio

Destiny Conferencing / Polycom RPX 408 Series 11

http://www.ivci.com/telepresence-index.html


Telepresence Distance Learning Classrooms — Holding from 18 to 36+ participants in an effective format for classroom instruction, distance learning solutions allow organizations (corporate or educational) to conduct instructor lead, classroom training between their own internal locations and those of other institutions on their effective visual collaboration network.

Providers include: Destiny Conferencing, Polycom RPX, Teliris

Teliris GlobalTable VirtuaLive 360

Polycom RPX 400 Series / Destiny Conferencing / MedPresence

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Small Group Telepresence Systems — Small group systems are sometimes referred to as “one-to-three” or “one-to-four” person solutions. These solutions are less costly, seat less participants, and can be mobile. The video codec is usually a standards-based traditional videoconferencing codec and systems can be run on a company’s existing network if the proper bandwidth is available and compliment/improve traditional videoconferencing deployments.

Providers Include: ATK, Digital Video Enterprises,

Desktop and Executive Solutions — Desktop and Executive Solutions extend telepresence capabilities to executive offices or home offices improving communications between the executive team and key managers.

Providers Include: Digital Video Enterprises

Digital Video Enterprises Executive Telepresence SystemDigital Video Enterprises Desktop Telepresence Display

Digital Video Enterprises Telepresence 50ATK I Vision

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Specialty Telepresence Solutions and Environments

These can include unique telepresence applications:

• DVE’s telepresence podium, which can project a life-size and life-like image of a speaker into one or more locations.

• The MedPresence MOR 400, which integrates a telepresence capability into an operating room, allowing a surgeon to interact with remote medical students during a procedure.

• DreamWorks Vir tual Studio Collaboration solution, which allows for motion picture and animation storyboarding between sites and film editing.

• Research and Development Environments, such as the phar-maceutical company that has used Teliris’ technology to create a vir tual lab environment between remote locations.

Digital Video Enterprises Telepresence Podium The MedPresence MM200 is a portable telepresence solution that deploys from its own shipping crate and can be easily set up at remote hospitals, physician’s offices, and/or conference venues.

MedPresence MOR 400

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Telepresence is an art and science of trade-offs: cost versus performance, quality of environment versus available space, func-tionality versus ease-of-use making the experience and quality of communication in different telepresence systems vary. Adding to the complexity, many solution elements are the intellectual property of a specific firm and protected by patent. Nevertheless, most telepres-ence solutions provide some combination of the following features.

Eye Contact

Eye contact is chief among the body’s non-verbal cues. From infancy, we are biologically drawn to the gaze of our parents, estab-lishing a preference for personal communication that continues throughout life. Eye contact between humans is physiologically powerful, eliciting changes in blood pressure and heart ratexiii and increasing brain activity.xiv The information transmitted through eye contact is rich and varied:

— Eye gaze provides many communication fundamentals, including: feedback, conversational regulation (turn taking), and the expres-sions that punctuate emotion.xv

— Mutual eye gaze has been described by psychologists as “the key to the awareness of the thoughts of another”xvi

Persons with strong eye contact are perceived to be more honestxvii, attractivexviii and successfulxix. Conversely, psychologists call people with poor eye contact as “gaze-avoidant personalities,” rated less favorably in the eyes of others.xx

Traditional videoconferencing systems deliver poor eye contact because the problem of parallax leads participants to intuitively focus on the eyes of the remote participants and not the camera. I know of several traditional videoconferencing vendors and resellers that actually place a camera in front of the display (obscuring the view of the remote participants) of the videoconferencing systems they use for demonstrations at their corporate headquarters. This improves the experience for prospective customers who connect

to them from trade shows or resellers but they fail to mention the fact that the prospective customers are hardly getting what could be considered an accurate representation of the offering.

Digital Video Enterprises provides users with eye contact by mounting its products with eye-level cameras behind a piece of silvered glass known as a beam splitter. With the camera hidden from view (another key telepresence concept covered later), the remote participant is reflected off the beam splitter from an upward facing flat screen display. Behind the beam splitter, an “optical black” background absorbs diffused light, providing a superior contrast and image to what you’d see if you were looking directly at the display.

Digital Video Enterprises’ True Eye-Contact Display

Destiny Conferencing’s TeleSuite and Polycom’s RPX mount multiple cameras behind a rear projection screen at eye-level, each camera capturing half the scene. The result for participants seated in the center of the room is an excellent approximation of eye contact, which is lost the further out you sit to the right or left in the environment.

Engineered Environments

While more sophisticated videoconferencing integrators may address such environmental elements as lighting, acoustical materials, camera placement and the color/reflectivity of furniture, the overwhelming majority of traditional videocon-ferencing rooms do not. Simply sticking a videoconferencing end point in a traditional conferencing room is a recipe for a mediocre experience:

— Direct overhead lighting casts a shadow from the brow over the eye socket that the camera magnifies.

— A room decorated with strong, saturated colors can clash with the clothing of participants and skin tones, rendering them artificial.

— Sticking a videoconferencing endpoint at the head of a long conference table assures an unnatural meeting format.

Delivering Telepresence and Effective Visual Collaboration: The Telepresence Toolkit

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Some telepresence solutions such as Destiny Conferencing’s TeleSuite, the HP Halo Collaboration Studio, Polycom’s RPX, and the Teliris GlobalTable solutions, create engineered environments that precisely position participants. Some of the environmental aspects engineered environments tackle include:

Lighting — Integrated lighting optimized for video and positioned to ideally light each position in the environment.

Cultural Proxemics — Precisely positioning the seating to make the meeting format “culturally correct,” life-size and natural for both site-to-site connections and multi-site connections.

Mirrored Environments — Creating environments that are identical with the other remote locations in the network. This way, all participants seem to share the same physical space.

Acoustics — Using acoustical materials to improve both sound absorption (eliminating reverberation of sound in the envi-ronment), and sound insulation (blocking external sounds such as conversations in the hallway, outside traffic, or the building’s air conditioning system). In addition, many telepresence providers have directional audio that makes the sound appear to be coming from the direction of remote participants on the screen.

Absence of Visible Technology — Concealing as many aspects of the conferencing technology as possible. Studies have shown that the even when the brain’s visual cortex has been temporarily shut down, the brain can still process detailed visual information subcon-sciously.xxi Because human beings tend to behave differently in front of a camera (sometimes referred to as the “documentarian’s curse”), having a camera visible in a conferencing environment reduces the comfort level of participants and naturalness of the meeting. Destiny

Conferencing’s TeleSuite, Polycom’s RPX and Telanetix use small lenses concealed in a small opening in the display to minimize the effect. Teliris offers options that hide the camera behind polarized glass and in several of its solutions; Digital Video Enterprises is able to completely hide the cameras at eye level behind the display.

Video Quality

Of the many elements that go into an effective visual collabo-ration, video quality remains one of the most important. The quality of video transmitted over Internet Protocol (IP) networks depends on a number of factors:

• The amount of bandwidth available to the codec

• The quality of the network over which it is being transmitted

• The video resolution of the video codec and camera

Telepresence and effective visual collaboration providers improve video quality using a variety of methods:

Increasing Bandwidth — Bandwidth is the measure of the amount of information that can be transmitted across a network. The more bandwidth you have, the more visual information you can transmit. The majority of deployed traditional videoconferencing endpoints still use ISDN networks that typically transmit between themselves at about 384K (384,000 bits per second). New current generation IP videoconferencing endpoints are capable of speeds of 768K, 1.54Mbps, 4Mbps, or greater. Destiny Conferencing, HP Halo, Telanetix and Teliris all use IP networks that provide more dedicated bandwidth than traditional ISDN and the overwhelming majority of IP videoconferencing deployments.

Vendors Deploying Private Network Solutions

Vendor/Solution Bandwidth Utilized Bandwidth Deployed

Destiny Conferencing — 2 Screen System 1.54 Mbps 2 x T1/E1 — 3.0 Mbps

Destiny Conferencing — 4 Screen System 3.0 Mbps 3 x T1/E1 — 4.5 Mbps

HP Halo Collaboration Studio Confidential DS3 - 45 Mbps

MedPresence — MCR/MOR 400 4.5 Mbps 3 x T1/E1 4.5 Mbps

Telanetix — Digital Presence 1 Mbps to 45 Mbps 4 x T1 (6 Mbps) or DS3

Teliris — Standard GlobalTable 2 Mbps to 45 Mbps DS3 - 45 Mbps

Teliris — High Definition GlobalTable Confidential Confidential

Telepresence Systems — Vendor Bandwidth Recommendations

Vendor/Solution Bandwidth Recommendation

ATK Services - I Vision 1.5 — 4MB

Digital Video Enterprises - Executive Telepesence System, Telepresence 50, Telepresence Podium

1.5MB

Polycom RPX — 200 Series 1.5MB Minimum

Polycom RPX — 400 Series 3.0MB Minimum

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Improving Bandwidth — High Bandwidth Dedicated, QoS Private Networks

Because of the real-time nature and delay intolerance of interactive video, simply throwing more bandwidth at a video codec does not guarantee a seamless picture so many telepres-ence providers deploy dedicated Quality-of-Service (QoS) private networks to ensure quality. Transmitting video over IP networks takes the compressed video from the codec and breaks down the data into packets that are then sent to the remote site(s). There the video is decompressed and displayed on the screen. E-mail or web surfing can tolerate lost, late, or out-of-sequence IP packets (known as jitter in videoconferencing parlance), but not real-time video. When IP packets containing video are lost in transit or arrive out-of-sequence, the video codec doesn’t have all the pieces of the puzzle to correctly reassemble the scene, resulting in a jumpy, freeze-frame effect. This ruins the immersive experience and “jolts” the brain back to a state of disbelief. A one-way latency (the time it takes IP packets to traverse a network and process through the video/audio codecs) of over 250 milliseconds would result in a perceptible and annoying delay when remote participants speak.

Because the Internet is a “best-effort” network where no packets receive prioritization over any other packets, telepresence solutions need dedicated private networks that ensure extremely low latency, packet-loss, and jitter. Much of the developing world, such as China and India, doesn’t have abundant network bandwidth of the quality required to support the real-time interaction of

telepresence, making the cost of delivering a high-bandwidth QoS network substantial in those locales.

Increasing Resolution

Video resolution can be defined as the number of pixels across the width and height of a display. The greater the resolution, the sharper the picture. The sharper the picture, the better the visual realism, which improves the quantity and quality of the informa-tion received by the brain as the subtle nuances of interpersonal communications become more apparent. These subtle nuances include perspiration, a slight grimace, or other nonverbal cues that might provide a window into the thoughts, truthfulness, motivation or comprehension level of remote participants.

A higher degree of visual realism also improves the brain’s ability to suspend disbelief and accept the telepresence experience, letting it stop focusing on the “medium” and concentrate on the “message.”

The majority of deployed traditional videoconferencing systems are limited to providing FCIF resolution -352 x 288 (352 horizontal pixels x 288 vertical pixels) at 15 - 30 frames per second. By comparison, standard cable television delivers a resolution of 672 x 384 at 30 frames per second and HDTV delivers 1280 x 720 or 1920 x 1080 at 30 to 60 frames per second. Telepresence providers use current generation video codecs including many that are capable of high-definition images to provide a superior picture quality.

Vendor/Solution # of people screens People Screen Size & Type Resolution Per People Screen

Compression Standard

ATK Services I Vision 1-5 50” DVE telepresence display 1024 x 768 H.263/H.264 MPEG-4

Destiny Conferencing TeleSuite 200 Series

2 4’ x 4’ panels 48” x 43” Rear Projection Fresnel Linticular

2SIF (352 x 576) scaled to 1024 x 768

H.263/H.264 MPEG-4

Destiny Conferencing TeleSuite 400 Series

4 4’ x 4’ panels 48” x 43” Rear Projection Fresnel Linticular

2SIF (352 x 576) scaled to 1024 x 768

H.263/H.264 MPEG-4

Digital Video Enterprises - Executive Telepesence System

1-3, 8+ in Multipoint or Switched Presence

40-46” LCD, Hidden Camera behind Screen

720p HDTV H.263/H.264 MPEG-4

Digital Video Enterprises - Telepresence 50

1-3, 8+ in Multipoint or Switched Presence

50” Plasma, Hidden Camera behind Screen

720p HDTV H.263/H.264 MPEG-4

Digital Video Enterprises - Telepresence Podium

1, Appears behind Podium

Holographic Projection technology

720p HDTV H.263/H.264 MPEG-4

HP Halo Collaboration Studio 3 50” plasma MPEG-2

MedPresence MOR 400 4 4 flat screen or Rear Projection Video Wall

1024 x 768 2CIF or Greater

H.263/H.264 MPEG-4

MedPresence MCR 400 4 4’ x 4’ panels 16’ x 32” Rear Projection Video Wall


H.263/H.264 MPEG-4

Polycom RPX 200 Series 2 4’ x 4’ panels 8’ x 42” Rear Projection Video Wall


H.263/H.264 MPEG-4

Polycom RPX 400 Series 4 4’ x 4’ panels 16’ x 42” Rear Projection Video Wall


H.263/H.264 MPEG-4

Telanetix 2 Customer’s Choice 1280 x 360 MPEG-4

Teliris — Standard GlobalTable 2-8 42” up to 100” Flat Panels D1 MPEG-2 or MPEG-4

Teliris — High Definition GlobalTable

2-8 42” up to 100” Flat Panels 720p or 1080i MPEG-2 or MPEG-417


Audio Quality

Audio quality is one of the most underestimated aspects of an effective visual collaboration experience. Telepresence providers strive for a level of acoustical realism that makes remote partici-pants sound natural and in the room. This realism in a conference depends on a number of factors:

Latency and Lip Synch — A remote participant’s speech must be in sync with the movement of his or her lips. Similar to video quality, high latency will produce a delay in the time between when something is said and heard on the remote end. This is a function of the quality of the network.

Audio Quality — As with video quality, the more audio information captured and transmitted to a remote location results in a more faithful representation to listeners. Most telepresence providers offer CD-quality audio with good echo cancellation in a “full duplex” configuration, allowing both sides to speak

simultaneously without losing any of the audio from either location. This level of audio can’t be achieved in traditional multi-point videoconferences. Telepresence providers including Destiny Conferencing, Telanetix, and Teliris solve this problem by maintaining direct connections to each location.

Spatial Orientation — In a traditional group videoconference, with a single microphone and single speaker on each side, it is often difficult to immediately determine which tiny remote participant is speaking, referred to as spatial orientation. A traditional “Hollywood Squares”-esque multi-point videoconference exacerbates this problem by making participants even smaller. Most telepresence group systems, on the other hand, make remote participants life-size, improving the ability to understand who is talking and some use directional audio to make the sound appear to be coming from a particular speaker or direction in the environment.

