Daily Archives: May 14, 2010

Cisco Makes Compelling Business Case for Video and Telepresence

Andy Greenberg of Forbes asks some good questions in his brief interview with Cisco’s Marthin de Beer, a former colleague of mine who has gone on to run the networking behemoth’s emerging technology group. (Meanwhile, I’m blogging about it, which tells you that our paths have diverged considerably over the years.)

Cisco’s executives might want us to forget how difficult the mechanics of the Tandberg acquisition were, but I have to agree with de Beer’s assertions regarding the compelling value proposition represented by telepresence and videoconferencing. I also agree with what he says about the considerable pull-through value that videoconferencing and telepresence brings to sales of Cisco’s bread-and-butter routers and switches.

On the first point, I think increasing numbers of corporations grasp the hard and soft quantitative business benefits of telepresence and videoconferencing. They see that the ROI isn’t just based on a linear calculation of travel bookings versus the amortized cost of the videoconferencing system.  Travel expenses, properly understood, involve not just the costs of airfare, cabs, accommodations, and meals, but also the harder-to-quantify costs of spending a lot of time in transit and what I’ll call, for want of a better term, travel purgatory.

Speaking of which, let’s considerable the hellish experience that modern commercial air travel has become. What Jack Nicholson reputedly said about attending Los Angeles Raiders football games almost applies to commercial air travel in the early 21st century:

“It was a hateful situation to put yourself in, sitting out there in the smog with a mob of criminal swine full of warm beer. At a Raiders game, you could get beaten and robbed without ever leaving your seat. It was like an outdoor jail.”

Okay, you don’t have the smog and the “criminal swine full of warm beer” (most of the time) on commercial aircraft, and you probably won’t get robbed in your seat. Still, commercial air travel is a terrible experience, replete with depressing and time-consuming security screenings, indifferent or abusive customer service, alarmingly frequent travel delays, and cramped quarters that are a claustrophobia sufferer’s worst nightmare.

I try to avoid the experience whenever possible, and I suspect I’m not alone. I really wish North America had not abandoned the concept of high-speed rail, but that’s another discussion for another time, and probably in a different virtual venue.

So, yes, I think Cisco’s got a good value proposition with its video conferencing and telepresence, as have others, such as Polycom, who compete with them for business.

The other point de Beer made, regarding the multiplier effect that videoconferencing and telepresence brings to sales of Cisco’s routers and switches, is just as valid. In reply to a question Greenberg asks about whether videoconferencing and telepresence represent a “sideshow” for Cisco or whether they boost its core business, de Beer replies:

We would not have spent $3.4 billion for a company that’s $1 billion in size playing in a market that’s only $2 billion if we didn’t expect, first of all, that telepresence would become a $10 billion market. And that’s just part of the bigger $34 billion collaboration market.

But yes, in every transaction, people have to upgrade and think about the network. High-definition video communications is the killer app for any network. If you haven’t got the right equipment, it just won’t give you that great experience. And so yes, customers are upgrading the networks to deploy telepresence. Customers save enough that both the upgrades in the network and the end systems are paying for themselves. The business case is there.

I think it’s difficult to argue otherwise, but I open the floor, as always, to those who offer dissenting opinions.