Videoconferencing has long been a staple of science fiction, but has taken longer to catch on in the real world than anyone expected. It was too expensive, too complicated and had too few users to make it valuable for all but the most limited applications.
Well, times may have finally changed. Ask Jim Mahoney, a vice president at SG Cowen & Co. and director of institutional trading, who’s based in Boston, although the gut of his operation is in New York. As little as a month ago, he would spend most of the day on the telephone. Today, he chats with his traders and sales staff face to face. (photo of Jim Mahoney)
The video connection is as easy to establish as sending an instant message. There’s a similar list of contacts, one click to connect, and the person on the receiving end can choose whether or not to respond. And then he’s talking.
His colleague’s face is in a window that fills most of Mahoney’s computer screen. The image is crisp and clear-no delays, no jumps, no synchronization problems between speech and video.
“I wasn’t sure about this when I first started,” Mahoney admits. “But it fundamentally changed the way I communicate.”
Mahoney and 82 other people at SG Cowen are using Avistar Communication Corp.’s desktop video applications. Avistar dominates the Wall Street market for desktop videoconferencing, according to Andrew Davis, managing partner at Wainhouse Research, which follows the video conferencing market.
With a per-user cost of around $3,000, it’s actually feasible to put a system on every desk. And some firms-particularly those with far-flung operations-are doing just that.
According to Jim Hughes, Avistar’s CEO, Deutsche Bank has 3,000 users in its equities departments getting connected in 22 cities around the globe.
UBS Warburg is another major installation, with more than 1,000 employees using the Avistar system.
Video helps bring a far-flung company closer together-in addition to cutting down on time and money spent traveling.
“The small offices that considered themselves out of the loop and remote are no longer remote,” said Andrew Konchan, executive director of e-commerce at UBS Warburg, who spoke to ITALICSecurities Industry News briefly between video calls.
And the more people are connected, the more incentive there is to connect others. Mahoney at SG Cowen is experiencing that same effect.
Currently, only executives, analysts and salespeople in Boston and New York have the system, but with the use its been getting in just the first month, Mahoney said, the company will soon expand it to other cities.
“It’s the network effect,” said Hughes. Avistar has been keeping track of the growth rates, he added. “After a client gets to 200 seats, they increase their seats 15 percent quarter over quarter and there’s a 25 percent usage growth in quarter over quarter. As opposed to video conference rooms, people actually use this stuff.”
With the system, Mahoney can talk face-to-face with up to three other people at a time, share documents and record presentations for later Web broadcast. These internal tools help SG Cowen communicate its research more effectively, he said.
“We can add value for our clients by having a concise, well thought-out research call,” he said, adding that he expects to see revenue increase from installing the system. Besides the potential of reducing travel costs, video conferencing is a differentiator, setting some communications apart from others.
“I get a hundred voice mails a day,” he said. “I get two video messages. Which one am I going to return? If I’m a client of SG Cowen and I have an Avistar system, there’s exclusivity built into it.”
In fact, some 30 Wall Street firms have given Avistar systems to their clients for that reason, according to Hughes.
“The more you communicate with the client, the more business you are able to do with the client,” said Konchan. Videoconferencing, he said, “increases the quality of communication and makes communication easier and more frequent.”
As a result, as prices come down, UBS Warburg plans to install Avistar systems for all of its front-office employees-and more of its customers.
That’s one of the reasons why video conferencing has finally taken off, according to Davis.
“Costs have come down pretty dramatically over the past few years,” he said. “I think, to some extent, we’re bottoming out today on costs.”
For example, he said, video conferencing systems cost between $25,000 and $45,000 each. Today, even a full-function room system can be had for under $7,000.
Video conferencing is also starting to reach critical mass. Davis estimates that half a million units have already been installed, with Wall Street among the biggest users.
“It’s a way to overcome the barrier of distance,” he said. “And also time-because you can save a lot of time from not having to fly to Chicago.”
Since communications are standards-based, systems offered by different vendors can communicate with one another. For example, Mahoney can call the downstairs conference room from his desktop, even though the room system is from another company, Polycom.
Finally, the picture quality has become extremely good, as Mahoney can testify.
“We have reached the point today where most business users would find the audio-video quality acceptable,” Davis said. “It’s not TV quality, but it’s getting there. And the biggest contributor to dissatisfaction-delay-has also been coming down every year.”
To demonstrate, Mahoney dialed up a colleague down the hall, one in New York, and Jim Hughes in California. In all three cases, the picture was natural and immediate, with no video “stuttering” or jaggedness like sometimes seen on an Internet streaming video.
“Today, we’re looking at delays of under a quarter of a second,” said Davis. “A year ago, that was half a second, varying by equipment.”
“But that’s an average that includes other desktop-based video conferencing systems.” Avistar stands out in terms of its TV-like quality, Davis added.
The technology that makes it possible includes a dedicated server (included in the $3,000 per-user cost) that takes the burden of the video processing work off the desktop, and two separate communication lines-one for video, and one for data.
The video signal is fed through unused wires on the local area network, meaning that video conferencing doesn’t slow down a company’s other communication systems.
Requiring two separate communication channels means that the video and sound can be routed intelligently around problem areas-a particular concern for long distance and international communications, said Avistar Vice President John Carlson