Vendor/Solution Audio Quality Audio Features Full Duplex In multi-point

ATK Services 64 Kbps 20 KHz 5:1 A/V

Destiny Conferencing 64 Kbps 22 KHz Y

Digital Video Enterprises — Executive Telepesence System, Telepresence 50, Telepresence Podium

Multiple channel audio and voices can emanate from the location of the people on the screens

HP Halo Collaboration Studio CD Quality Audio Y

MedPresence MCR/MOR 64 Kbps 20 KHz Y

Telanetix 128 Kbps 44.1 KHz

Studio quality, per channel echo cancellation and noise reduction, equalizatin, level compressor

Y

Teliris — Standard GlobalTable 256 — 384 Kbps 20 KHz

Teliris - Standard GlobalTable - High end echo cancellation per vectored channel

Y

Teliris — High Definition GlobalTable

256 — 384 Kbps 20 KHz

Teliris - High Definition GlobalTable - High end echo cancellation per vectored channel

Y

Polycom RPX 200 Series 64 Kbps 22 KHz Automatically mixes microphones and other audio sources while cancelling acoustic echo’s and background noise.

Y

Polycom RPX 400 Series 64 Kbps 22 KHz Automatically mixes microphones and other audio sources while cancelling acoustic echo’s and background noise.

Y

Ease-of-Use

Traditional videoconferencing has long been characterized by technical complexity, requiring the mastery of often indecipher-able remote controls and the assistance of a conferencing or IT professional in the room to set up and start the conference. While videoconferencing providers have simplified their controls, most telepresence providers have taken it a step further by:

— Providing concierge services that handle every aspect of reservation and call set up. This is an option offered by HP Halo, Destiny Conferencing, Polycom RPX, and Teliris.

— Tightly integrating and simplifying the use of collaborative tools in the environment.

— Simplifying the ability to launch ad-hoc calls by providing a touch sensitive GUI or intuitive call set up menu.

— A fixed camera and display solution that captures the entire scene eliminating the need to adjust the camera and the annoyance of disruptive panning, tilting, and zooming.

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As an example: Teliris offers a room availability and scheduling option that provides a touch sensitive display outside each GlobalTable room that simplifies ad-hoc usage. Having a hallway conversation with a co-worker and want to bring in Bob in London? Check the avail-ability of both GlobalTable rooms at the door, reserve both rooms and call Bob in London on his cell phone and ask him to pop in for a quick meeting.

Scaled Geometric Perspective/Life-Size Participants

Most traditional group videoconferencing systems display the image of remote participants to a single 36- to 50-inch monitor. While many videoconferencing providers offer dual displays, the second display is meant for data, a self-view of your location, or another remote location, not to double the screen real estate. As a result, the single screen reduces the size and warps the proportions of the people on the other end. Those non-verbal cues that are so important to communication end up getting lost in the shuffle, limiting the suspension of disbelief required to take participants from an observant experience to an immersive one. Most traditional videoconferencing systems display users from more than two locations in a format known as “continuous presence,” which makes all participants look like they’re on the title sequence of the Brady Bunch.

Telepresence providers address the problem of scaled geometric perspective with large format video walls and multiple monitors, keeping everyone life-size, or almost life-size and in perfect proportion.

Multi-Point Meetings — Conferencing with Three or More Locations

Traditional multi-point videoconference can be broken into two main formats:

Continuous Presence — Each remote site is reduced in size and visible on the screen in with various screen formats of “Hollywood Squares”.

Voice Activated — The remote site that is speaking or spoke last is visible on the screen, leaving the other locations invisible until they speak.

Neither approach offers much in the way of replicating the natural dynamics of a face-to-face meeting. Traditional continuous presence formats often shrink images so small they prohibit the non-verbal cues so essential to effective visual collaboration. Voice activated formats also negate this benefit by keeping most participants off-screen.

Most telepresence providers devote single or multiple screens to each remote location, allowing the key individuals at each to remain life-size or almost life-size.

While group telepresence environments do have their limita-tions (the number of visible life-size participants is limited to the available screens in the environment), the overall experience is substantially more natural, comfortable and productive than the tiny remote participants of videoconferencing. Some remote participants may not be visible on-screen, but all of them have a life-size view of the action. Besides, most large-group meetings tend to be dominated by a small number of speakers anyway.

Teliris uses a proprietary concept called “Vir tualVectoring” to provide realistic lines of sight and audio direction in a multi-point meeting. To explain Vir tualVectoring, let’s expand on the three-site GlobalTable meeting above, using some additional images supplied by Teliris.

To keep the appropriate orientation between speakers in a multi-point meeting, GlobalTable participants at each location tell the system where the active participants are sitting. Because Teliris places a dedicated call between each site with a specific camera, microphone and display for each position, the participants are able to maintain their lines of site and the direction of audio when speaking with multiple locations.

The Teliris GlobalTable touchscreen room availability and scheduling display

Illustrative example of a three-site, multi-point meeting using the Teliris GlobalTable

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The HP Halo Collaboration Studio can connect up to four sites with up to four participants visible at each location.

Destiny Conferencing’s TeleSuite System and Polycom’s RPX can connect up to five locations in their 400 series offerings with from two to twelve remote participants visible per screen depending on the model.

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Switched Presence — a proprietary solution offered by Digital Video Enterprises and ATK Services, switched presence gives each participant a microphone with a small control unit installed under the lip of the table in their group system. Everyone in the multi-site conference can take “the conch” by pushing a single button, which switches the focus of all remote sites to that participant, accompanied by a quick screen fade. This way, each participant appears life size and appears to have eye contact with all participants.

Data Collaboration

Data may enter a visual collaboration environment from a laptop, USB flash drive, CD, piece-of-paper or other physical object, such as a circuit board. To handle all this input, telepresence environments use a variety of tools, including:

Collaboration Screens — All providers of group telepresence systems provide screens for sharing power point slides, documents or the output from document and object cameras. Placement of the screens differs in each environment.

Digital Video Enterprises / ATK switched presence control unit

Teliris GlobalTable Data Collaboration Screen

Destiny Conferencing, Polycom RPX and MedPresence provide 17” monitors between each two seats

Telanetix Digital Presence System has data collaboration on the outside screens 21


Plug and Play Data Collaboration — Many telepresence providers simplify sharing data between locations by providing a plug and play VGA connection that lets participants connect a laptop for easy sharing between locations.

Document Replication — Teliris offers a document replica-tion system that automatically scans, distributes and prints hard copies of physical documents to all locations in a conference.

Document and Object Cameras — The HP Halo Studio and ATK’s I Vision offer a ceiling mounted high resolution, high magnifi-cation camera that lets users share documents or physical objects on the studio’s 50-inch collaboration screen. The magnification and resolution are high enough to show detail as fine as printed circuit boards or garment stitching.

HP Halo Collaboration Studio’s Plug and Play Data Collaboration

Teliris Document Replicator

HP Halo’s High Resolution, High Magnification Document Camera22


Stand Up Presentation Capability — The Teliris GlobalTable Vir tuaLive 360 telepresence environment offers an optional stand-up presentation capability which can capture a speaker at a lectern and display the speaker behind lecterns at the other remote locations. The environment can also capture par ticipants at a whiteboard or an optional storyboarding capability for the motion picture and animation industries.

Reliability, End-to-End Service and Service-Level Agreements

Telepresence doesn’t offer a lot of productivity advantages if the system doesn’t work. Every time. In every location. Around the world.

Complicated telepresence solutions entail the management and monitoring of multiple, complex sub-systems. These can include:

• Video and Audio codecs• Acoustical components

• Echo-cancellation• Multiple microphones and speakers

• Network links • Local loops provisioned by a telecom provider• Long-haul transport• Network equipment co-located around the world

• Network premise equipment • IP Routers/Switches

• Display Systems• Flat panel displays and DLP projectors with bulb life issues

• Reservation Systems• Gateways to off-network IP and ISDN traditional videoconfer-

encing end-points

The sub-systems listed above are a small sampling of the various technical elements that can comprise a group telepres-ence solution. This complexity and interdependence is one of the reasons the majority of group telepresence system providers offer

their solutions as an end-to-end service backed up with a Service Level Agreement covering: System Availability, Network Availability and Network Quality including packet loss, latency and jitter.

Various components of end-to-end service typically include:

Site Survey — A review of the architectural, facilities, networking, delivery, and installation logistics of each site. This is especially important for engineered environments that may require modifications to the facility to accommodate the environment.

Telco Provisioning — Handling every aspect of provisioning the network to each location.

Proactive Monitoring and Remote Management — Actively and continuously monitoring the quality of the network and status of the devices with the ability to remotely diagnose and trouble-shoot any problems.

Concierge Services — The ability for any participant to access an “operator” that can place a call, assist with a reservation, explain the collaborative tools or bridge in a telephone participant or legacy videoconferencing end-point.

Equipment Maintenance and On-Site Repair — Burnt-out bulb in Burma? Mangled microphone in Malaysia? Cracked camera in Calgary? Many vendors, including Destiny Conferencing, HP, and Teliris, offer equipment maintenance and on-site repair around the world.

Teliris GlobalTable VirtuaLive 360 With Stand-up Presentation and Lectern Option

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So while traditional videoconferencing systems long promised substantial Return-On-Investment (ROI), much of that ROI never materialized because the systems weren’t used. This section looks at the substantial improvements in usage of telepresence systems over traditional videoconferencing and then the savings and benefits that become possible because they are actually used.

Measuring and Understanding Telepresence and Effective Visual Collaboration Usage

Like traditional videoconferencing, the usage of telepresence solutions is dependent on a number of factors:

• The size, geographical distribution and business of the organization

• Firms with geographically dispersed knowledge workers collaborating on software or pharmaceutical development are naturally heavier users than, say, a mining company or textile manufacturer, where the majority of employees are engaged in manual labor.

• Large multi-national firms with offices scattered over multiple international time zones tend to use their systems across off-peak hours driving additional usage.

• Whether or not the system is open to all employees or reserved for management.

• The total number of telepresence sites an organization has and the total number of legacy videoconferencing systems to which the telepresence systems can connect.

With that said, how do the major telepresence group system vendors stack up with traditional videoconferencing’s 15 hours per month, per endpoint?

• Destiny Conferencing, who also manufactures the similar Polycom specified RPX, reports some customers averaging as many as 200 hours per site, per month.

• HP, whose 20 active internal Halo Collaboration Studios make up the largest deployment of telepresence sites in the world, has systems averaging up 200 hours per month with some hitting 275 hours per month.

• Some of this usage is assumed to be demonstrations for prospective customers

• Teliris reports average usage at 60 percent of capacity during a 10-hour business day or 120 hours per month, per location.

Business Effectiveness — Increased Utility, Greater Productivity, and Improved Outcomes

“I think the Halo room in the short time we’ve had it has already increased my team’s efficiency. You have to understand how we work. We have a large contingent of people in Chicago, another large contingent in Dallas and a fair number of people in New York and those people literally traveled every day between those three sites - and that’s travel. Our expectation is that this type of travel will virtually stop.”

-Steve Reinemund, CEO and Chairman of the Board, PepsiCo

Increased Utility

The poor quality of the videoconferencing experience has traditionally limited its usage to primarily lower importance intra-company meetings. Very few organizations would ever consider having a Board of Directors’ session or an important meeting with a customer using traditional videoconference. And if they have, the outcome was likely limited. The quality of telepresence has expanded the utility of visual collaboration to applications and types of meetings previously beyond consideration for traditional videoconferencing users. Some examples:

• DreamWorks’ Virtual Studio Colloboration initiative lets the company conduct virtual storyboard sessions between various campuses and Aardman Animation, a joint venture partner, in Bristol, UK. DreamWorks credits the use of telepresence with its ability to ramp up from producing one animated feature a year to its current pace of two animated features a year, effectively doubling its revenue potential each year.

• UBS and Oppenheimer used TeleSuite’s publicly available virtual meeting center at the Waldorf=Astoria to meet with private investors at another publicly available TeleSuite at the Ritz-Carlton in Phoenix. The companies’ mutual fund and portfolio managers could present to, answer questions from, and develop a rapport with the remote investors. Some of these events were catered and one concluded with a vir tual wine tasting.

• HP, utilizing its own Halo network, transferred a production line from its R&D beginnings in Corvallis, Oregon to its permanent home in Singapore. According to HP, the usual timeframe for such a move is 12 months, with multiple trips between locations. The HP team responsible for the move estimated that its use of Halo enabled it to shave six months off the project and avoid 44 international trips.

The ROI of Telepresence and Effective Visual Collaboration

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Greater Productivity

While it is harder to measure the soft-dollar ROI of greater productivity over traditional videoconferencing, numerous telep-resence customers have specifically mentioned this as a benefit. In late 2004 CapitalOne surveyed over 150 employees, from the CXO level down, who had access to and experience with both a telepresence system from TeleSuite (now Destiny Conferencing) and the company’s top-of-the-line videoconferencing rooms. The videoconferencing rooms were custom integrated solutions that combined IP videoconferencing running at high-bandwidths, a 60” display that doubled as a rear-projection interactive whiteboard, a VCR, a DVD player, a document camera, and a custom-designed, touch-sensitive, wireless remote control that simplified call set up and use of the collaborative tools.

Here are some of the results of the survey and participant comments:

“Awesome, we are fans and think it is so superior to videoconfer-encing that this is the only format we should use going forward”

“All TeleSuite meetings I have attended have been very positive. I could never use a videoconference again! TeleSuites are great!”

“I set up meetings for T4+ all the time and using TeleSuite (and learning about the TeleSuite tools) have made meetings so much more efficient and productive for me. My team always gets excited when we have the TeleSuite for meetings.”

Improved Outcomes

The quality of the collaborative experience has also lead to improved outcomes.

Pearson plc, a $7 billion media company with 34,000 employees in 61 countries, has been a Teliris GlobalTable customer since 2001. Justine Kanter, an HR and management development executive at Pearson, was good enough to provide some specific examples of how Pearson is using the GlobalTable to “share intellectual property across the company and allowing executives to connect across business units” without extensive physical travel. Ms. Kanter credited GlobalTable with enabling a degree of international collaboration between publishing subsidiaries that had tradition-ally been in separate publishing niches, leading to one of Pearson’s most complex and successful product launches ever.

In an ambitious attempt to create a visually compelling cross-curricular reading program for elementary school students, the company used GlobalTable to connect across the Atlantic the talents and image library of the company’s Dorling Kindersley (DK) subsidiary in London with the educational publishing expertise of Pearson Longman in New York City.

The project, fittingly enough, came to called Four Corners. The GlobalTable connection allowed the New York and London teams to meet for over a year, as often as twice a day, to collaborate on 140 titles —textbooks, teacher support materials and CD-ROMs spanning science, history, geography, art, design and technology, among others, and each published in four different versions. According to Ms. Kanter : “First year revenue was estimated at $2m and exceeded all expectations with actual sales of $10m. It has been heralded as one of the greatest Pearson publishing success stories.”

Hard-Dollar Travel Avoidance

While the soft-dollar benefits of telepresence and effective visual collaboration (improved productivity, business effective-ness, flexibility and time-to-market advantage) outweigh travel savings alone, many organiza-tions evaluating this sort of investment first focus on the more easily quantifiable hard-dollar costs of reducing intra-company travel. In the Fortune 2000 it appears, a lot can be cut. HP’s travel expenses, including executive aviation, have been reported to be one percent of its $86 Billion in revenue, which equates to about ~$860MM annually.xxii In Q4 of 2005 with only a fraction of their existing network of Halo Studio up and operational

HP estimated they were able to shave two percent off their existing travel budget or ~$17.2MM. Cisco’s CEO John Chambers has said he believes a network of twenty telepresence centers would allow the company to shave 20 percent off its travel budget.

