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Meet Via Video

Videoconferencing technology comes to the rescue when being there isn't an option.

Location was almost a deal-breaker when technology entrepreneur Ofer Shapiro tried to hire a senior marketing executive to join his startup team at Vidyo. But he overcame the hurdle by using his company's own next-generation videoconferencing technology to start conducting regular staff meetings between its offices in Hackensack, New Jersey, Northern California and other far-flung locations. The technology has saved Vidyo thousands of dollars in airfare, hotel fees and time wasted in transit.

"I wouldn't move away from California," says Marty Hollander, Vidyo's senior vice president of marketing. "So I declined Ofer's offer. He called back and suggested we use our own product to make it work."

Vidyo, which received a $12 million second round of venture funding in 2007, sells what it calls "personal telepresence" technology. Its products include desktop and room-based videoconferencing systems that promise to deliver the same sort of HD-quality immersive experience that companies like Cisco Systems and Hewlett-Packard tout in ultra-expensive alternatives but at a fraction of their six-digit price tags: Vidyo ranges from $3,000 to $13,000 for the hardware; additional licenses for a Windows desktop or notebook computer are $30. There are also Vidyo service providers with subscription-based Vidyo-Conferencing services.

"You want the feeling that you're in the same room when you're using these systems," says Ira Weinstein, senior analyst and partner for Wainhouse Research. "Tele-presence is the new efficiency tool; it keeps you off planes." He says Vidyo's technology is unique in that it scales to accommodate whether it's running over a sluggish internet connection or a faster in-house computer network. "Vidyo literally is working on a better mousetrap in this market," says Weinstein. "This stuff is really designed to work over lousy network connections."

Vidyo works by scaling the video stream through a new protocol, H.264/Scalable Video Coding, which is much more forgiving of what a bad internet connection can do to a videoconferencing experience. "It'd have to work over DSL, in hotel rooms, even from an airport lounge," explains Hollander.

Cisco and ShoreTel, another respected company that sells unified phone and data network equipment, have both licensed the Vidyo technology to incorporate into their own products.

While videoconferencing at your desktop certainly isn't new, early incarnations suffered from low quality and high costs. But sales growth for the segment doubled from 2007 to 2008 to between 25 percent and 30 percent, according to Wainhouse. For the second quarter of 2008, the research firm reports that videoconferencing end-point sales hit $325 million, up 24 percent. The market for the high-end systems is much smaller. In the first 18 months since Cisco began selling TelePresence, it sold just 500 or so systems in the line.

But Weinstein says the positive reception for Cisco's technology is helping change market dynamics, notably a serious improvement in the quality of the products and overtures by the larger vendors and channel partners to develop a larger audience that touches growing businesses.

Cisco, for example, has inked a deal with AT&T under which the telecommunication services company provides telepresence meeting services in its offices, and it's encouraging companies in the hospitality industry to do the same. And HP is working with Marriott International to build out telepresence meeting rooms in major business centers around the globe.

Because these options still require you to leave your office, Cisco, HP and others are creating ways for desktop videoconferencing systems to communicate with high-end room setups. That means you could conduct a meeting, for example, with one of your clients without having to plunk down $500,000. HP and Tandberg have teamed up to create gateway products for communicating with HP Halo Studios. Cisco also has introduced a scaled-down version of TelePresence. The TelePresence System 500 comes with a 37-inch screen, a camera, a microphone array, speakers and lighting; it carries a hefty price tag of $33,900.

If that's still a little rich for your taste, Polycom sells the HDX 4000 that supports HD video and starts at around $7,000. Unlike some rival systems, Polycom's gear uses industry-standard video encryption, and Joan Vandermate, vice president of marketing for the video solutions group at Polycom, says it can act with any other system that uses the H.323 video standard.

Other companies Weinstein suggests offer appropriate high-quality videoconferencing options for entrepreneurs, including Teliris Personal Telepresence, still rather pricey at $32,500; or LifeSize Communications, which has priced its entry-level LifeSize Express with the Focus video communications system below $5,000.

"The value that you place on these systems really depends on the individual," Weinstein says. "The price points may seem out of reach for me, but the overall value proposition of being able to communicate more effectively with your clients or employees makes the difference."

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This article was originally published in the December 2008 print edition of Entrepreneur with the headline: Meet Via Video.

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