Crosswinds Communities, a $200-million home builder and land developer based in Novi, Mich., is poised to save as much as $400,000 per year on business travel costs by conducting videoconferences over the Internet.
That reduction may not sound earth-shattering, given the pullback in corporate travel in recent years amid war, terrorist fears, and the sluggish economy. But Crosswind's use of the Internet for this application places it in a minority of companies that are discovering the savings not only in telecommunication costs but also in decision-making time.
"On a corporate basis, virtually no companies are using the Internet [for telecommunication]," said Elliot Gold, president of Altadena, Calif.-based TeleSpan Publishing Corp., which follows the teleconferencing and videoconferencing markets. That's because once video signals hit the Internet, there's no assurance of a consistent amount of network capacity on an end-to-end basis, meaning video quality and performance can degrade.
Indeed, Crosswinds was acutely aware of the potential downsides as it embarked on Internet videoconferencing, according to CEO Bernie Glieberman. "My guys were so surprised on the quality," Glieberman said. "They were worried about it, and they had provisions to switch if it didn't work."
The most common medium for carrying videoconferences is ISDN, short for Integrated Services Digital Network, a service that allows the voice telephone network to carry voice, data, and video simultaneously. While ISDN lines guarantee a predetermined amount of network capacity for a pristine video transmission, there are charges not only for the lines but also for usage time.
Contrast that with the approach being used at Crosswinds: the company has high-capacity, dedicated phone lines from three sites to its Internet service provider; it pays about $500 per month for each of those lines. Once a videoconference reaches the Internet, there are no additional charges -- but also no guarantees of quality.
"The thing they need to realize is that when the teenagers get home from school at 2:30 until the end of the business day, the Internet goes into the casket," Gold said. "That's an issue they'll need to address."
Crosswinds looked at alternatives to the Internet, including ISDN and a "virtual private network" (VPN), which establishes a temporary end-to-end connection -- effectively a secure tunnel -- inside an Internet link. ISDN was rejected because of the cost, while Crosswinds tried a VPN but had problems in the deployment, said Ed Andrews, Crosswinds' vice president of information technology.
For these reasons, the company was willing to take the performance risk when it first began using the Internet for videoconferencing late in 2002, but if performance does become a big issue, the company will explore alternatives.
There are many arguments in favor of videoconferencing. Glieberman reported that he alone can save a couple hundred thousand dollars a year by using videoconferencing rather than traveling on his private airplane, and that he thinks corporate savings could reach $300,000 to $400,000 per year. The company previously held a weekly Monday morning teleconference with its Florida office; that call alone cost $300, Glieberman said.
While Crosswinds builds 1,300 to 1,400 new homes per year, the biggest part of its business is land development. Videoconferencing supports a corporate objective to move fast and be responsive to business conditions in this realm.
"Our unique position is being able to buy land, zone and entitle it quickly, and then be able to sell it to public builders and other private builders," Glieberman said. Videoconferencing lets the company operate in several states -- Arizona, California, Florida, Michigan, North Carolina, and Virginia -- without requiring key personnel to travel as much as they would without the video technology.
Crosswinds' videoconferencing system -- based on hardware from Polycom Inc. -- makes it easier to set up and hold meetings. "We can have a business discussion with people that want to sell us land," Glieberman said. "Or in recruiting, when someone wants to work for our company in a high position, we don't have to go and do an interview in person."
Crosswinds has a T1 line at two of the three locations conducting videoconferences. The third location has an even faster connection based on technology called SDSL. T1 operates at 1.5 megabits per second (that's the equivalent capacity of 24 voice telephone circuits), while Crosswinds' SDSL line supports up to 2 megabits per second.
Videoconferencing also delivers value in that it lets participants in the meeting interpret body language, something that's not possible in a voice teleconference. "I can now do almost everything I need to do in Florida except look at land" through videoconferences, Glieberman said.
Use of videoconferencing puts Crosswinds in front of other builders in its size range, although the biggest of builders, including Del Webb Corp., implemented videoconferencing years ago, observed Chris Shaida, president of the home building consultant firm RealFoundations Inc., in Dallas. "It demonstrates some forward thinking on their part and a willingness to invest in better ways of doing the softer, more abstract parts of doing business."
Still, Shaida and other experts cautioned that videoconferencing isn't a technology that will revolutionize the way builders or other businesses operate; instead, it's most likely to streamline internal operations and improve the way meetings get conducted. "I don't think people have found it to drive brand-new ways of doing business," Shaida said. "It's more of an incremental improvement."
More and more videoconferencing systems being sold support the IP protocol that's used on the Internet, Gold said. In 2001, 10 percent or less of videoconferencing systems that were shipped supported IP, while 15 percent to 20 percent did in 2002. This year, he speculated it's possible the number sold that support IP could reach 25 percent to 30 percent.
Based on its experience, Crosswinds expects to expand its use of videoconferencing. Future plans could include video for sales sites and construction sites, Andrews said.
Morrison delivers sales training videos online.
Crosswinds Communities isn't alone in its use of video technology and the Internet to make its business run more efficiently. Atlanta-based Morrison Homes Inc. distributes weekly video clips outlining sales best practices to its remote sales locations, according to Kevin Gnewikow, Web site manager for the company.
The clips are an evolution from an earlier practice of recording interviews with salespeople on a once-a-year basis and compiling those interviews in a lengthy VHS tape, Gnewikow explained. The company now uses a miniDV recorder to record numerous interviews with salespeople at an annual sales meeting, then Gnewikow edits them using his Macintosh computer's iMovie software down to a point where individual snippets are anywhere from one to five minutes long. Those snippets -- known as Morty Morsels after the corporate mascot Morty -- are then uploaded to the corporate extranet. A link to a given week's snippet is distributed to the sales force via e-mail, and then salespeople are able to link through to the snippet and play it using QuickTime video. Salespeople access the video through a standard Internet connection, because they're not linked into headquarters through a virtual private, or semi-private, network, Gnewikow explained.
"The big story here is how you use technology to create a better sales environment for dispersed locations," said John Rymer, until recently a Morrison Homes sales executive who has now launched his own consulting company. "Having the content has never been a question. The question has been the delivery system and how to get the information out in a timely manner," says Rymer. The real investment in this system, says Gnewikow, is the DV recorder, which costs about $1,000.