NWME: Polycom has just had a record year of revenues. Why has videoconferencing come so far now when it was supposed to be the big thing several years ago?
Hagerty: We have a great value proposition with video communications and it has taken a long time in coming. Originally, we were hobbled by a telephony infrastructure than ran on ISDN, but now it is on Internet Protocol. You can't believe how incredibly good the video quality is today. We at Polycom offer anything from desktop to PC to video that runs on phones to telepresence, all seamlessly built and high definition. It's spooky good video. You could take a penny and show Lincoln as he sits in the Lincoln Memorial on the back. That's how good it is. The integration with other phone and desktop communications has also leapfrogged.
NWME: But why so long? Wasn't there supposed to be this interest in the mid-1990s?
Hagerty: We were one of the first to commercialize IP video in 1998, which didn't get a lot of play because networks were built for e-mail and not built for real-time communications. They were best-effort kinds of networks. But five years ago, we started seeing quality of service, meaning some data should be best effort and some should be on-time, and the technology worked well. So a leap happened.
Another breakthrough in technology was with high-definition video. It's such an incredible experience. People who've used this technology will walk up to each other and say, “It's so great to meet you in person, only on video, I didn't realize you were so tall.”
NWME: Is the value proposition of videoconferencing to reduce travel costs working?
Hagerty: At Polycom, we have video for anybody who wants it, and that's up to 2,000 people in our work force. The value proposition is there, our travel budgets are less and we're not spewing the carbon anywhere near others on planes. The productivity level is much higher. There's opportunity not to be on a plane, or out driving, or in a cab. I can meet eight to 10 customers a day on videoconference and I have great meetings in high definition, face to face.
NWME: In addition to your duties at Polycom, you are on the board of Palm , a maker of handhelds and soon the new Pre . Does that mean you are helping them put video on their handhelds, perhaps?
Hagerty: There are no partnerships implied with Palm. It's just the kind of technology I've advocated over my career and a good natural fit. But more importantly, when are we going to see videoconferencing on wireless handhelds? We have videoconferencing solutions working over 3G networks with Ericsson in Italy running on the Palm. It's live TV, a live videoconferencing hook through our enterprise network and through 3G and into the backbone which connects a person to the office, so they can talk on a handheld. It looks great, but it's not high definition. You can get high definition videoconferencing on a PC. It easily downloads. We're doing it over Wi-Fi, too, so people sitting in airports can be on video conference calls with their laptops while they are waiting. That's live videoconferencing in high def.
It is good motion quality, at 30 frames a second? It's a full 30 frames a second, depending on the network. That's TV quality.
NWME: What will be the impact of videoconferencing on handhelds? Are you preparing for that?
Hagerty: As videoconferencing migrates from a niche technology to the mainstream in the enterprise, you'll want videoconferencing for everyone, everywhere. It's an important solution and, of course, you will want it everywhere and on what you want to connect. Sure it's a huge thing. It's part of a wave that's starting to crest and affecting everyone.
NWME: Will we see a videoconferencing or video chat wristwatch, like the one LG Electronics showed at International CES recently?
Hagerty: A wristwatch is probably the wrong form factor. That's less important than that people at work, whether at a home office or a work environment, will want to be able to connect to the rest of the organization.
As we see bigger developments in 3G networks, videoconferencing will be ubiquitous. Everyone will do it on handhelds. To be provocative, I'd say voice-only will be a rarity on a wireless handheld and videoconferencing will be the norm, sometime in the not-too-distant future.
I can see some drawbacks to that. The handheld does have the issue that holding it with a hand means it's not a steady camera image. The image needs to be higher than most people working on a handheld provide, since you'll be looking up somebody's nose if you aren't careful. We've developed video products for this and the camera angle is important. The early videophones generally had the screens too low so the camera looked up your nose. Also the video can be a little like the video from the Blair Witch Project , with the moving images, with the handheld moving up to the head, to the eye. You'll even get nosehair to nosehair.
NWME: So your researchers are looking into this?
Hagerty: Yes, we have 600 people, nearly one third of the company, in research and development, and some are busy researching and building gateways to the handheld. We never make the phones, but they will require lots of processing power for video. As the networks get more bandwidth, any of the new smartphones will work, the Palm being the best of course.
NWME: There are several major companies offering videoconferencing products, some of the telepresence kind, including Cisco Systems. How are you distinguishing yourselves from them?
Hagerty: The industry is moving faster and faster, yes. We want to create a very immersive experience, the most immersive in the world with telepresence. We want you to feel like you are in the room with the other person. We want to push the envelope towards bigger and more natural. We have stereo audio and beautiful pictures. We're pushing for something bigger, something beyond high definition.
The other consideration we address is how much of an available pipe can your organization provide? The home office couldn't really deliver videoconferencing quality over cable or DSL, because there was not enough bandwidth. Now with algorithms, we have the unique ability to detect lost packets and create beautiful video. We excel at that and will continue to push the envelope and challenge the industry on how to create ease-of-use and how to get more picture for less money.
NWME: How is your telepresence product selling?
Hagerty: We let customers look at it and they like it. Fox News and News Corp. are using it to connect their execs together. The Cancer Network in the U.K. uses it, and so does the Bank of China to connect to hundreds of other banks. There's the Alabama Department of Education and Deloitte. The difference between us and Lifesize is that our video is significantly better. We also have solutions that are less expensive than Lifesize.
NWME: Do you compete and cooperate at the same time with Cisco?
Hagerty: Yes, Cisco resells our conference phones and we work together on protocols that provide interoperability. We cooperate when it makes sense.
NWME: Your sales of traditional voice products have declined recently. Is there a shift going on from voice to video?
Hagerty: Voice over IP is more challenging, and people are delaying on those purchases. We've found that people might already have a phone and must not have a new one. There's nowhere near the return on investment from VoIP compared to videconferencing.
NWME: What is the videoconferencing ROI, generally speaking?
Hagerty: The ROI varies depending on the travel a company does, but from the reduced carbon footprint and dollars saved on travel, the return on investment is six months. Our team found the ROI was 265% in the first year.
NWME: People seem to hold any kind of meeting in telepresence, but are there some things you would never do, such as fire somebody over telepresence?
Hagerty: We do performance reviews over videoconference, and people love it. That's performance reviews, not layoffs.
NWME: How will your company and the videoconferencing industry do in 2009?
Hagerty: We heard in 2001 that bad times would help videoconferencing, but it didn't seem to materialize. We'll see double-digit growth in video revenues, but not at the level of 2008. It's a growth year and we expect the voice division to pull through. The analysts haven't really finished their 2009 forecasts.
NWME: How much of a threat is Cisco, given how they seem to enter markets and conquer them?
Hagerty: We still have the largest number of installed units in videoconferencing deployed, about 650,000 globally. The noise Cisco is making is a net gain for our industry. We welcome competition, but we think we outplay them.
