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By deploying streaming media using Microsoft's Windows Media ...

  1. 1. AberdeenGroup OnSite Hewlett-Packard Company: Using Streaming Media for Competitive Advantage By deploying streaming media using Microsoft's Windows Media™ Technologies and services from Network24 Communications, Hewlett-Packard Company (HP) was able to streamline product introductions, increase the effectiveness and reach of its communications, and significantly reduce the costs of key communications. The cost savings - derived primarily from reducing the use of multi-city road shows, audio bridges, and satellite links - were approximately $1.2 million in the first year and generated an ROI of over 1800% and a one-month payback. There- fore, Aberdeen concludes that the business benefits are sufficiently compelling that enterprises should seriously investigate deploying streaming media technolo- gy. Executive Summary Streaming media — the delivery of audio and video content over networks on a live or on-demand basis — is one of the fastest growing technologies on the Inter- net. Streaming media is growing in popularity because it greatly enhances Web- based communications and it makes a large amount of programming content (mu- sic and video) available to audiences — without the time and storage require- ments associated with downloading large files. In addition, streaming media en- ables companies to convey information in a more dynamic and compelling fash- ion, which in turn allows them to communicate information more effectively. Orga- nizations with a significant web presence (e.g., Web portals, e-retailers, and broadcasters) have found that streaming media, provides a more interesting view- ing experience, which attracts more web surfers and encourages them to stay longer on the site — both which can increase the success of the web site. While streaming media is very popular among consumers and in consumer orient- ed web sites, enterprises, until recently, have been noticeably slower to adopt this technology. This reluctance on the part of enterprises results from information technology (IT) departments’ concern about increasing network congestion, and from business managers’ lack of awareness of the business benefits of streaming media. While new networking solutions are overcoming the technical barriers, there is still a lack of research that enumerates the business benefits of streaming media. To fill this gap, Aberdeen conducted a case study of Hewlett-Packard
  2. 2. Hewlett-Packard Company 2 Company (HP), a leading user of streaming media, with the objective of docu- menting the real-life business benefits and return on investment of this technology. Key Findings By deploying streaming media using Microsoft’s Windows Media Technologies and services from Network24 Communications, HP was able to streamline product in- troductions, increase the effectiveness and reach of its communications, and sig- nificantly reduce the costs of key communications. The cost savings — derived primarily from reducing the use of multi-city road shows, audio bridges and satel- lite links — were approximately $1.2 million in the first year, and generated a re- turn on investment (ROI) over 1800% and a one-month payback. Therefore, Ab- erdeen concludes that the business benefits are sufficiently compelling that enter- prises should seriously investigate deploying streaming media technology. Streaming Media Market Dynamics Over the past six months, we have witnessed a rapid upsurge in streaming media adoption. Research indicates that networked multimedia (which includes stream- ing media and interactive multimedia) will grow roughly 50% per year for a total market of approximately $40 billion by 2003. Much of this growth is being fueled by e-commerce sites and Web portals that are adding streaming media to en- hance the user experience, which increases a site’s attractiveness and “sticki- ness.” Early studies have shown that visitors to sites with streaming media remain up to twice as long as they do at sites without media content, and that banner ads with streaming media have very high click-through rates. In addition, streaming media has become a new and important distribution method for music and for ra- dio and television broadcasting. The adoption of streaming media for enterprise use, however, has been much slower. Enterprise decision-makers are considerably more cautious because streaming media can significantly increase bandwidth utilization and network con- gestion. Solutions to network congestion include upgrading the network to add bandwidth, enabling quality of service (QoS) capability, and/or implementing multi- cast — which are potentially expensive, lengthy, and risky options. Also, IT de- partments may incur additional hardware costs if desktops need upgrading, and increased support costs to ensure that all browsers are streaming media enabled. Moreover, there has been little demand from end users or business managers, caused in part by a scarcity of data for building a business case for deploying streaming media. This lack of interest by enterprises is changing rapidly as enter- prises are now beginning to realize that utilizing streaming media can increase the reach, impact, timeliness and cost-effectiveness of key communications with em- ployees, customers, partners and suppliers. The objective of this OnSite Profile is to increase the availability of such data by using a case study analysis to quantify one company’s installation of streaming © 1999 Aberdeen Group, Inc. Telephone: 617 723 7890 One Boston Place Fax: 617 723 7897 Boston, Massachusetts 02108