Let’s look at some actual ROI models to better understand where the savings come from.

Important Note on the Following Hard-Dollar ROI Models: With less than an estimated forty companies actively utilizing telepresence and effective visual collabo-ration solutions worldwide (and many for less than one year), ROI data is extremely hard to come by. Many companies aren’t willing to share their travel data, and many companies using telepresence solutions never did any ROI analysis, assuming the Return on Investment to be a “no-brainer.” While some of the ROI data below is several years old and — in two cases — from companies that have not yet deployed telepresence solutions, the models we’ve established are meant to illustrate the costs involved in intra-company travel and convey how orga-nizations can model their potential travel savings which is a consulting engagement the Lab offers. Some of the following companies cited here will remain anonymous.

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ROI Study #1

Fortune 100 Financial Services Company - >$20 Billion in 2003 Revenue

Analysis done in 2004 with 2003 data — Company ended up not deploying a telepresence solution at the time

2003 Total travel spend excluding executive aviation: $95.6MM

2003 Total Spend by Expense Category

Expense Type Total For Exp Type

Airfare $49,243,219.51 51%

Car Rental $4,072,464.34 4%

Lodging $29,664,622.59 31%

Meals-Self Traveling $4,685,348.40 5%

Taxi/Limo $7,983,438.54 8%

$95,649,093.37

The analysis looked at inter-company travel between six key locations, including London, Sydney, New York and three additional domestic locations. In 2003, the company made a total of 15,434 trips between these pairs of cities, with the top four pairs (all domestic) accounting for 4,800, 3,057, 3,044 and 1,956 respectively. The fifth largest city pair was NYC-London, with 1,165 trips.

The company spent a total of $10.6MM on air travel for the top six destinations and $15.8MM on hotels. Trips to these locations averaged 1,286 trips per month. An analysis of four variables — airfare, hotel, meals (self) and car rental/taxi/limo expenses — yielded a fully-weighted average of $1,727 per employee, per trip.

The analysis did not examine: Cost of corporate aviation, productivity, tax advantages of leasing, or cost of executive time while in transit.

1286 TOTAL AVG. Monthly Total Annualized

Shifted # of TRAVEL COSTS TRAVEL COSTS % T&E T&E

% of travel Travelers Traditional Virtual Traditional Virtual Savings Savings Savings

1.0% 13 22,209 127,622 1,727 9,923.95 -475% (105,413) (1,264,953)

2.5% 32 55,523 127,622 1,727 3,969.58 -130% (72,099) (865,187)

3.8% 49 84,395 127,622 1,727 2611.57 -51% (43,227) (518,724)

5.0% 64 111,046 127,622 1,727 1984.79 -15% (16,576) (198,911)

5.8% 75 128,813 127,622 1,727 1711.03 1% 1,191 14,298

10.0% 129 222,092 127,622 1,727 992.40 43% 94,470 1,133,642

12.5% 161 277,615 127,622 1,727 793.92 54% 149,993 1,799,919

15.0% 193 333,138 127,622 1,727 661.60 62% 205,516 2,466,196

17.5% 225 388,661 127,622 1,727 567.08 67% 261,039 3,132,472

20.0% 257 444,184 127,622 1,727 496.20 71% 316,562 3,798,749

22.5% 289 499,707 127,622 1,727 441.06 74% 372,085 4,465,025

25.0% 322 555,231 127,622 1,727 396.96 77% 427,609 5,131,302

30.0% 386 666,277 127,622 1,727 330.80 81% 538,655 6,463,855

ROI Analysis Assumptions

1) Seven Telepresence Systems at six company locations

2) Telepresence systems were leased over 48 months

3) Unlimited usage at each endpoint

4) $18,232 was the average cost per telepresence system per month

5) Total T & E $1,727 USD per trip

6) 1,286 round trips per month

7) Green highlight is breakeven

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ROI Study #2

Pearson plc Global 1000 Media Company

> $7.5 Billion in 2005 Revenue

ROI Analysis Conducted in 2002 with 2002 Data

Teliris GlobalTable Customer — Locations in New York City and London at time of analysis

• Have since added additional rooms in London and New York

• Analysis looked at savings internal to corporate parent only and not to subsidiaries.

• Analysis only looked at hard-dollar travel savings of specific regularly scheduled transatlantic meetings

• Analysis did not consider : corporate aviation or productivity

• Executive time in transit was estimated at:

• Mid-level executives: $2,000 per day

• Senior Executives: $4,000 per day

Corporate Strategy Group Meetings

• Five members in the UK, Six in the US

• GlobalTable replaced three Meetings Every 2 Months

• $90,000 in savings every two months

• Business class flights, hotel, car service, dining, and executive time in transit

Management Committee Meeting

• Four members in the UK, 3 in US

• Group moved from monthly in-person meetings to using GlobalTable every other month and an in-person meeting on alternate months.

• Approximate cost savings: $21,750 per meeting

• Business class flights, hotels, car service, dining, and executive time in transit

Corporate Communications Meetings

• New York City based Director meeting with London team and London investors

• Approximately 4 trips per month @ $7,250 per trip

Company’s estimated annualized savings for the single business unit @ $2.1MM

Company’s Self-Reported Additional Benefits: Justine Kanter, a Management Development and HR Executive at Pearson, reports:

“I have been thinking a little about Global Table, after we spoke, particularly as I went straight into a meeting with the US. There are two important points to make I think:

1. Frequency of use continues to increase, on a wide scale. The diary for bookings is full now, almost 2-3 weeks in advance. It is becoming second nature for people to use it for the majority of communication with the US, and that includes our main Pearson Education offices in New Jersey, where people make the journey to Manhattan without hesitation. The cost savings to all parts of the business continue, particularly as people are placing increasing importance on family life and reduced travel - all values very strongly espoused by Marjorie Scardino [Pearson’s CEO]. David Bell [Director and Chairman of Subsidiary] for example is doing less and less travel at the moment and is therefore increasingly reliant on it.

2. It is not just about saving money on international travel. It is also about getting smarter at: communication strategy collaboration Marjorie recently announced a $50,000 prize for the best collabora-tion at Pearson. Marjorie’s aim is to get Pearson people working together across businesses to create new products, open new markets and build working relationships with their colleagues. Our businesses have more in common than they first thought. Obstacles to collaboration soon fall away when you have tools such as Global Table in place. We are now discussing strategic initiatives with people in the business that previously were just email colleagues because it is so simple. We are witnessing a massive culture change where people are talking more openly to each other about their markets and products, and not feeling in any way threatened by sharing knowledge. Talking face to face with someone is very different from sending memos and submitting reports. For example, the meeting I went off to on Wednesday was with a group of us here at plc, The Financial Times, and one of the HR Directors in Pearson Education US. We have a very good relationship with all of them but previously we would only communicate by email for standard business. We had a brilliant 2 hour discussion about a key talent review, sharing joint initiatives and looking at ways we could roll something out across the whole of Pearson - that conversation would never have happened previously and importantly, the initiative would never have been developed. Finally there are an increasing number of positions being taken by senior managers that require transatlantic collaboration — Chairman of Penguin worldwide, Finance Director of Penguin worldwide, Chief Collaboration Officer, and one person taking on the role of President of Pearson Inc in the US and Communications Director in the UK. This is not to say that these roles would not exist without Global Table, but it is certainly a very good tool to help make these positions work effectively.”

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ROI Study #3

Fortune 500 Oil Company

2004 ROI Analysis on 2003 Travel Data

• Data from Jan. 1, 2003 — Sept. 30, 2003 only

• Analysis looked at top three city pairs only: Houston, London, and third Domestic U.S. Location

• Nine-month spending on travel for top three city pairs: $3,192,338; Est. 2003 Total: $4.25MM

• Airfare, hotel, car rental/car service

• Analysis did not evaluate: corporate aviation expenses, productivity, meals, entertainment, or executive time in transit

• Total number of trips between top three city pairs in nine months: 2,987 Est. 2003 Total: 3,982

• Average Costs Per Trip: Airfare: $2,097 Car/Hotel: $681 Total Per Trip: $2778

Monthly Components Annualized 6 Month

% Travel Trips Shifted to TeleSuite

# Travel Trips

# TeleSuite Meetings

# Meeting Hours

Travel Costs

TeleSuite Site Costs

TeleSuite Usage Costs

Combined Travel + TeleSuite

Costs

Travel Shift to TeleSuite Savings/Loss



0.0% 96 0 0 $266,667 $21,900 $0 $288,567 ($21,900) ($262,800) ($131,400)

5.0% 91 4 11 $253,333 $21,900 $1,782 $277,015 ($10,349) ($124,184) ($62,092)

10.0% 86 7 22 $240,000 $21,900 $3,564 $265,464 $1,203 $14,432 $7,216

15.0% 82 11 32 $226,667 $21,900 $5,346 $253,913 $12,754 $153,048 $76,524

20.0% 77 14 43 $213,333 $21,900 $7,128 $242,361 $24,305 $291,664 $145,832

25.0% 72 18 54 $200,000 $21,900 $8,910 $230,810 $35,857 $430,280 $215,140

30.0% 67 22 65 $186,667 $21,900 $10,692 $219,259 $47,408 $568,896 $284,448

35.0% 62 25 76 $173,333 $21,900 $12,474 $207,707 $58,959 $707,512 $353,756

40.0% 58 29 86 $160,000 $21,900 $14,256 $196,156 $70,511 $846,128 $423,064

45.0% 53 32 97 $146,667 $21,900 $16,038 $184,605 $82,062 $984,744 $492,372

50.0% 48 36 108 $133,333 $21,900 $17,820 $173,053 $93,613 $1,123,360 $561,680

55.0% 43 40 119 $120,000 $21,900 $19,602 $161,502 $105,165 $1,261,976 $630,988

60.0% 38 43 130 $106,667 $21,900 $21,384 $149,951 $116,716 $1,400,592 $700,296

Company Travel Data

Average T&E per trip:

Airfare: $2,097

Car/Hotel per trip: $681

Meals/Incidentals per trip: $0

Total T&E Per Trip: $2,778

Assumptions

3 TeleSuite sites: London, Houston & 3rd City

TeleSuite Systems Initially Capitalized — Not Leased

Total # Travel Trips = Monthly company travel only between all 3 cities: 96

Total # Meeting Hours = Average meeting length: 3

Travel Costs = Average T&E per trip: $2,778

TeleSuite Site Costs = Monthly site for all 3 sites (fixed): $21,900

TeleSuite Usage Costs = Hourly rate per site: $75

(assumes 80% of meetings are 2-way, 20% are 3-way)

The analysis did not examine: Cost of corporate aviation, productivity, tax advantages of leasing, or cost of executive time while in transit.

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• Reduced Intra-company business travel — Quantifiable hard dollar ROI

• Reduced Use of Executive Aircraft — Quantifiable hard dollar ROI

• Productivity — Shortening decision times. Accelerating the speed of business. Reducing time in transit and out of the office.

• Flexibility — The ability to hold meetings that would be impossible in any other format due to the time limitations of physical travel and/or the impossibility of being in two places simultaneously.

• Cost Efficiency — The ability to bring more of the team to a meeting that normally would have traveled.

• Knowledge Transfer & Management — Some telepresence envi-ronments can be used to capture, stream, and archive content (including both video and data) created in the environment.

• Time-to-Market Advantage — The ability to reduce the cycle time to launch new product offerings and integrate them into production.

• True Lease Tax Advantages — Many telepresence systems can be leased with an equipment write-off tied to the lease term, which can be shorter than IRS depreciation schedules, resulting in larger tax deductions each year.

• Merger & Acquisition — Improving the M&A process by:

• Allowing the key executives from each team to be “right down the hall” from their counterparts.

• Reduce the costs associated with M & A in hard-dollar travel, lost productivity, and technical integration.

• Improve the knowledge and cultural transfer between the organizations.

• Quality-of-Life — Business travel can be hard on personnel, families, and the lower back.

• Relationship Management — The ability to meet face-to-face and nurture important business relationships with board members, clients, direct reports, vendors, shareholders, and the media among others.

• Employee Health & Safety — The ability to do business in regions that hold the threat of terrorism, war, or public health emergencies.

• Disaster Preparation & Business Continuity — The ability to effectively manage after a disaster or during restrictions of air travel due to war or terrorism.

• Improved ROI from existing VTC investment — Many telepresence solutions have been proven to improve the usage and ROI of existing videoconferencing deployments by improving the experience of connecting to legacy videoconferencing systems and increasing their usage.

Summarized Hard and Soft Dollar ROI and Intangible Benefits

The Polycom RPX /Destiny Conferencing 210M seats ten participants and doubles as a traditional conferencing/training room

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Telepresence Buyers Guide

Understanding the Total Cost of Ownership and Acquisition Scenarios

When an organization contemplates a telepresence solution, it must first decide between purchasing an end-to-end managed service (such as Destiny Conferencing’s TeleSuite, Polycom’s RPX, the HP Halo Collaboration Studio, or the Teliris GlobalTable) or building a custom integrated solution. The latter uses products or bundled solutions from vendors such as ATK, Digital Video Enterprises and Telanetix that require installation, networking, and support from an internal conferencing / IT department or third-party vendors. Solutions by Destiny Conferencing and Polycom can be deployed as either end-to-end managed services or the telepresence environments purchased outright and run on an organization’s existing network. Since no single provider currently offers a complete range of telepresence solutions, it is conceivable that an organization might deploy a mix of vendors. Example:

• Six seat HP Halo Collaboration Studios for group collaboration between offices and to connect with vendors, customers and/or joint venture partners on the HP Halo Collaboration Network

• 21 or 36 Seat TeleSuite Distance Learning Environments for training and large groups

• Digital Video Enterprises’ desktop Executive Telepresence System in the offices of senior executive

For the sake of simplicity, we will break these options down between End-to-End Managed Services and Custom Integration.

End-to-End Managed Services

Typically the end-to-end managed service providers break their costs down into two components:

Upfront Costs: The telepresence systems themselves including the environment and electronics, a site survey for each location prior to installation, and the on-site installation of the system.

Recurring Costs: The IP network, 24 x7 concierge, help desk and reservation services, and on-site equipment maintenance.

I will add to the list a third component which I call:

Additional/Hidden Costs: These can include: acquisition consulting, internal project management and training costs and facilities (some facilities require significant modifications & make-ready to accept a specific telepresence environment, such as moving a vent, removing walls or repositioning a door.)

Custom Integration

Vendors such as HP Halo and Teliris do not let the buyer run their products on an organization’s existing network or manage them internally, but this is not a problem for companies like ATK, Destiny Conferencing, Digital Video Enterprises, Polycom, and Telanetix. Understanding the total cost of ownership for a custom integrated solution is much more complicated to determine — the costs can vary widely depending on a number of variables:

• Network Connectivity — Do you have the right type of network and enough bandwidth for the application or will you need to deploy an overlay network?

