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Dennis Sandow chuckles recalling his “Halo moment.” It occurred when an illusion created by the video conferencing system he was using made it seem that a colleague was in intimate proximity, even though they were thousands of miles apart.

“He didn't have his pen,” says Sandow, a social scientist who studies collaboration and human interaction and performs contractual work for Hewlett-Packard Co.'s Halo video conferencing system. “So, he looked up and said, ‘Dennis, do you have a pen I could borrow?' And I reached for it to pass it over.”

A second later, with Halo's illusion broken, the men shared a laugh but the point, Sandow stresses, is that removing barriers to social interaction is the key to video conferencing success.

Slow, cumbersome, artificial and exorbitantly expensive when it lumbered onto the landscape nearly two decades ago, video conferencing is evolving as a vital collaborative tool for a diverse range of applications, from multinational corporations to health care, and even the arts.

The University of Waterloo, for example, uses it to allow actors and directors to collaborate on projects all over the world while also delivering live theatre to wider audiences. The National Arts Centre in Ottawa uses video conferencing to export Canadian culture across the country and to the world. “This is not your grandmother's video conferencing tool,” says Halo marketing manager Ray Siuta of the system, which can connect up to four studios around the world simultaneously. “It's about creating a distraction-free environment for business.”

Video conferencing is becoming a natural extension of telephone conferencing or e-mail, adds Laura Shay, marketing director for Polycom Video Solutions, the biggest player in the video conferencing world with others like Tandberg and Sony close behind.

It's also a growing market. In 2005 video conferencing was worth about $1.15-billion (U.S.) globally, says Roopam Jain, an analyst with ICT Frost & Sullivan. The market is expected to reach $3.1-billion by 2010, growing at a compound annual rate of 22.1 per cent. Research firm Gartner Inc. is even more bullish on the sector, projecting video conferencing technology to be worth $12.8-billion by 2011.

“We see healthy but gradual growth in this market as the technology becomes more intuitive and is integrated with other communication tools and enterprise applications,” Jain said.

“It really cuts down on the time it takes for a decision, you get the right people meeting right way and it cuts costs,” enthuses Guy Welty, manager of global media networks and collaborative services for W. R. Grace, a global chemical supplier with annual sales of more than $2.5-billion and 6,400 employees in nearly 40 countries.

Welty manages nearly 90 video conferencing points of varying sophistication around the world and says bringing the system in-house over a unified communication system saved $5.5-million over outsourcing for both audio and video conferencing last year. Managing the resources and booking conferences is as simple as using Outlook, he said.

“We have one big one here in Columbia, Maryland, that the CEO uses for town hall meetings that are recorded and archived. It cuts travel costs and saves time. Sending two high-level executives to Asia is two days each of downtime with the travelling. This is much more effective.”

Video conferencing hardware and software runs the gamut of complexity and price. While consumer level systems go for as little as $50, the quality is reflective of the price. Polycom's more sophisticated desktop system is $200 and runs at 30 frames a second, enough for smooth motion but still subject to some lag or latency. Still, the low entry price makes it a worthwhile experiment, especially at the rank-and-file level for employees working in distributed or virtual teams in far flung locations.

The next step up is a $5,000 system with an integrated camera and screen. From there systems evolve into dedicated conference rooms starting at $25,000 and soars to $500,000 for top of the line systems designed for lecture halls or other large meeting rooms. As the prices rise, so too does the level of sophistication and illusion.

Cisco Systems Inc. is now rolling out its own version, says Marthin De Beer, Cisco's vice-president of emerging technology markets. It's called Telepresence and has been two years and 25 patents in the making. Unlike Halo, which processes a staggering 45 mbps over a proprietary fibre optics network, using MPEG2 video compression to render high definition images and sound with connectivity limited to other Halo studios, Telepresence uses existing, normal IP networks and standard compression protocols and is compatible with other systems.

HP is currently looking into building a Halo studio in Mississauga, Ont. Halo now costs about $425,000 per studio (down about $125,000) plus a $20,000 monthly network and maintenance fee while Cisco's Telepresence will run about $299,000 with the two-on-two seat version for $79,000.

Most systems maintain that all-important illusion of proximity reality with dedicated conference rooms and matching decor; in Cisco's version it's an oval table with a giant wide screen across the centre that shows the other six participants in life-size, ultra high-definition 1080p resolution.

Both HP and Cisco claim the presentation is so lifelike, users can count freckles and watch irises contract during key negotiations and moments of stress. And that's crucial, says Sandow. At the high end, video conferencing transcends the physical. Even the sound is crucial to ensure voices aren't disembodied but appear to come from the speaker's “position” in the room, left, right or centre.

“Human beings are wired for facial expressions and body gestures as a way of collecting information,” says Sandow. Anything that gets in the way of our primal senses interferes with communication. That's partly why e-mail and, to some extent, phone or audio conferencing isn't as effective as face-to-face meetings. Some 90 per cent of what we discern about others come from these visual clues, says Sandow.

At the same time, he says, a video conferencing system must also suppress other distractions — there can be no buttons to push, microphones to speak into, extraneous sounds or visual interferences.

“No one opens their laptops, checks their BlackBerrys or cellphones because there's nowhere to hide,” Siuta said of the 60 Halo studios either installed or under construction with top Fortune 1000 companies.

The investment in capital structure is steep and the debate on payback is moving from travel costs to a host of other factors. The skyrocketing costs of air travel, post-9/11 security delays, and the stresses maintaining a work/life balance aside, there are several other factors driving interest in video conferencing, notes Johna Till Johnson, president & senior founding partner at Nemertes Research in New York, including real estate costs. “Housing an employee at a corporate office in a major U.S. metropolitan centre costs up to $20,000 a year,” says Johnson, whose firm advises business on emerging technologies. “If they move that person to the suburbs, it can cut it in half.”

As needs change quickly, companies need to either assemble expert teams for specific projects or change organizational structures, without physically moving bodies, she says.

“On audio conference calls the tendency is to put the phone on mute and not pay attention,” said Johnson. “Meetings tend to get longer and people got gassier. In video conferencing you see the whites of their eyes and meetings get shorter because people want to get back to work.”

Sometimes the payoff comes in much more human terms, adds De Beer, noting his own assistant was planning to quit because she couldn't afford to live in the highly inflated San Francisco Bay area and work at Cisco's Silicon Valley offices. By leveraging Telepresence, she relocated to Cisco's offices outside Dallas but remained as his assistant.

“She's still with me, but on a screen outside my office,” De Beer grins. “People still drop by her desk and chat. And she's happy in Texas where she can afford a nice house in a nice neighbourhood.”