  3. 3. Hewlett-Packard Company 3 media. Aberdeen chose HP because it is a leader in the deployment and use of streaming media to enhance a wide range of communications. Situation Analysis Marketing Communications Challenges The impetus for implementing streaming media at HP started with the Worldwide Marketing group for the Enterprise Computing organization (EC). Responsible for product launches, sales training, channels training, internal and customer semi- nars, the Worldwide Marketing group was interested in enhancing and streamlin- ing key communications processes — and one of the most important is the intro- duction phase of a product life cycle. One of the critical driving forces of the computer industry is that product life cycles are quite short — ranging from four to 12 months — and a substantial portion of a product’s life can be subsumed by the launch process. If the launch process could be made more efficient by reaching more people in less time, then each product would have more time-in-market and sales and profits would increase commensu- rately. In addition, special circumstances, such as compressed schedules or the need to keep information under strict non-disclosure until the announcement day, limits the ability of traditional means to quickly and effectively disseminate such in- formation. In addition, typical corporate communications, such as product updates, corporate announcements, and internal communications, are conducted via road shows, au- dio conferences and videoconferences. For example, product launches often in- volve a major road show to 10 - 40 North American and up to 10 European cities, or live broadcasts via satellite. Internal or short public briefings are often conduct- ed using traditional audio conference services or via an ISDN-based videoconfer- ence. The problem with these traditional options are that they are expensive, es- pecially road shows and audio conferences of more than 20 people. In addition, audio conferencing lacks live visual input and videoconferencing lacks good docu- ment sharing and synchronization. In addition, all of these alternatives have limit- ed reach, and their archiving and redistribution capability is cumbersome. HP’s Vision for Change Worldwide Marketing was looking to broaden the scope and delivery methods of its marketing communications (marcom). Recognizing the potential of the Web to revolutionize marketing by delivering more customized information to decision- makers in a variety of formats, the Worldwide Marketing group wanted to incorpo- rate streaming media in multiple points in the company’s external marketing com- munication mix. HP’s objectives were to make its Web-based marketing material (including its Web site) more interesting and convey information in a creative manner — which in turn, would increase the usefulness of the web site for its customers, increase the © 1999 Aberdeen Group, Inc. Telephone: 617 723 7890 One Boston Place Fax: 617 723 7897 Boston, Massachusetts 02108
  4. 4. Hewlett-Packard Company 4 amount of time customer spent on the web site, and increase the retention of in- formation. HP also wanted to increase the visibility and recognition of its key ex- ecutives. Additionally, HP had launched its e-services strategy as the overarching strategy to guide the company. As the lead organization for promoting this strategy, EC wanted to adopt and showcase the use of its own technology and services to fun- damentally transform internal business processes. As well as being able to communicate more effectively with customers and part- ners, EC wanted to use Internet based technology to enhance internal communi- cations as well. For example, this technology could be used to increase interac- tions across the gap created by distance and time zones, which would help main- tain company morale and cohesiveness. Given these drawbacks with existing communication vehicles and HP’s desire to streamline communications process- es, the Worldwide Marketing group evaluated the Web and streaming media as potential solutions. The Answer: Streaming Media HP weighed the live communications options of road shows, satellite broadcasts, audio conferences, and chose streaming media to be the cornerstone of marcom. HP chose streaming live via the Web (webcasting) because it is more cost-effec- tive, immediate, effective in conveying content, and is able to reach a much broad- er audience. In addition, webcasts have unique attributes such as the ability to provide effective methods of interactivity and feedback with the audience, deliver a consistent message to the entire audience, and provide an easy and cost-effective way to archive the content for on-demand viewing at a later date. HP decided to implement streaming media for external audiences first using an outsource service and is in the process of deploying similar capabilities for internal webcasts. By using streaming media, HP could more effectively educate and in- fluence customers and channels partner by quickly and conveniently delivering rich information content. Furthermore, in order to demonstrate the value of its e- services strategy, HP chose to have streaming media — and the related applica- tions — hosted by an e-services partner. HP’s Deployment of Streaming Media The Preferred Solution To deploy streaming media, HP chose the products and services of two compa- nies, Microsoft for Windows Media Technologies and Network24, a streaming me- dia services company, for hosting and managing the live and archived content. For creation and distribution of content, HP chose Microsoft’s Windows Media En- coder and Windows Media Services, and the Windows Media Player for displaying the streams on client desktops. © 1999 Aberdeen Group, Inc. Telephone: 617 723 7890 One Boston Place Fax: 617 723 7897 Boston, Massachusetts 02108
  5. 5. Hewlett-Packard Company 5 Network24 supplies the event management software and streaming services for public events (both live and on-demand) on a hosted basis. Network24’s services, which it delivers on an integrated platform, provides a rich suite of administration functions including scheduling, audience acquisition and registration, monitoring of webcasts, moderator controls, Q&A sessions, surveys, viewer profiling and cus- tomizable management reports. In addition, HP built a webcast studio specifically to support webcasts that re- quired lower production values and quick turnaround, and would be less expen- sive to run than a typical studio. This studio is a scaled-down and lower cost ver- sion of the full video production studios operated by HP — with a single camera and less mixing and switching equipment, it can be run by a single person. In or- der to promote the use of streaming media for multiple uses and groups, the web- cast studio is available to any group within HP for a nominal hourly fee. HP chose Microsoft’s Windows Media Technologies because of the audio/video quality, comprehensive functionality, widespread availability in the market, and us- ing a single supplier greatly simplifies desktop maintenance and support. HP chose Network24 for a number of reasons. Network24 supplies a complete solution for webcasting, it has extensive expertise in video production, and