• Video Network Infrastructure — Do you require multi-point capabilities and does that require additional video network infrastructure to purchase and support?

• Custom Software Development — Do you want a simplified interface to integrate collaborative tools, storing and archiving of sessions, and/or streaming to the internet? Scheduling integration with Outlook, Lotus Notes, and/or a company web portal?

Capitalize or Lease?

After determining the vendor and initial number of sites, an organization will need to decide whether to capitalize the upfront costs or lease the equipment. Leasing can provide tax advantages, such as an accelerated depreciating schedule. HP offers a leasing option on its $425,000 per room HP Halo Collaboration Studio through HP Financial Services that wraps up the upfront costs, including environment, electronics, site survey and on-site instal-lation into a 48-month lease with a fair market value end-of-term purchase option. When coupled with the recurring charges for HVEN (HP’s network, concierge, and on-site maintenance services), the cost of acquiring a Halo Collaboration Suite comes in at a flat-rate cost of $27,500 per month, per room in a four-studio scenario.

The HP Halo Collaboration Studio connected in a conference

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The Future of Telepresence and Effective Visual Collaboration

Now that the end-user acceptance problems of visual collabo-ration have been solved and the early adopters are sharing their experiences with the benefits and ROI, telepresence appears to have a bright future indeed. HP and Polycom’s entry into the market and Cisco’s impending entry announced in Newsweek in March of 2006 is sure to attract the attention of other potential Global 2000 competitors (Sony and Tandberg are obvious candidates as fast-followers) assuring more research and development resources directed at the field. Let’s look at some of the trends that will be driving the industry in the coming decade:

Effective Inter-Company Business

The ability for organizations to instantaneously and effec-tively connect with vendors, investors, joint-venture partners and customers globally, will revolutionize business in ways that can only be speculated on at the dawn of this technology’s inception.

This level of interconnection will start slowly but accelerate rapidly. Currently, fewer than 40 known companies have deployed telepresence and effective visual collaboration group systems. These companies have barely scratched the surface of the technology, but already their benefits have been substantial, the ROI proven and further adoption among their peers certain.

Telepresence vendor Teliris has already developed a security feature for inter-company business called SecurePath NNI which sets up a secure connection between disparate organizations on the Teliris network. The connection must be approved by both parties in a call and then the connection is torn down when the call is completed.

As you look over the following list of publicly known telep-resence customers, you will notice a bunch of individual islands and island chains. These initial early adopters are using telepres-ence internally, but the overwhelming majority cannot yet connect to their key vendors, joint venture partners and customers. The exception is HP Halo which has quickly built a network connecting them to some of their key business partners, vendors, and customers including most notably: DreamWorks and AMD which the company has strategic relationships for on-going research and product development. The ability for the employees of these orga-nizations to walk down the hall and effectively collaborate with their partners globally is illustrative of the promise and potential that telepresence offers. Now multiply this capability by 10, 100, 1000, or 10,000 companies world-wide to understand the implica-tions for the future of global business.

Right now, however, because of networking and compatibility issues the majority of the systems below cannot yet connect with the other telepresence systems not on their own networks. While it is technically possible to inter-connect the networks and pass IP traffic there are compatibility issues with multiple video compression standards, room scheduling and availability, and envi-ronmental format (I.E. how does a telepresence group system

with two-screens and two-cameras mounted in the center of the displays connect to a system with four screens and a camera over each screen? How do you maintain lines of sight, directional audio, etc.?)

Eventually I see a standard (or de-facto standard) developing for inter-company business in the format of these systems. A baseline format will be adopted that establishes a consistency-of-quality between the majority of telepresence systems with respect to: cultural proxemics, camera and display placement, communications protocols, etc. for the overwhelming majority of inter-company interactions especially in the telepresence group systems and distance learning classrooms. The stakes involved in being the first company to set “the standard” are huge, so expect to see a knife fight at the speed of light between the vendors in this area.


HP Halo’s GUI Simplifies Inter-company Calls

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Telepresence and Effective Visual Collaboration Networks TodayPublicly Announced Customers

Company Existing Locations Planned/On-Order Public/Private

Destiny Conferencing/TeleSuite — 100+ Sites — 50 Installed and 50+ On-Order — 3COM 4 sites PrivateAccounting Firm 3 sites PrivateAOL 9 sites 3-5 PrivateCapitalOne 6 sites PrivateCigna 2 sites PrivateCommercial Bank (Global) 4 sites PrivateCommercial Products Manufacture 3 sites PrivateDeloitte 8 sites PrivateDestiny Conferencing 2 sites PublicDomestic Banking Company 2 sites PrivateDuke University 3 sites PrivateGlobal Bank 5 sites PrivateGlobal Consulting Firm 10 sites PrivateGlobal Consulting/IT Services 12 sites PrivateInvestment Bank 3 sites PrivateMedia/Television company 6 sites PrivatePangeAir 2 site 50+* PublicPharma 3 sites PrivatePriceWaterhouseCoopers 7 sites PrivatePrivate Equity Firm 2 sites PrivatePublic University 2 sites PrivateUniversity of Arizona 1 site Private

* Contingent on Funding

HP Halo Collaboration Studio — 60 Sites Deployed or On-OrderAIG Financial Products Corporation AMD 2 sites 2 sites PrivateBHP Billiton PrivateDreamWorks 10 sites PrivateHP 20 sites 3 sites PrivateGE Commercial Finance PrivatePepsiCo 5 sites PrivateNovartis PrivateA Consumer Products Company Private

MedPresence — 15 Operating Rooms & 10 Conference Rooms Deployed or On-Order Arizona State University 1 site PrivateArizona Heart Institute 3-5 sites PrivateBarrow Neurological Institute 3 site PrivateTranslational Genomics Research Institute 1 site Private

Polycom RPX — 10 Sites On-Order Polycom 10 Sites PrivateWaldorf=Astoria 1 site Public

Telanetix — 8 Sites Deployed and 5 On-Order Film and Television Production Company 2 Sites PrivateInvestment Bank 2 Sites Private

Teliris — 110 Sites Deployed or On-Order 3i PrivateBP 5 sites PrivateGE Healthcare PrivateGlaxoSmithKline 14 sites PrivateLazard PrivatePearson 4 sites PrivateRoyal Bank of Scotland PrivateTeliris 2 site 10 sites PrivateVodaphone 5 sites PrivateXchanging PrivateDDI PrivateIT Managed Service Provider PrivateMajor Investment Bank PrivateLarge Pharma PrivateLarge manufacturer of mobile phone handsets and technologies PrivateMajor studio and content provider PrivateStudio PrivateMajor investment bank PrivateMajor fortune 500 technology company PrivateManagement consultant firm Private32


The Interconnection of Effective Visual Collaboration Networks

Making logical and physical connections while maintaining an acceptable quality of service across multiple high-bandwidth IP networks is a difficult undertaking . . . at least for now. Technical challenges aside, some solution vendors will resist the interconnection of telepresence and effective visual collaboration networks. Vendors will seek to leverage the value of connecting to the businesses, publicly available locations and content headends on their own network by closing it to all but paying customers. This will not last long. Their own customers will demand connection between networks, making interconnection the future of effective visual collaboration.

Publicly Available Telepresence Systems

While publicly available videoconferencing has failed to set the world on fire, that’s not to say there isn’t a market opportunity to connect business people around the globe in a comfortable, productive and cost-effective manner. In fact, it is hard to imagine another business opportunity where the existing alternative, global physical business travel, produces as much real “pain” in hard-dollar costs, lost productivity and the victimized lower back. Publicly available videoconferencing has remained moribund largely because:

• The quality of the observant videoconferencing experience was/is poor

• The costs were/are too high

• The majority of publicly available sites still use the limited bandwidth and poor reliability of ISDN networks for connections

• Effective, easy-to-use collaborative tools remain essentially non-existent.

• Public availability has never been the core business or received much focus from the existing players with the most locations (Kinkos and HQ Global Workplaces)

The medium also suffers from what I like to refer to as a “lack of a business-class consistency-of-quality,” where virtually every global publicly available videoconferencing room is different than every other room in lighting, acoustics, camera angle, cultural proxemics, etc.

Most interestingly, publicly available videoconferencing lives on with an ad-hoc network of thousands of global locations that see some use with the smart operators in the major metropolitan areas conducting hundreds of conferences a year. These calls average $250 to $2,000+ per event for what is essentially the rental of a very small physical space and $10,000 to $100,000 in easy-to-operate equipment. It’s not hard to see how dramatically improving the end-user experience, lowering the cost and getting the business model right could supercharge usage.

David Allen, one of the co-founders of Destiny Conferencing/TeleSuite, has started an affiliated company, PangeAir, with the goal of launching a global network of public TeleSuite Systems in business-class hotels and shared-tenant office buildings. The company has developed

a franchise business model and is currently seeking investors and fran-chisees with a goal to launch with an initial 50 locations world-wide.

The Human Productivity Lab has also developed a business model for publicly available telepresence, Powwow Virtual Conferencing Centers, and is currently seeking partners and investment. There are sure to be others.

I expect to see one or more of the telepresence group system providers (Cisco, HP, Polycom, Teliris, etc.) getting into this business for a number of reasons:

1. Public availability dramatically improves the utility of their existing telepresence offering. For potential customers evaluating a telepresence solution between Brand X that connects to some number of Global Fortune 2000 companies OR Brand Y that connects to some number of Global Fortune 2000 companies AND a global network of publicly available locations that differentiator could be substantial. Many corporate telepresence systems operate at capacity, especially during peak hours. This dynamic will worsen as the use of the technology for intra-company business grows. Having an overflow capacity for corporate users will be attractive.

2. Public availability dramatically reduces cost-of-sales. Demonstrating an effective visual collaboration environment is a very expensive proposition even for the big boys. First you take at least two environments out of production (that your other employees and/or customers would like to use to run their business), then you take away the sales person and sales manager’s time. And to top it off, depending on the importance of the prospect, you may take away some senior executives and product managers as well. Public availability allows the companies to flip the model around. Now you have prospective customers paying to “try-it-before-they-buy-it.”

3. Global network of demonstration facilities that pay for themselves with the ability to grow exponentially.

4. Profitable business in its own right — With the right business model, it can be quite profitable to rent a 350-600 sq. ft. space for several hundred dollars an hour with equipment leased over a number of years.

Small Office/Home Office (SOHO) and Consumer Telepresence

Two converging trends in the coming decade promise to popularize telepresence for small/home business owners and consumers:

• Fiber Optic Bandwidth to the Home — As I type these words, I look out my window at two 1’ x 4’ patches of fresh sod left by the Verizon sub-contractor who came through my neighbor-hood in Northern Virginia last week and laid fiber optic cable for Verizon Communications FiOS network. Each FiOS-connected home has the theoretical capacity of 644 Mbps (or ~14 times the capacity of the 45Mbps DS3 circuits used by some tele-presence solutions), but Verizon limits the maximum available

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bandwidth to 30Mbps download and 5Mbps upload, running $179.95-$199.95 per month depending on delivery area. By way of comparison, a full 45Mbps DS3 of best effort Internet connectivity was ~$75,000 per month a decade ago. Expect the dynamic of higher speeds and lower costs to continue.

• The commoditization of consumer IP videoconferencing appliances and capabilities — Cisco Systems recently acquired the country’s second largest set-top box maker, Scientific Atlanta, for a record $6.9 billion. Evidently, Cisco viewed this acquisition as strategic and critical, because the company went into debt for the first time ever to do so, issuing $6.5 billion in bonds to finance the purchase.xxiii With Cisco’s expertise in routing IP packets, videoconferencing infrastructure, and its soon to be released telepresence product line, it probably isn’t too much of a stretch to assume that the Cisco/Scientific Atlanta set-top box of the future could very well have an IP videoconferencing capability built into it. While Cisco and Scientific Atlanta illustrate the potential of the set top box, they will be competing with the PC as the consumer videoconferencing platform of the future. Cheap web cams and interactive consumer videocon-ferencing capabilities already abound, often for free, in services like MSN Messenger, Skype, WebEx and AOL Instant Messenger. Traditional set-top videoconferencing provider Emblaze VCON recently released a high-definition (720p) software-based video-conferencing codec that brings to most modern PCs a superb video quality and all the functionality to connect to traditional videoconferencing endpoints for less than $150 plus $100-200 for a good camera. Expect the dynamic of higher quality and lower costs to continue.

I expect the merging of low-cost, high-speed bandwidth at home and low-cost, high-quality videoconferencing capabilities in PCs and set-top boxes to popularize something akin to the traditional video-conferencing experience first and then telepresence capabilities over time. In many ways, the trend has already taken hold in PCs, though quality has been moderate to poor. I expect quality to continue to improve at the PC while I expect integration of higher-quality consumer videoconferencing capabilities to become standard in mid-to-high-end home theatre set ups in the coming years. Eventually this will lead to consumer solutions that address the human factors of participants and eventually a telepresence experience. Some companies have already deployed videoconferencing capa-bilities to senior executive’s homes to improve productivity and for disaster recovery/business continuity. Wired Magazine reported that Steven Spielberg wanted to extend the DreamWorks Virtual Studio Collaboration’s telepresence capabilities to his home in the Hamptons. With telepresence improving end-user acceptance and the cost of the technology and bandwidth dropping, more and more executives will have these capabilities in their home.

The Rise of the Virtual Organization

Where knowledge workers were once tethered to corporate headquarters and regional offices by the need to be connected to the company’s network and information resources, ubiquitous and inexpensive broadband connectivity, secure virtual private networks,

VoIP, and effective collaborative tools like webconferencing are making it possible to cut the ties that bind. According to a 2005 study from Nemertes Research, geographically dispersed workers are on the rise, creating a more virtual work force. Nemertes estimates that the number of virtual workers has increased by 800 percent within the last five years, with between 60 to 70 percent of all employees working in locations different from their supervisors. Telepresence’s ability to improve the communications between executives, supervisors, remote workers and virtual employees but still provide a natural humanistic interaction will only accelerate and compliment this trend. The eventual public availability of telepres-ence and effective visual collaboration solutions will also accelerate this dynamic.

For many types of organizations where knowledge, information and services are the only products, the advantages of the virtual organization will be substantial.

• Investing in effective visual collaboration systems to connect remote employees will be less expensive than owning/leasing/maintaining brick and mortar facilities.

• Talent is no longer a function of geography (and/or cost-effective-ness in the case of work than can be performed in lower-cost geographies)

• Improved quality-of-life for former road warriors and commuters

• The ability to utilize talent that would be unavailable in a traditional 9-to-5 office environment given family, health, or travel restraints.

Better and Cheaper Telepresence Solutions

Expect better and cheaper systems over time as the costs of the major components of telepresence solutions substantially drop while the performance of those components dramatically increases. Examples:

• Bandwidth — Bandwidth costs are dropping dramatically while the capacity available to enterprise moves from T1 (1.54MBps) and DS3 (45MBps) speeds to Gigabit Ethernet (1000MBps). As more high-capacity fiber-optic submarine cables land around the world, IP bandwidth becomes more abundant and less expensive around the globe.

