August 18, 2009

Will Videoconferencing Kill Business Class Travel?

[My column last week on Harvard Business Online]

In a tight economy, with companies spending much less on IT, the tech giants will take growth wherever they can find it. The Wall Street Journal reported recently that Cisco and HP are in a pitched battle for customers for their high-end teleconferencing systems. According to the report, it's "one of the few technologies that has benefited from the downturn, growing 30% from last year as businesses look to reduce travel expenses."

Cisco, HP, Nortel, and telepresence-focused players like Teleris have developed impressive, beautiful systems that make you feel like you're in the same room with your colleagues. The pitch is that you'll save money — but you'll also reduce your environmental footprint through reduced travel. These companies are cashing in on the business world's pressing need to get lean, while also appealing to the desire to get green. In my new book Green Recovery, I lay out five areas of a business that hold real promise for fast payback: facilities (lighting, heating, cooling), IT, fleet, waste, and telework. While companies are finding savings in all these operational areas, telework may be the most underleveraged of them all.

Just a few companies have made a concerted effort to reduce business travel through a combination of high-end telepresence systems and everyday technologies like WebEx. Most of the big users are, not surprisingly, tech companies that are acting in the spirit of "eat your own dog food." British Telecom calculated that it was saving $330 million per year on avoided travel costs and time saved, and Microsoft pegged its savings at $90 million. Non-tech leaders such as P&G and Deloitte have installed dozens of systems around the world — you need the network effect to kick in and make the investment worth it. They're saving millions every month on reduced travel expense.

It would seem that telework fits service and knowledge-based businesses best, but even companies with mostly hard assets see the value. David Ratcliffe, CEO of electric utility Southern Company, talked to the Journal in early 2009 about ways to cut costs in the downturn. He focused on two items: slashing $200 million from the capital expenditure budget by delaying some work on the physical plant and "more meetings with technology instead."

The business of telework is interesting to me on two levels. First, from the customer's side, even though the upfront investment is not small, it clearly saves a lot of money. Telework also represents a great way to show your most harried and valued employees that you care both about their life balance AND about greening your business.

But second, from the perspective of the suppliers of these technologies, the story has some interesting strategic angles. With their pitch of reducing travel, who are Cisco, HP, and the others truly competing against? The phone? No, they're going after the airlines — and targeting their best, most frequent, business-class customers. Do you think the airlines ever thought they'd be competing with IT companies?

[the rest of the blog is here]

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