Does streaming video increase revenue? Does it decrease total cost of ownership? Most top managers are asking these questions today. Streaming video technologies can do either -- sometimes nearly expense-free.
Determining whether streaming video is cost-effective to an organization's needs depends largely on the WAN bandwidth required, since much of the software is free. If an organization doesn't require multiple instances, or that the application will run over a LAN, streaming video has a number of possibilities. Otherwise, the added bandwidth will contribute a substantial cost -- as much as 65 percent, as seen in the sample breakdown below.
Take, for instance, the following two fictitious companies -- one is looking to drive sales revenue and the other is looking to reduce costs. Neither company has a budget for adding streaming video, so creativity is key.
Millennium 21 is a 500-person, $20 million real-estate organization in Chicago. It shows properties on its Web site to registered clients, who pay a fee to download video clips. The files are large and downloads are slow, but the company's main concern is accuracy. Properties sell quickly, and there is no way to update the information once it has been downloaded. Millennium 21 estimates that a more effective application would increase sales by 15 percent within six months.
Streaming video addresses the problem, but the chosen solution has to have a universally available player, work in a Unix environment, be supported by hosting provider Digex, perform well over the Internet, leverage existing bandwidth and support up to 75 simultaneous users.
RealNetworks' RealSystem iQ and Apple's QuickTime 5.0 are under consideration. Microsoft's Windows Media Services is eliminated because it operates in a Windows environment only. RealNetworks and Apple offer free players that can be downloaded. Apple's server software is free; RealNetworks' would cost $4,000. Millennium 21 decides to go with Apple's product.
Why? Given the potential to increase revenue by $2 million to $3 million, and all other costs being equal, Millennium 21 decided to save the extra $4,000 it would cost to use RealSystem.
Suburban Style is a 10,000-person, $75 million clothing catalog company with call centers in Ireland. It also provides its call-in customers with fashion advice. To ensure that its consultants are familiar with the latest products, the company has been producing CDs with video clips on how to sell the products. Each shift of operators receives 25 CDs every two weeks, at a total cost of $25,000 per year. The company believes streaming video would be a better solution, as long as it leverages Suburban Style's environment of 18 Windows 2000 servers, consumes less than 15 percent of LAN bandwidth, enables on-demand viewing for 10 to 15 operators simultaneously and requires no added investment.
Suburban Style evaluates RealNetworks' and Microsoft's solutions, choosing not to introduce Apple into its environment. Both solutions can accommodate 10 to 15 simultaneous users, but the up-front investment of $2,000 per server for the RealNetworks solution ($36,000 in all) makes it more costly than the CDs. Suburban Style chooses Microsoft for the cost savings.
Shally Bansal Stanley manages Greenwich Technology Partners' Network Economics practice, where she analyzes financial and contractual impacts to changes in voice, data and wireless infrastructures. Send your comments on this article to her at sstanley@greenwichtech.com.
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