• Display Technology — DLP projection technology and flat screen is enjoying a similar dynamic, with quality and screen size going up as cost goes down.

• Codec Technology — Last year, 2005, saw the introduction of the first video codec to offer high-definition quality at T1 (1.0 Mbps) speed from LifeSize Communications, an increase in resolution of 10X over traditional set top videoconferencing systems. More HD codec solutions are on the way from other vendors.

• Environments — Part of the high cost of engineered environ-ments like HP Halo and TeleSuite is small production runs. Expect the cost of engineered environments to come down with volume and specialization.

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Distance Learning Will Become a Key Telepresence Application

In 1999, the Eller College of Management at the University of Arizona launched the world’s first MBA program taught via telepresence. The course connected a professor and students in a telepresence classroom designed by TeleSuite (now Destiny Conferencing) in Tucson with other MBA students in Santa Clara using a TeleSuite System the college would rent from 3COM, a TeleSuite customer, two nights per week. The course was the only part-time option available in the Silicon Valley to get a Top 50 MBA.

The professor had the option of “stacking” the life-size virtual students on a video wall situated behind the local students in Tucson while lecturing or utilizing a separate video wall in the front of the classroom to connect the vir tual students and local students face-to-face for discussions or collaborative case work. The program graduated three MBA classes using the technology and essentially broke even on the cost of the equipment through the tuition it earned from students who wouldn’t otherwise have signed up.

In January 2006, MedPresence, an off-shoot of Destiny Conferencing (which utilizes the same core technology as the TeleSuite System and Polycom’s RPX), unveiled a surgical education solution the company had developed with Barrow Neurological Institute in Phoenix, Arizona and funded through the generosity of Karl Eller, an innovative telepresence investor and philanthropist.

The MedPresence Conference Room is a telepresence solution for surgical education, physician consultations, case reviews, and the development of surgical tools and techniques. The system gives medical students, peer physicians and developers of surgical tools and techniques the ability to be “present” in the neurological operating room at Barrows and interact in real-time with the institute’s world-class surgeons and specialists during an operation.

The Eller College of Management’s distance learning telepresence classroom connected to a remote classroom in both lecture mode and face-to-face

MedPresence MCR 400 with Students MedPresence MOR 400 in an Operation

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Unlike the traditional telemedicine view of the localized area of the operation, the MedPresence solution provides a panoramic view of the entire operating theatre allowing remote participants the ability to witness the complete scene: What equipment is being used, the positioning of the surgical staff and the pace of the procedure. The view of the localized area of the operation, the view through the operating microscope, and medical informatics and imagery can be delivered to outside panels on the 4’x16’ video wall or high-resolution displays mounted between each two locations in the MedPresence Conference Room.

From the operating room, the surgeon can see and interact with the students and remote par ticipants in real-time in

whatever global city they happen to be located. MedPresence has also developed a por table version of the conference room that can be transpor ted to seminars, medical schools and other hospitals allowing the surgeons at Barrow and future MedPresence customers to share their specialized knowledge around the world.

The ability to cost-effectively deliver this level of specialized instruction and real-time interaction will revolutionize the delivery of education globally. Corporations, with their need for both internal training and training for customers, should prove to be equally as enthusiastic about telepresence distance learning as universities and medical schools.

Headends: Content will be King

Companies that have complex vendor/customer relationships involving frequent direct interaction (such as instructor-lead training, product certification or on-going consulting relationships) will help drive inter-company visual collaboration. These content “headends” will accelerate connections by allowing their customers (and themselves) to reduce the expense of the relationship by connecting directly for virtual training or consulting. Expect individual headends to star t small, offering limited training, cer tification and/or audit/consulting to support the telepresence early adopters. As more and more headends offer more and more “content,” the network will grow rapidly, and the utility of being connected to the network will expand exponentially. The more Content Headends, the greater the value of being connected to the network.

Examples of Existing and Potential Content Headends:

Potential Content Headends with Existing Telepresence Capabilities in Green

IT Training / Certification American Management AssociationCisco Systems — Product CertificationSun Microsystems — Instructor lead training

Executive & Professional Continuing EducationThe Wharton Business School — MBA for ExecutivesMIT — Professional Institute — Executive Continuing EducationDuke University — Fuqua School of Business MBAUniversity of Arizona — Eller College of Management MBA

Medical Education and TrainingBarrow Neurological Institute — Surgical Education Translational Genomics Research Institute — Genomics

Public Accountancy, Internal Audit, and ConsultingPriceWaterhouseCoopersErnst & YoungDeloitte & ToucheCapgeminiAccentureBearingPoint

Wall Street — NASD Training & Complex Vendor Training and CertificationKaplan Financial-NASD Registered Representative and Principal Training

Bloomberg — Market Data Systems Training and CertificationReuters — Market Data Systems Training and Certification

Artist’s Rendition of Destiny Conferencing’s design for a 36 seat distance learning TeleSuite System

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Accelerated Adoption for Economic and Geopolitical Reasons

Outsourcing

When most people think of outsourcing, the first thing that comes to mind is the outsourcing of labor to lower cost geog-raphies. While this trend will be accelerated by telepresence and expand to more and more white-collar occupations, it is only half of the outsourcing dynamic.

Management Guru Peter Drucker once recommended outsourcing everything for which there is no career track that could lead into senior management. This has been advice of limited value because of the cost savings that the physical proximity of employees has provided. The ability to effectively collaborate with other firms, foreign and domestic, offering specialized knowledge and services will re-engineer and vir tualize the corporation even fur ther.

In a March 2006 survey conducted by Patni, a technology outsourcing company and reported on by UPI, 89 percent of U.S., British, and Asian corporate technology decision makers at their annual conference expected to increase their outsourcing budget in the next 12 months. Interestingly, the survey found that price was not given as the most important factor in selecting an outsourcing partner. The two most important factors were “cultural fit” and “quality of service,” which were each chosen by 24 percent of respondents. The ability to address these cultural and quality issues through an effective collaborative experience is sure to improve and accelerate the outsourcing paradigm.

The Higher Costs and Reduced Convenience of Physical Travel

For decades, commercial and executive aviation have provided cost-effective transportation for business travel largely thanks to relatively inexpensive jet fuel from relatively inexpensive crude oil. From 1994—2004, the price for a barrel of NYMEX light sweet crude averaged between $10 and $30 a barrel. Since 2004, the price per barrel has more than doubled to $71.76 as of this writing (June 12th, 2006) and the price of jet fuel has risen from $0.82 a gallon to $3.45 a gallon today.xxiv And it won’t stop there. A number of potential geopolitical risks, natural disasters and resource economics issues could very well send the price of oil even higher, making a significant impact on the affordability and convenience of air travel.

The commercial aviation industry relies on cheap seats and full planes. Reducing either side of this equation creates a vicious cycle for the carriers. Rising fuel prices equals higher ticket prices, which reduces demand for seats. Less passengers leads to even higher ticket prices as carriers cover flying costs at reduced capacities. Higher ticket prices leads to . . . reduced demand for seats. Dramatically more expensive oil could deal another significant blow to the international aviation industry, which saw five bankruptcies in 2005 and is still reeling from six straight years of net losses, with 2006 set to be number seven.xxv The International Air Transport Association recently raised its 2006 net loss forecast to $3 billion from $2.2 billion, and a major increase in the price of jet fuel would substantially increase these losses even further and most likely see marginally profitable routes and flights eliminated making air travel even less convenient.xxvi Additional airline bankrupt-cies will inevitably lead to reduced competition, which equals higher costs and less convenience.

The growth of telepresence and effective visual collaboration will worsen this dynamic by further reducing demand for commercial aviation among business travelers who are the airlines least price-dependent customers. When Cigna deployed two TeleSuite Systems between its offices in Philadelphia and Bloomfield, Conn., it eliminated thousands of flights a year. Its ticket volume grew so low the company’s US Air representative even called to inquire about the financial health of the company.xxvii HP reported a two percent reduction in its $800MM+ travel costs in Q4 2005, with less than half of its planned deployment of 24 Halo Collaboration Studios active (no wonder the company is considering doubling that number in the future).

“The inefficiency of knowledge workers is partly the legacy of the 19th-century belief that a modern company tries to do everything for itself. Now, thank God, we’ve discovered outsourcing, but I would also say we don’t yet really know how to do outsourcing well. Most look at outsourcing from the point of view of cutting costs, which I think is a delusion. What outsourcing does is greatly improve the quality of the people who still work for you.

I believe you should outsource everything for which there is no career track that could lead into senior management. When you outsource to a total-quality-control specialist, he is busy 48 weeks a year working for you and a number of other clients on something he sees as challenging. Whereas a total-quality-control person employed by the company is busy six weeks a year and the rest of the time is writing memoranda and looking for projects. That’s why when you outsource you may actually increase costs, but you also get better effectiveness.”

— Peter Drucker

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Dramatically Higher Oil Prices — Peak Oil, Expanded War in the Middle East, Increased Terrorism, Natural Disaster or All of the Above.

With high oil prices already wreaking havoc on commercial aviation, it wouldn’t take many more increases in the price of oil to deal a mortal blow to many carriers. A number of potential geopo-litical events, natural disasters and the ongoing problem of global oil field depletion could alone or together send oil over $100 per barrel.

Peak Oil

“Peak oil” refers to the long-term depletion of oil production globally. Geophysicist Marion King Hubert first coined the term in the 1950s as “Hubert’s Peak,” postulating that oil production in oil fields, oil-producing countries and the world as a whole would all follow a similar bell-shaped curve with rising production followed by a production plateau, and then eventual depletion. In 1956, Hubert predicted that conventional oilfield production in the United States would peak in 1970, a position which earned him significant scorn at the time but proved prophetic. Conventional U.S. oilfield production (excluding off-shore, Alaska, deep-water, etc.) did peak in 1971, and since then the U.S. has produced less oil and imported more. In fact, the majority of oil-producing countries have seen their oil production peak, including the majority of OPEC countries. As fields dwindle, the global demand for oil is soaring. Growth has averaged one to two percent a year as the third world continues to industrialize. Peak oil theory has its skeptics, including this author, but should the theory prove true, the adoption of telepresence and effective visual collaboration would necessarily accelerate.

Natural Disasters

The Gulf of Mexico accounts for 27 percent of U.S. oil and natural gas production, and the region contains 46 percent of U.S. refining capacity.xxviii In 2005, Hurricanes Rita and Katrina destroyed 109 oil platforms and nine drilling rigs in the Gulf of Mexico, bringing oil production in the region to a halt. Rigs, platforms and refineries were secured and evacuated prior to and during each hurricane, many of them staying off-line for months during repairs from the damage they took. A hurricane season just as bad or worse could also dramatically increase oil prices.xxix

Terrorism/Asymmetrical Warfare against Oil Production

The potential of terrorism and asymmetrical warfare against oil production facilities also threatens oil prices. CIA analyst Robert Baer has predicted in his book Sleeping with the Devil: How Washington Sold our Soul for Saudi Crude that:

At the least, a moderate-to-severe attack on [Saudi Arabian Oil Production Facility] Abqaiq would slow average production there from 6.8 million barrels a day to roughly a million barrels for the first two months post attack, a loss equivalent to approximately one-third of America’s current daily consumption of crude oil. Even as long as seven months after an attack, Abqaiq output would still be about 40 percent of pre-attack output, as much as four million barrels below normal — roughly equal to what all of the OPEC partners collectively took out of production during the devastating 1973 embargo.

Indeed, Saudi Arabian security forces foiled an attack on the Abqaiq facility in February this year when two separate cars carrying explosives attempted to ram through a gate at the facility. And this was only one of a number of attacks the kingdom saw against oil industry related targets this year.

Oil facilities in Iraq have endured 298 recorded attacks since June 2003. As of December 2005, Iraqi production averaged around 1.9 million barrels per day, as compared with its January 2003 2.58 million barrels per day production rate.xxx

Expanded War in the Middle East

The specter of an expanded war in the Middle East looms ominously on the horizon. Iran continues to defy the United States’ demands to halt its uranium enrichment activities and threatens dollar hegemony by opening an oil bourse on the island of Kish to trade oil in Euros. At this writing in early June 2006, two U.S. aircraft carrier task forces are joining a third already in the region for what many observers believe to be an imminent confrontation.

The gulf region contains 60 percent of the world’s known oil reserves and 18 million barrels a day (representing about 40 percent of internationally traded oil) must pass through the Strait of Hormuz, which borders Iran and is 34 miles at its narrowest junction.xxxi The Iranian military comes equipped with the Russian Sunburn anti-ship missile, which flies over two times the speed of sound over a 100-mile range and hugs the surface of the water to minimize its radar signature.xxxii In early June 2006, Iranian Ayatollah Ali Khamenei publicly threatened to disrupt oil supplies in the region with the following statement: “If you [the United States] make a wrong move regarding Iran, definitely the energy flow in this region will be seriously endangered.” xxxiii Should the conflict escalate, Iran has the ability to use the “oil weapon,” not only restricting its own oil supplies but completely shutting down oil shipments through the Persian Gulf. Energy experts have predicted that such an action could double or triple the price per barrel. Expanded war in the Middle East would likely arouse increased terrorism directed towards U.S. airlines and citizens abroad. This would result in tighter security at airports, imposing additional costs in lost productivity and the potential reluctance of key personnel to engage in business travel to certain regions. The net result to both domestic and international business: Higher physical travel costs in both ticket prices and lost productivity.

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The Decline of the Dollar

As of mid-May 2006, the dollar has declined 22 percent against a trade-weighted basket of seven currencies tracked by the Federal Reserve since 2001, the biggest drop since the index was estab-lished in 1987.xxxiv The dollar has lost 7.1 percent of its value, versus the Euro, and 6.2 percent of its value versus the yen since Dec. 31st, 2005. The dollar seems poised for a further decline, fueled by a 72 percent increase in the money supply over six years to a record 10.27 Trillion under the Greenspan Fedxxxv and a decision by the central bank in March to simply quit publishing the total amount of $USD in circulation (known as the M3) fueling inflationary fears among $USD holders worldwide. The Organization for Economic Co-operation and Development (OECD), an economic forum of 30 of the world’s leading market democracies, recently predicted that the additional depreciation of the dollar could be ‘of the order of one-third to one-half.’xxxvi A number of other factors seem to suggest a coming decade of dollar weakness:

• Several foreign central banks have publicly reduced their dollar reserves including: Sweden, India, Syria, Thailand, Indonesia, Taiwan and China, while others including Japan and South Korea have announced their interest in doing so.xxxvii

• The Iranians are in the process of opening an oil bourse to be denominated in “petroeuros” vs. “petrodollars,” which will further weaken demand for the dollar among nations that have tradi-tionally had to hold large $USD reserves to pay for oil imports. Venezuela, China, India and Russia have all expressed support for the boursexxxviii, and Russia President Vladimir Putin has proposed starting a non-USD denominated bourse in Russia that would trade oil in Rubles as well as publicly stated his desire to make the Ruble an internationally convertible reserve currency.xxxix Norway has also proposed a Euro-denominated oil bourse.

• The U.S. deficit hit a record $805 Billion, or 6.4 percent of national income, in 2005, a trend which shows no signs of slowingxl. Coupled with a ballooning national debt of $8.347 Trillion at this writing, a generally accepted deflation of the “housing bubble,” and substantial increases in both the Producer Price Index and the Consumer Price Index, there seems to be little positive economic news that could possibly reverse this trend.

A declining dollar will help drive adoption of telepresence and effective visual collaboration solutions in a number of ways:

• Telepresence and effective visual collaboration solutions in which the U.S. has competitive advantage will become less expensive in EMEA and Asia-Pac.

• The cost of travel will become more expensive as foreign oil producers demand more dollars for their oil.

• U.S. exports in general will become cheaper, stimulating foreign trade, which can be conducted more effectively by telepresence and effective visual collaboration.

• The cost of acquiring U.S. companies will be reduced, and telepres-ence and effective visual collaboration will become an attractive option for foreign owners to manage their new U.S. assets.

The End

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About the AuthorHoward S. Lichtman (HSL) is a productivity-focused technologist

and consultant with specialties in telepresence and visual collabo-ration, organizational and personal productivity and sales model optimization. HSL served as Vice President of Business Development at TeleSuite Corporation, the first commercially successful telepres-ence provider and an innovator in visual collaboration.

Prior to TeleSuite, HSL co-founded and served as President and Chief Product Officer of Powwow Networks, a visual collabo-ration start-up looking to improve the human factors, effectiveness, reliability and cost of both visual and data collaboration. Powwow Networks developed an alpha product that combined IP video, web conferencing and rear projection SMART Board interactive whiteboards into templated collaboration environments delivered as a flat-rate managed service with true QoS over disparate IP networks.

Before he developed his interest in telepresence and visual collaboration, HSL started and ran the financial vertical sales orga-nization at Savvis Communications, which specialized in managed networking and managed service solutions for trading floor technology and market data applications for Wall Street. Holding positions that included Regional Sales Manager, Director of Sales, and National Sales Manager at Savvis, HSL opened outside sales offices in New York, Boston, Herndon, San Francisco, Chicago, Atlanta and Miami and managed multiple sales forces running diverse sales models simultaneously.

During HSL’s tenure at Savvis, he founded the original Human Productivity Lab, a skunk works that tested and evaluated technologies and business process improvements with the potential to improve productivity, accelerate the sales cycle, or improve business communications within the organiza-tion. Some of the technologies the Lab rolled into production at Savvis included: Webconferencing, IP Videoconferencing, SMART Board Interactive Whiteboards, Blackberry Messaging, Franklin Covey Time Management, Collaboration Rooms, Cordless Headsets, and The Demonstrator, a trade show display designed by HSL to showcase SAVVIS’ solutions for financial industry connectivity.

Prior to Savvis, HSL was a senior account manager at DIGEX when the company was one of the first and fastest growing private Internet Service Providers in the world. HSL has also held a variety of sales, sales management, marketing, consulting, and business development “gigs” at firms ranging from star t-ups such as Spontaneous Networks, where the endeavor was to develop a wire-speed data center vir tualization switch to For tune 500 powerhouse SunGard, the global leader in infor-mation availability.

Howard can be reached at [email protected].

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About the Human Productivity Lab

The Human Productivity Lab is a consultancy specializing in telepresence and visual collaboration, personal and organizational productivity, and sales model optimization. The Lab was founded by Howard S. Lichtman, a productivity-focused technologist who, while running the financial vertical sales organization at a global internet-working company, came to a number of important realizations:

• In high-growth and/or rapidly changing knowledge-centric organi-zations, you can achieve faster growth (in sales, market share and shareholder value) by investing in and improving the productivity and business communication capabilities of your existing human capital.

• Increasing the return on human capital is possible by leveraging technology to improve your sales and knowledge workers ability to find, access, understand, evaluate, act on, communicate, disseminate and archive information.

• The most important and most often neglected element in successfully implementing technology is the “Human Factor.” Failing to take it into account leads to wasted time, opportunity and treasure.

While unequivocally pro-technology, the Lab tempers its enthusiasm by a firm understanding of technology’s limits, especially with respect to the all-too-often neglected “Human Factors” of implementation.

The Lab provides telepresence consulting services to vendors and end users including: Telepresence Solution Design, Acquisition Consulting, RFI/RFP Development, and Market Research among other engagements.

In 2007 the Lab will be co-sponsoring TelePresence World 2007, a landmark series of CXO level conferences dedicated to telepresence, presence, and unified communications.

www.TelePresenceWorld.com

The Lab is also seeking partners and investment for Powwow Virtual, its business model for publicly available telepresence.

www.PowwowVirtual.com

The Lab’s Board of Advisors includes:

Jeff Dalton — Regional CTO, Stewart Title

Brent Houlahan — Former CTO of NetSec and Vice President of Managed Security Services at MCI

Thomas Jackson — CEO of Mission Benefits and former CEO of TeleSuite

Tim Nielsen — Vice President of Sales, Financial Vertical — SunGard

Chris Van Waters — CIO, QuadraMed

LeMoyne Zacherl — CFO, Learning Tree International

While Productivity is our Middle name, we always put the Human First.

Contact InformationHuman Productivity Lab43861 Laurel Ridge DriveAshburn, VA 20147

O (512) 828-7317F (480) 393-5435

[email protected]

www.HumanProductivityLab.com

The Lab’s website at www.HumanProductivityLab.com is currently the #1 site on the Internet for news, research, and analysis on corporate and organizational telepresence and currently averages over 350,000 hits per month from over 65 different countries with a growth rate of over 15 to 30 percent a month in 2006.

About the Human Productivity Lab

The Lab’s Newsletter The Art of Productivity follows the telepresence industry and provides news you can use to improve your personal effectiveness

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Bibliographyi Bureau of Transportation Statistics Press Release — February 2nd

2006: http://www.bts.gov/press_releases/2006/dot018_06/html/dot018_06.html

ii The Practical Nomad: FAQ About Airline Bankruptcies http://www.hasbrouck.org/articles/bankruptcy.html

iii FAA Aerospace Forecasts Fiscal Years 2006-2017, Page 30. http://www.faa.gov/data_statistics/aviation/aerospace_forecasts/2006-2017/media/FAA%20Aerospace%20Forecast.pdf

ix FAA Aerospace Forecasts Fiscal Years 2006-2017, Page 38. http://www.faa.gov/data_statistics/aviation/aerospace_forecasts/2006-2017/media/FAA%20Aerospace%20Forecast.pdf

x Travelocity Website http://www.travelocity.com — Costs were for a 21 day advance economy fare and a 7 day advance business class fare from NYC to Shanghai on domestic carriers.

xi Managing Conferencing Services for Success, Wainhouse Research, July 2005, Page 9: http://www.wrplatinum.com/ bestanden/4121-WP-ManagingConf4Success-v3.pdf

xii A History of Videoconferencing Website: http://myhome.hanafos.com/~soonjp/vchx.html

xiii Presentation: Human Factors and Perception — Dr. Oliver Staadt, Department of Computer Science; University of California, Davis. http://graphics.cs.ucdavis.edu/~staadt/ECS280/notes/04_VR_Human_Factors.pdf

ix Wikipedia : http://en.wikipedia.org/wiki/Retina

x The Vision Thing: Mainly in the Brain, DISCOVER Vol. 14 No. 06 | June 1993 | Biology & Medicine : http://www.discover.com/issues/jun-93/features/thevisionthingma227/

xi Ibid

xii Birdwhistell, RL Kinesics and context; essays on body motion commu-nication. University of Pennsylvania Press, Philadelphia, 1970

xiii Wellens, A. Rodney. 1978. “A Device that Provides an Eye-to-Eye Video Perspective for Interactive Television.” Behavior Research Methods and Instrumentation 10, no.1, pp.25-26.

xiv Gale, Anthony; Kingsley, Eliot; Brookes, Sorrel; and Smith, David. 1978. “Cortical Arousal and Social Intimacy in the Human Female Under Different Conditions of Eye Contact.” Behavioral Processes 3, no.3 (October): 271 275.

xv Kendon, A. 1967. “Some Functions of Gaze Direction in Social Interaction.” Acta Psychologica. 26: 22-63.

xvi Argyle, Michael, and Cook, Mark. Gaze and Mutual Gaze. 1976. New York: Cambridge University Press.

xvii Aguinis, Herman; Simonsen, Melissa M.; and Pierce, Charles A. 1998. “Effects of Nonverbal Behavior on Perceptions of Power Bases.” Journal of Social Psychology 138, no.4 (August): 455 469.

xviii Kleinke, Chris L.; Staneski, Richard A.; and Berger, Dale E. 1975. “Evaluation of an Interviewer as a Function of Interviewer Gaze, Reinforcement of Subject Gaze, and Interviewer Attractiveness.” Journal of Personality and Social Psychology 1 (January 31): 115 122.

xix Hornik, Jacob. 1987. “The Effect of Touch and Gaze Upon Compliance and Interest of Interviewees.” Journal of Social Psychology 127, no.6 (December): 681 683.

xx Droney, Joylin M., and Brooks, Charles I. 1993. “Attributions of Self Esteem as a Function of Duration of Eye Contact.” Journal of Social Psychology 133, no.5 (October): 715 755.

xxi The Brain Sees What We Don’t, Live Science, November 1st, 2005: http://www.livescience.com/humanbiology/051101_blindsight.html

xxii Hewlett-Packard’s new Halo video-conferencing system brings people face-to-face from a world apart, but price tag poses hurdle, San Diego Union-Tribune, April 7th, 2006

xxiii Latest Acquisition Gives Cisco Entree to Consumer Market By BOBBY WHITE

February 28, 2006; Page B1

http://newsroom.cisco.com/dlls/tln/exec_team/giancarlo/pdf/ latest_acquisition_gives_cisco.pdf.

xxiv ABC News Story: Higher Fuel Prices Mean Higher Airfares, May 7th, 2006 Found at: http://www.abcnews.go.com/WNT/story?id=1934560&page=1

xxv Oil price surge may delay airline recovery, Business Week On-line June 5th, 2007.

xxvi Ibid

xxvii Author’s conversation with Linda Dykas, Cigna’s corporate travel manager in 2003.

xxviii Ready for the Hurricanes? By Rober t Aronen June 9, 2006 Motley Fool http://www.fool.com/News/mft/2006/mft06060922.htm

xxix Hurricanes Destroyed 109 Oil Platforms: US Government, Oct. 4th 2005, Agence France-Presse

http://www.terradaily.com/news/energy-tech-05zzzzzzp.html

xxx Institute for the Analysis of Global Security, http://www.iags.org/iraqpipelinewatch.htm

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Bibliography

xxxi Facing Iran’s Challenge: Safeguarding Oil Exports from the Persian Gulf, Policy Watch — The Washington Institute for Near East Policy, June 7th 2006: http://www.washingtoninstitute.org/templateC05.php?CID=2477

xxxii The Sunburn - Iran’s Awesome Nuclear Anti-Ship Missile, By Mark Gaffney 11-2-4 - http://www.indiemediamagazine.com/ article.php?story=20050118055547492

xxxiii Teheran hints it may use oil weapon in nuclear row, The Standard- Monday June 5th, 2006 - http://www.thestandard .com.hk/news_deta i l . asp?pp_cat=17&ar t_id=20121&sid=8267065&con_type=1

xxxiv Bush’s Bond Market Favors Borrowers; Clinton’s Rewarded Traders May 22, 2006, Bloomberg: http://www.bloomberg.com/apps/news?pid=10000087&sid=agpZpPfkNMZM&refer=top_world_news

xxxv Central Bankers’ Worst Nightmare - the Gold and Bond Vigilantes, by Gary Dorsch, May 9th 2006: http://www.safehaven.com/article-5131.htm

xxxvi OECD Warns that the rebalancing of the US deficit may drive dollar down sharply, Forbes.com, May 23rd, 2006: http://www.forbes.com/finance/feeds/afx/2006/05/23/afx2765701.html

xxxvii Dollar catching Asian flu By Alan Boyd, March 11th, 2006 http://atimes01.atimes.com/atimes/Asian_Economy/GC11Dk01.html

xxxviii The Greenback’s long downward spiral by Mike Whitney, May 4th 2006: http://www.opednews.com/articles/opedne_mike_whi_060504_the_greenback_92s_long.htm

xxxix Collapse of the petrodollar looming by Dave Kimble, May 18th, 2006 http://www.energybulletin.net/16110.html

xl US deficit data fuel anxieties on dollar, By Christopher Swann, The Financial Times Published: March 14 2006 http://news.ft.com/cms/s/db63450e-b383-11da-89c7-0000779e2340.html

Hubbert peak graph from public domain document “Strategic Significance of America’s Oil Shale Resource Volume I Assessment of Strategic Issues” at http://www.fe.doe.gov/programs/ reserves/publications/Pubs-NPR/npr_strategic_significancev1.pdf

Oil Prices 1994 — 2006 Price Graph — Wikipedia Entry: Petroleum http://en.wikipedia.org/wiki/Crude_oil

Artist Rendering of the upcoming 4th generation Teliris display system

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Telepresence Company ProfilesCompany/Division: AudioTek /ATK ServicesWebsite: www.atkservices.comCompany Founded: 1983 2005 Revenue: N/APublic / Private: Private

Key Executives: Mike Stahl, President Duncan Foster, Vice President, Sales and Development

Best know for providing the sound for such complex produc-tions as every SuperBowl since 1998, the Academy Awards, The Emmy Awards, The Grammys and the Olympics, AudioTek Corporation has more on its plate than mega events. The company’s ATK Services division handles complex AV integration projects such as wiring every Apple Computer store in the US for voice, video, and data. The company has recently produced the first turnkey small group (1-4) Telepresence solution to use Digital Video Enterprises’ true-eye contact display technology and Intelligent Switched Telepresence control system, both of which ATK helped develop.

The Intelligent Switched Telepresence control system gives each participant a small microphone/control unit installed under the lip of the table, allowing a user in a multi-site conference to take “the conch” —and push a single button that switches the focus of all remote sites to that participant after a quick screen fade. The system temporarily presents a wide shot of the table while the close shot of the designated speaker is acquired.

The company’s I VISION direct telepresence experience marries the following technology and capabilities:

• Digital Video Enterprises 50” true eye-contact display, which hides two Sony BRC 300 three chip cameras behind the display at eye-level

• The Sony G 70 codec, capable of a 4MBps video stream (other codecs can be used)

• AMX Control System with media archiving capability, total room control for lighting, shades and conference set up

• Ceiling mounted high resolution document camera with laser alignment.

• 61” data collaboration Plasma display

The I VISION starts at $165,000 and will fit into most conference rooms without any make-ready other than appropriate bandwidth.

HSL’s Analysis

The ATK I VISION is the first small group (1-4) telepresence solution that utilizes the Digital Video Enterprises true eye-contact display technology and intelligent switched presence. The intelligent switched presence experience is like watching a live broadcast TV show with dynamic scene switching between participants. The company’s turnkey solution utilizes the Sony G70 codec to produce exceptional video quality for a non-HD system, and can accept other codecs or retro fit an existing deployment of traditional videocon-ferencing systems to improve the human factors, ease-of-use and collaboration. Though I was unable to experience an actual call when I visited the facility, I liked the ceiling-mounted document camera with a high magnification for collaborating on documents or physical objects such as circuit boards between remote locations. ATK had also done good work tying the multiple devices together into an easy-to-use AMX touch-sensitive control unit.

Company: Destiny Conferencing/TeleSuiteCompany Website: www.destinyconferencing.comCompany Founded: 2005Employees Dedicated To Visual Collaboration: 302005 Revenue: N/APublic/Private: Private

Key Executives: David Allen, Chief Executive OfficerScott Allen, PresidentTed Carter, Chief Operating OfficerRob Whatley, Director of Customer Service

In 1993, hotel developers David Allen and Herold Williams founded TeleSuite, the first commercially-successful telepres-ence provider, after failing to find a traditional videoconferencing solution good enough to keep their well-heeled guests from leaving their Caribbean resort early for business meetings in less exotic locations. Initially founded as an R&D shop the company built early TeleSuite Systems from Styrofoam and duct tape to understand the geometries of getting the environment right, the company shipped its first commercial TeleSuite Systems in 1997. The company has benefited from strong support from visionary telepresence investor Karl Eller, the founder of Eller Outdoor Media and former Chairman and CEO of Circle K.

In 2003, a board of directors’ dispute took management away from the co-founders and the company foundered, laying off a number of staff in 2004. The company’s assets were sold back to co-founder David Allen (Herold Williams is no longer with the company) and the company was re-organized in 2005 as Destiny Conferencing. As Destiny Conferencing, the company struck a strategic partnership and manufacturing agreement with Polycom in May 2006 whereby Polycom specifies and private label OEM’s six TeleSuite based Systems under the Polycom RealPresence Experience (RPX) brand.

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Telepresence Company Profiles

Polycom RPX customers will also have the option of purchasing a Polycom branded and specified RPX VNOC and Circuit Services IP network and concierge/help desk services from Destiny. This network enables and connection and collabo-ration with the company’s existing network of For tune 1000 customers, which include PricewaterhouseCoopers, AOL and Cigna among others.

Through an affiliated company, MedPresence, Destiny also manufactures a telepresence solution for surgical education. Another affiliated company, PangeAir LLC, is working on launching a global network of publicly-available TeleSuite Systems in business class hotels and multi-tenant office buildings.

TeleSuite Systems are free-standing, modular, engineered telepresence environments that are deployed as a “room-within-a-room” and can be moved if required. The environments range in size from four participants facing a 4’x8’ video wall starting at $249,000 to 36-seat distance learning environments where partici-pants sit in tiered seating and face a 5’x20’ video wall. $559,000

Destiny Conferencing’s network and concierge/help desk services start at $5,950 per month for the two screen 200 series and $8,950 per month for the four screen 400 series.

To avoid repetition, please find the technical specifications of the TeleSuite System on page 49 in the write-up on the Polycom RPX.

HSL’s Analysis

The TeleSuite System (including the Polycom RPX models) with their rear-projection semi-seamless video walls provide the most immersive experience of the major group telepres-ence systems providers. However, they lack the video quality achieved by its main competitors, HP and Teliris, who throw 45MB of bandwidth at each location. Still, the ability to deliver effective telepresence environments at more cost-effective T1/E1 speeds is an attractive proposition for those organizations that can’t afford the operating costs of systems requiring 45MB of bandwidth.

The company’s large distance education environments are a strong differentiator from the rest of the pack, and the system has proven itself through its use at the Eller College of Management at the University of Arizona, graduating three remote MBA classes. As telepresence continues to gain acceptance, I expect that other universities and corporations will take the plunge; eventually creating a network of “content” that will allow organizations to access specialized instruction from around the world. With the Eller College of Management, Duke’s Fuqua Business School and the Barrow Neurological Institute already on the network, Destiny seems ideally situated to benefit as telepresence goes mainstream.

Destiny’s strategic partnership with Polycom is the most exciting news from the company in quite some time, a grand slam home run for the boys from Dayton. While it remains to be seen how many prospective customers will choose to buy the equivalent

solution from Destiny that can be purchased from Polycom, the company can’t help but benefit as Polycom drives the growth of compatible telepresence environments. I see the Polycom partner-ship providing a number of pluses:

• Further legitimizes telepresence (HP and Cisco got the ball rolling nicely in 2006, but Polycom’s entry into the industry is sure to accelerate “mainstreaming”).

• Provides much needed technical expertise in IP video/audio and video network/infrastructure management, scheduling and reservation systems, and data collaboration tools (areas that have been a weakness at the company).

• Marketing and distribution muscle (another historic TeleSuite weakness) that should be able to nicely leverage Polycom’s tier-one marketing organization, sales force, and international network of resellers and channel partners.

• Transparency and Viability — After years of watching the big ones get away because so many potential customers were hesitant to bet on financially shaky, privately-held TeleSuite, Polycom provide a level of comfort with public and audited financials and a stability that TeleSuite had lacked.

Company: Digital Video EnterprisesWebsite: www.dvetelepresence.comCompany Founded: 1999Employees Dedicated To Visual Collaboration: Two2005 Revenue: N/APublic / Private: Private

Key Executives: Jeff Machtig, Co-founder Dr. Steve McNelley, Co-founder

Digital Video Enterprises (DVE) is small, privately held corporation specializing in telepresence solutions that provide true eye-contact between participants and holographic displays for telepresence, marketing and virtual reality applications. The company was founded in 1995 as Videotronic Systems, a partner-ship between Jeff Machtig, an optics and special effects inventor, and Dr. Steve McNelley, a psychologist whose doctoral work and career has been focused on the importance of eye-contact in human communications. DVE holds 11 patents (with several pending) in various aspects of true eye contact videoconferencing and telepresence.

The company’s product line falls into two categories:

True Eye-Contact Telepresence and Display Solutions — The company makes a variety of display and bundled solutions that use

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eye-level cameras behind a piece of silvered glass known as a beam splitter. With the camera hidden from view, the image of the remote participant is reflected off the beam splitter from an upward-facing flat screen display, allowing natural eye-contact between partici-pants.

DVE’s true eye-contact display solutions are available in a variety of formats:

• Immersive Group Systems —DVE has a number of designs for immersive group systems with true eye contact and multiple camera arrays that work with six to eight participants.

• Small Group Roll-About Systems — One to four participants with a locking cabinet that rolls through a standard 30” door. The DVE Telepresence 50 can upgrade an existing deployment or improve a planned deployment of traditional videoconferencing end-points.

• Personal/Executive Systems — The DVE Eye-Contact Silhouette provides a dedicated eye-contact display solution for the desktop, allowing a user’s computer monitor to remain dedicated to data collaboration. The Executive Telepresence Solution (ETS) provides a life-size, eye-contact experience in a small footprint, mobile lockable cabinet for an executive’s office or small conference room.

Telepresence Podiums and Holographic Displays

DVE makes a number of specialty solutions, including:

• Telepresence Podium —Projects a life-size image of a remote presenter as if he or she is standing at a podium. The podium itself has a camera that allows the remote presenter to see the room he is presenting to; in turn, the remote audience can see the presenter’s demeanor and gestures clearly.

• Virtual Observer — A portable production studio for distance learning and training that tracks and captures stand-up presentations.

• Transparent Telepresence Display —Presents floating 3-D objects in addition to remote participants for marketing purposes.

HSL’s Analysis

Digital Video Enterprises remains the undiscovered jewel of the telepresence industry. Its displays are the only true eye contact solutions on the market, making them especially powerful in one-on-one conferences. The rest of its product line provides several other advantages as well, including:

• The DVE Telepresence 50 can immediately improve existing deploy-ments of traditional videoconferencing systems by providing true eye contact, hiding the camera and enhancing image quality by improving image contrast.

• In my opinion, the DVE Executive Telepresence System (ETS) offers the highest quality experience currently available in a

personal/executive system. With a 40” true eye-contact display and LifeSize Communications’ camera and codec bundled into a turnkey package, the ETS lets life-size remote participants talk with true eye contact in high-definition.

• The company’s Telepresence Podium works uniquely well for remote presenters. I believe that the Telepresence Podium’s ability to project a life-like virtual speaker into a venue (or multiple venues simultaneously) anywhere in the world will be an attractive option that will catch on over time as telepresence continues to gain acceptance and visibility.

The downside to Digital Video Enterprises’ solutions: their cost relative to the current expectations of the market especially in the executive systems. The company’s size keeps its production runs small, which means that it’s most affordable desktop display solution, the $7,500 Silhouette, can’t be ordered in increments less than 15, so customers wanting one to fourteen units have to get on a waiting list. However, the company’s current strategy is to focus on the new Executive Telepresence System, which creates real size images of conferees in your office. Having been released less than three weeks ago at this writing, the ETS is currently being deployed around the globe with no minimum order needed.

The company also has a demonstration problem. Like telepres-ence group systems, eye-contact telepresence is an experience; getting experienced is hard to do unless you visit a DVE customer, and most movie studios, investment banks, etc. don’t exactly let folks walk in off the street. Most prospects have to travel to the company’s R&D facility in Irvine, California. This will continue to hinder adoption until the company develops a strategy or partnership to make convenient demonstration units available around the world.

Company/Division: Hewlett-Packard/Halo Collaboration Division Website: http://www.hp.com/haloDivision Founded: 2003Employees Dedicated To Visual Collaboration: N/A2005 Revenue: $86.70B

Public / Private: Public (NYSE: HPQ) Key Executives: Vyomesh Joshi, Executive Vice President, Imaging and Printing Group (IPG) Steve Nigro, Senior Vice President and General Manager, Graphics and Imaging Business (GIB)Ken Crangle, General Manager, Graphics and Imaging Business (GIB)Ray Siuta, Marketing Manager, Halo Collaboration Solutions

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With $86.6 billion in 2005 sales and $2.39 billion in net income, Hewlett-Packard is better known for its ubiquitous printers, multi-function machines, personal computers and network servers than visual collaboration. For now. The company teamed up with DreamWorks in late 2003 to perfect and take to market a visual collaboration system the studio designed to help it produce animated films between its multiple campuses and partners.

The HP Halo Collaboration Studio launched in December 2005 and has quickly built a strong network of Fortune 500 customers, including: AIG Financial Products, AMD, BHP Billiton, DreamWorks, General Electric Commercial Finance, PepsiCo and Novartis.

At 17’x21’, the HP Halo Collaboration Studio seats six primary participants, with a secondary row of bench seats that can comfortably accommodate up to an additional six. The participants face three 50-inch plasma displays, each of which display up to two remote participants in site-to-site call or up to four participants per screen in a multi-point call and a fourth screen for data collaboration.

HP Halo Collaboration Studios include:

• DVD quality, MPEG-2 codecs with professional grade 16”x9” cameras

• High-resolution document camera, HD collaboration display with high-bandwidth VGA connections to the collaborative PC and participant laptops

• Life-sized multi-point (up to four locations) with no perceived delay between inter-continental locations.

• Power and network connections at each position

• Site survey and on-site installation

This engineered environment precisely positions cameras, displays, and the table down to millimeter tolerances and achieves a superb “consistency-of-quality” between studios with studio-quality acoustics and lighting.

The cost of Halo varies depending on the number of studios purchased. In smaller quantities, the rooms are approximately $425,000 each, and pricing falls the more rooms you buy. In the United States and most global business centers, the network and service fee is $18,000 monthly per room, which can varies in other countries depending on local telecommunications costs. HP offers several lease options through its HP Financial Services subsidiary.

The monthly fees cover :

• HVEN ( Halo Video Exchange Network ) HP’s private, secure high—bandwidth, full duplex, QoS IP network

• 24x7 concierge-class connection support and help desk support

• Proactive monitoring, remote diagnostics and management, on-site equipment maintenance

HSL’s Analysis

I give HP a tremendous amount of credit for being the first Fortune 500 company to realize the importance, potential and profit opportunity of effective visual collaboration and getting themselves into the big game. While this first-generation system is definitely pricey, HP appears to be doing more R&D than anyone else in the industry. The company has recently tripled the size of its telepresence lab in Corvallis, Oregon, and boasts a tier-one team of Halo-devoted technologists. I was especially impressed with Mark Gorzynski, Halo’s Chief Scientist. Future collaborative formats from HP promise to address other spaces and sizes to compliment the growing network of Halo Studios.

The Halo Studio itself is a superb first effort. The look and feel of the room is warm and inviting. Though engineered, the environment conveys a natural experience with an excellent consistency-of-quality between all locations on the Halo Network. Also, the simple interface and ease-of-use of the collaborative tools outshines those of rival environment providers.

But the company’s strongest asset is its growing network of Fortune 500 companies using Halo — 60 locations installed or under construction (23 at HP and 10 at DreamWorks). Between HP itself and PepsiCo (with 16 brands that each do over one billion dollars in business ) alone, it is a good bet that executives from vendors and partners will see real value in being “right down the hall” and collaborating in real time.

However, as virtually every other analyst has said of Halo, the price presents a barrier. For large, geographically-dispersed Fortune 500 companies I believe that the ROI is definitely there. But as you go farther down the Fortune 2000 ladder, the cost gets harder and harder to justify, especially for the limited capabilities of version one. To HP’s credit, however, it’s rolling out a free upgrade to their initial customer that fixes the lack of multi-point capabilities. As a standard business practice, HP retrofits its customer base with new services and capabilities such as multi-point, as they become available. These enhancements come at no extra charge beyond the monthly service fee. Hopefully the company will introduce backwards compatibility with traditional videoconferencing and high-definition as well. Versions two and three will present the real tests for HP, but if the company shows the same innovation it’s already displayed in so many aspects of its other businesses, its early adopter customers likely won’t mind having kicked in a little extra to help the effort.

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Company: MedPresenceCompany Website: www.MedPresence.comCompany Founded: 2005Employees Dedicated To Visual Collaboration: N/A2005 Revenue: N/APublic / Private: Private

Key Executives: David Allen, Chief Executive OfficerBrian Kinne, President

MedPresence is a spin-off of Destiny Conferencing/TeleSuite, which worked with a team of neurosurgeons at Barrow Neurological Institute in Phoenix, Arizona to design a telepresence solution for surgical education. The team at Barrow included world-renowned neurosurgeon Dr. Robert Spetzler, the director of the institute, and Drs. Stephen Papadopoulos and Shahram “Shez” Partovi, with substantial funding by telepresence/MedPresence investor Karl Eller as a gift to Barrow, whose work he has long supported.

Unlike traditional telemedicine solutions that focus primarily on displaying the local area of the operation, MedPresence connects one of its telepresence conference rooms to its solution for the operating room giving participants a panoramic view of the entire procedure and the surgeon a view of and interaction with the conference room. Medical students, peer physicians and medical solution partners can view the equipment being used, the pace of the procedure and even the demeanor of the participants. Each user views the operating room via a 4’x16’ video wall with the local view of the operation and medical imagery/informatics displays on high-resolution monitors between every two positions in the conference room and/or the outer two panels of the video wall.

MedPresence has also developed a mobile unit with a 4’x8’ video wall that deploys from an integrated shipping crate. The mobile unit can be shipped to a medical school, teaching hospital or surgical conference and then hooked up to an appropriate IP network, where it can then be connected to a MedPresence Operating Room(s) or Conference Room(s) for surgical education, consultations or routine medical check ups globally.

The MedPresence solution consists of three components:

• MedPresence Conference Room (MCR 400) — With seating options ranging from four ($250,000) to 28 ($599,000)

• MedPresence Operating Room (MOR 400) — With options for a stainless steel portable unit to a rear projection video wall, the cost of the MOR 400 ranges from ($250,000) to ($449,000)

• MedPresence Mobile Unit (MM 200) — The MM200 comes complete with a mini-conference table with embedded monitors and a 4’x8’ video wall that collapses into its own shipping crate ($200,000).

MedPresence’s IP network and concierge/help desk services start at $5,750 per month for the two-screen 200 series and $8,500 per month for the four-screen 400 series.

The technical specifications of the MedPresence Conference Room, Operating Room and Mobile unit can be found in detail in the company write-ups for Destiny Conferencing and the Polycom RPX on pages 44 and 49, respectively (they share the same video codec and audio platform), so I will focus on details specific to the MedPresence version. The MedPresence solution delivers medical informatics into the environment, including operating microscopes, X-Ray/CAT scan imagery, patient history, physician notes, anesthe-siology data and basically any other diagnostic data being used in the operating room, all under the umbrella of an integrated medical informatics platform.

HSL’s Analysis

I had the opportunity to attend the public unveiling of the MedPresence solution at Barrow in January and observed both a spinal cord surgery and brain surgery conducted by Dr. Spetzler from the MedPresence Conference Room. I’m still amazed at the experience to this day. The good folks at Barrow were kind enough to let me and the Lab’s videographer to scrub up and enter the operating room during the spinal cord procedure to understand and document the interaction the operating room has with the remote sites during an operation. (Our video is available at the Lab’s website: http://www.humanproductivitylab.com/video/barrow_video.php).

I was also able to spend time with Drs. Papadopoulos and Partovi, who explained the revolution this capability brings to both surgical education and the ability for Barrow, with its very rare and specialized institutional knowledge, to assist globally in delicate operations where life, mobility and/or brain function could be riding on the outcome.

With a MedPresence solution already installed at the Translational Genomics Research Institute (TGen) and the company reporting 14 operating rooms and eight conference rooms on order from a variety of institutions, including the Arizona Heart Institute and Arizona State University, it appears this capability will spread rapidly among the approximately 2,500 teaching hospitals globally. The medical community is poised to be the first to create a strong network of “content” available, with instruction from Barrow in Neurological Surgical Education and Genomics expertise from TGen already on-tap. It appears that other institutions with expertise in cardiology, orthopedics, oncology, pediatric surgery, etc. will soon join in creating a growing network where world-class expertise in a variety of disciplines can quickly be accessed and shared. Universities with medical schools will have the ability to utilize their MedPresence conference rooms in other fields and departments so they can share knowledge and instruction across a wide spectrum of disciplines adding value to the network as a whole.

Without a doubt, this technology has the ability to save lives, improve medical diagnosis and outcomes, and revolutionize the delivery of medical education and healthcare services globally. As I predicted two years ago as a TeleSuite employee when we initially began developing this capability, this one looks like a grand slam home run.

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Company: PolycomDivision Website: www.polycom.comCompany Founded: 1990Employees Dedicated To Visual Collaboration: N/A2005 Revenue: $580.66MMPublic / Private: Public (NASDAQ: PLCM)

Key Executives: Robert C. Hagerty — Chairman, President, and Chief Executive Officer Steven C. Huey — Chief Marketing Officer Craig Lynar — Vice President, Solutions Marketing

Polycom, the market leader in traditional videoconferencing, brings a complete portfolio of solutions to the emerging telep-resence industry with 42 percent of the group videoconferencing market and strong institutional knowledge and intellectual property in IP/ISDN video, voice, data collaboration, and videoconferencing network management/scheduling.

The company announced the Polycom RealPresence Experience (RPX) on May 22nd, 2006, the result of a strategic partnership with Destiny Conferencing, whose TeleSuite product line was the original commercially-available group telepresence solution. The RPX was specified from the market-proven strengths of Destiny Conferencing’s telepresence environment and Polycom video codecs, audio technology, and data collaboration tools. Polycom customers will have the option to utilize a Polycom Branded Conferencing network and concierge/help desk services provided by Destiny Conferencing, which connects them to the second-largest effective visual collaboration network after Teliris.

The Polycom RPX is available in six initial configurations, its options ranging from four participants facing a 4’x8’ video wall for $249,000 to a 28-participant environment facing a 4’x16’ video wall for $559,000.

Polycom’s RPX VNOC and Circuit Services (network and concierge/help desk services) start at $8,000 per month for the two screen 200 series and $12,000 per month for the four-screen 400 series.

Polycom RPX solutions include:

• Polycom VSX 8000 video codecs

• Polycom EF 2241 Vortex Automatic Mic / Matrix Mixer with Phone Hybrid and Power Amp

• Polycom People + Content IP Data Collaboration Tools

• Life-sized multi-point • Three Sites — RPX 200 Series• Five Sites — RPX 400 Series

• Voice-activated, or traditional videoconferencing “Hollywood Squares” multi-point format available for both 200 and 400 series

• Power and network connections at each position

• Site survey and on-site installation

The Polycom RPX can be run as a stand-alone system using a company’s internal network, or it can also be purchased with optional RPX VNOC and Circuit Services (concierge class service and an overlay Quality-of-Service IP network). This network currently provides connectivity to Destiny Conferencing’s customers, which include PricewaterhouseCoopers, 3COM and AOL among others.

HSL’s Analysis

While it only took Polycom three years to catch on to the fact that telepresence solutions have spectacularly better end-user satis-faction and usage than traditional set top videoconferencing, they finally made it to the party in a big way. Striking a deal with Destiny Conferencing locks up the only manufacturer of telepresence envi-ronments in the world outside their main competitors (HP Halo and Teliris). If Tandberg, Sony, and/or Aethra want to get into the business of group telepresence environments, they’ll need to start from scratch and face intellectual property hurdles to do so.

The Polycom RPX solution also has a lot going for it:

• The modular “room-within-a-room” environment doesn’t require any permits, minimum facilities make-ready, and can be moved relatively easily should a company relocate a facility or deploy a temporary suite to support a project or joint venture.

• With Polycom’s standards-based VSX 8000 videoconferencing codec platform, RPX suites are compatible with legacy video-conferencing equipment — a capability that HP Halo still lacks.

• Polycom RPX customers can connect to Destiny Conferencing’s existing network of Fortune 1000 clients, which is, by my calcula-tion, the second largest effective visual collaboration network on the planet after Teliris.

• The ability to seat 28 participants in an effective classroom setting also separates them from the pack. Effective distance education (for both universities and corporate training/on-going education/certifications) will be a key application in the coming years, and the Polycom/Destiny Conferencing product line boasts the only large-capacity classroom solutions on the market.

The biggest drawbacks to the RPX? Its lack of a high-definition codec solution (the company reports it’s in the works) and the problem of eye-contact among participants in the larger 400 series environments. While the participants closest to the center of the room have an excellent approximation of eye contact with the participants closest to the center of the room at the remote site, the effect is lost as you move out to the left and right of the center seats because of the position of the camera. This is not a significant issue in larger classroom settings or for small meetings of one to four, but for meetings of six to eight on each side, it can become annoying.

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Company/Division: TelanetixCompany Website: www.Telanetix.comCompany Founded: 2001Employees: N/A2006 Revenue from VC: N/APublic / Private: Public (OTC TNXI.OB)

Key Executives: Thomas A. Szabo, Chairman and Co-founderBob Alford, Chief Architect and Co-founder Rob Arnold, Chief Technology officer and Co-founderRick Ono, Chief Operating Officer

Founded in 2001, San Diego-based Telanetix star ted shipping systems in 2005. The company has eight sites installed with an additional five on order. Unlike the other providers of telepresence solutions (with the exception of Polycom which manufactures its own codec), Telanetix is unique in that it has developed its own proprietary MPEG-4 codec and networking platform that supports multiple video streams, allowing it to provide a relatively inexpensive solution compared with most other providers that must integrate multiple codecs and a premise router from other providers.

Another difference is that Telanetix distributes its systems through high-end audio-visual systems integration firms that then integrate the base Telanetix technology package into a range of options individually designed to the customer’s specifications. Telanetix customers have a choice of different display sizes and options, and their system integration par tners can construct engineered environments that address lighting, acoustics and par ticipant placement. The company’s announced AV par tners include Avidex, Audio Video Innovations (AVI) and Audio Visual Systems (AVS)

The Telanetix Digital Presence Conferencing Solutions range from two screen systems that start at $39,550 and four screen systems at $45,383. Solutions that require more than four screens are quoted based on the number of screens. The base Telanetix system consists of the following components:

• Linux-based, multi-stream MPEG-4 codecs and IP networking platform.

• Fixed-position camera hidden at eye-level for an approximation of eye-contact with remote participants.

• Life-size multipoint with up to nine locations using IP multi-cast (limited to the number of screens deployed by the customer I.E. four screens = nine locations)

Telanetix Network Services provide QoS, IP multicast-enabled network connections starting at $3,500 per month for 5MBS of QOS bandwidth. The company also provides a 24 x 7 help desk as part of its service for an additional $500 per month.

HSL’s Analysis

I found Telanetix to have good video and audio quality with the lowest price point out of all the systems with multiple video streams, life-size par ticipants and hidden eye-level cameras. The Telanetix solution was also the least expensive group system that we reviewed which is impor tant for those organizations where six-figure solutions are not an option. I also found the system controls easy-to-use, with the ability to launch calls and share data simple and intuitive.

I was also impressed that Telanetix choose to par tner with Savvis Communications for its QoS network solution that suppor ts IP multi-cast. In a previous life, I headed a sales organization at Savvis that specialized in building QoS network solutions for the financial industry for trading floor technology and market data applications. The quality of the Savvis network for delay-intolerant IP video helped inspire my original research into effective visual collaboration and eventually telepresence. Savvis’ ability to layer in additional network services — including Internet and VPN on the same connection — without affecting the quality of the video reduces the operating costs for companies that choose to get their network services from Savvis as well.

Telanetix lacks in some areas, however. Not having a complete turnkey solution that addresses lighting, acoustics and par ticipant placement hinders it from providing a consis-tency-of-quality among all Telanetix rooms. The company says its network of AV par tners could develop such as solution for any customer who wants it, but I believe they should get an engineered environment on the menu and the sooner the better. Additionally, high-definition seems to be a ways off for the company, and its compatibility with traditional videoconferencing is limited to integrating in an additional videoconferencing endpoint that seems somewhat kludge.

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Company: Teliris Website: www.Teliris.com Company Founded: February 2001Employees Dedicated to Visual Collaboration: 402005 Revenue: N/APublic/Private: Private

Key Executives: Martyn Lewis, ChairmanMarc Trachtenberg, Chief Executive Officer Steve Gage, Chief Operating OfficerJamie Thomson, Managing Director

Teliris was founded in February 2001 as an off-shoot of Mycroft, a New York City-based networking and IT security company, and Global Intercasting, Ltd., a UK-based corporate communications and design/integration firm. The company has been shipping its GlobalTable group telepresence solution since October 2001. Teliris GlobalTable customers include: BP, Euronext, GlaxoSmithKline, 3i, Pearson plc, Lazard, Vodaphone, Xchanging and The Royal Bank of Scotland, among others.

GlobalTable appears to lead the pack in installed customer locations, with over 110+ sites either in place or on order, making Teliris the commercial leader in the space. Available in a number of multi-screen configurations, ranging from four to sixteen seats, the Teliris GlobalTable can also be integrated into larger environ-ments. As a compliment to its larger product, the company offers single-screen personal and executive solutions that executives can operate from their offices. GlobalTable also provides backward compatibility with traditional videoconferencing endpoints.

GlobalTable installations include:

• High-quality, MPEG-2 or MPEG-4 video (true high-definition optional)

• Full-size, multi-point (up to six locations) with Teliris’ proprietary VirtualVectoring technology (discussed in more detail in the paper)

• Data collaboration screen and presentation sharing.

• Simplified, touch-sensitive control for volume and collaborative tools.

• Site survey and on-site installation.

• Options include: audio conferencing add-in, multi-site document replication, DVD integration, 2D Cam, 3D Cam, stand up presen-tation, digital flip charting/storyboarding, lectern, encryption, and full redundancy among others.

Unlike the HP Halo Collaboration Studio and Destiny Conferencing’s TeleSuite Systems, which essentially install a “room within a room” with a uniform look and feel, the GlobalTable solution has more flexibility in its room size. The final design can match corporate aesthetics.

The cost of a GlobalTable installation ranges from $164,000 for a standard three-screen system to $280,000 for a high-definition version. GlobalTable Access, the company’s executive solution starts at $63,000 per room and larger GlobalTable and GlobalTable VirtuaLive/VirtuaLive 360° environments can run north of $300,000 depending on the number of screens and options. Recurring operating costs run from $3,500-$12,000+ per month, per location, depending on the type of system and network costs in the country of installation. The recurring costs include:

• InfiNET — Teliris’ secure, high-bandwidth, low-latency Quality-of-Service IP network

• Proactive remote monitoring of the audio/visual and network devices in the environment

• Concierge reservation support, help desk and regular health checks/equipment maintenance

HSL’s Analysis

With over 110 sites installed or on order, a large network of Global Fortune 2000 customers and a fourth generation product coming out this fall, Teliris seems well positioned to ride the telep-resence wave generated by HP, Polycom, and Cisco’s entrance into a market that has so far remained the best kept secret in telecom-munications. With a strong background in internetworking and IP security, the company has built a scalable, carrier-grade network platform for managing and monitoring high-bandwidth interactive video that is also backwards compatible with legacy videoconfer-encing end-points. No small feat. It touts a system and network uptime reliability of 99 percent and an SLA to back it up, giving prospective customers confidence that the GlobalTable solution is going to work as advertised.

The company’s customer base remains one of its strongest assets, especially as more and more users realize the value and potential for inter-company business. As the partners, vendors and customers of Teliris’ clients begin to seriously evaluate telepres-ence solutions, they’ll surely find sitting around the GlobalTable with their friends an attractive option.

With a true high-definition system at a price point at almost half the cost of a non-high definition HP Halo Collaboration Studio, the company is strongly positioned price-wise against its newest and much better known competitor. The company is also developing a solution for the movie and animation industries with a stand-up presentation capability and large video wall for storyboarding that looks promising. It is also working on several solutions that integrate tools for collab-orative research and development between remote facilities in pharmaceutical research and other specialized applications.

The company’s VirtuaLive 360° offering which is just coming into deployment adds a stand-up presentation capability that the other vendors in the space have so far failed to address. I have seen an R&D version of Teliris’ fourth generation display system, due out this fall, which provide a more seamless and immersive display and the company has been working on a camera technology for over a year and ½ which promises to more seamlessly stitch together multiple video streams.

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