its val- ue-added software platform greatly simplifies important housekeeping tasks such as scheduling, registering viewers, tracking, polling, reporting, and administering questions and answers, which in turn reduces the administration cost. In addition, having Network24’s technology available on a service basis was attractive to HP because the team could obtain rich functionality without heavy capital investments in servers and software, or maintenance of additional software packages. The worldwide marketing team recognized that outsourcing enabled it to deploy impor- tant web-based functionality while efficiently using its marketing budget. Implementation Issues Technical Issues While implementing the streaming capability for external audiences, HP faced only a handful of technical issues — because Network24 took responsibility for deliver- ing the service. The major tasks that HP faced were to provide sufficient band- width between HP and Network24’s operation center and to install Network24 client software. Additionally, there were some issues with ensuring that users had downloaded the correct version of the Windows Media Player prior to the web cast. HP faced some early interoperability issues with Netscape browsers. HP decided to support both Microsoft and Netscape browsers for external audiences, and chose to write a custom script to automatically install Windows Media Player for older versions of Netscape browsers. As HP deploys streaming media for internal communications, it will face other technical challenges such as multicast enabling routers, upgrading local area net- © 1999 Aberdeen Group, Inc. Telephone: 617 723 7890 One Boston Place Fax: 617 723 7897 Boston, Massachusetts 02108
  6. 6. Hewlett-Packard Company 6 work (LAN) and wide area network (WAN) bandwidth, and adding servers to han- dle the encoding and streaming of the content. Business and Organizational Issues Budgeting was not an issue for EC because it had sufficient budget for live product launches, and had the flexibility to reallocate funds for this new communications method. Moving to the Web as a major mode of communication did require some changes to business practices. For example, HP had to modify its processes to incorporate Web-based media, install feedback mechanisms, and communicate to audience members how they would be receiving the information. Finally, audience members needed to be willing to change their habits and be willing to use Web- based streaming media to obtain certain information. Impacts of Streaming Media Transforming Business Processes EC’s Worldwide Marketing group has made the Web a key component of its mar- keting strategy and has transformed key business processes. EC is moving away from traditional real-time group communications methods and is moving rapidly to- wards web-based communications. Currently, EC is webcasting product launch- es, training, customer and field communications, and will be deploying capability to webcast multiple types of internal company announcements, including corporate- wide profit-sharing announcements and group briefings. Audience response to the webcasts has been very positive and news about this enhanced capability has spread rapidly — fueled by word-of-mouth marketing within EC and among other organizations at HP. Consequently, 15 groups are currently using streaming video capabilities and several more groups are interest- ed in adopting this technology for a variety of functions. For example, some orga- nizations have built Web-only programs such as Business Intelligence Live, a peri- odic show featuring outside consultants discussing critical business and competi- tive issues. Another group has webcast tradeshow demos and presentations on the Web, so that information is widely available to customers and field personnel who could not attend the trade show. HP is now producing and broadcasting approximately 10 webcasts per month, up from one per month when the program started in early 1999. All indications are that interest is accelerating and the amount of programming will increase as news of this capability spreads throughout HP. In addition, the webcast studio is an im- portant ingredient for helping various organizations within HP quickly and cost-ef- fectively produce video content for webcasts. Other Benefits Using the Web for communicating product launches has additional substantial benefit over traditional communication methods. Webcasts can help reduce © 1999 Aberdeen Group, Inc. Telephone: 617 723 7890 One Boston Place Fax: 617 723 7897 Boston, Massachusetts 02108
  7. 7. Hewlett-Packard Company 7 launch time, which can mean more time-in-market; get the message in front of a larger audience of customers, prospects, press, and analysts; and increase awareness among customers by making the content conveniently accessible on a 24-hour basis. For example, HP estimates that the streaming webcast for one re- cent major product launch reached twice as many reporters and analysts as other methods, and it resulted in 25% more press coverage. In addition, the Web events are archived and are available on demand to Web au- dience users at their convenience. This approach increases the coverage and also enhances understanding because the audience can pause, rewind, and re- view the material, as well as review the Q&A sessions. In addition, streaming we- bcasts, with Network24’s system for tracking, polling, and collecting feedback, can improve the effectiveness of an event. Costs Benefit Analysis Methodology To conduct this analysis, Aberdeen accounted for incremental one-time invest- ments in hardware, software, and facilities, as well as incremental recurring costs of deploying streaming media. As part of the one-time costs, we allocated ex- penses associated with the time invested by EC personnel to set up the webcast- ing capability. Against those costs, we netted the costs avoided by reducing or eliminating multi-city tours, satellite transmission, and audio conference bridges. To simplify the analysis, we did not amortize the cost of capital improvements over time. In addition, this analysis did not quantify the increase in revenue and profit from faster time-to-market or increased public awareness — which have the po- tential to overshadow all other benefits. Also, the analysis did not quantify any soft benefits that might arise, such as better internal communications, increased morale, better communication of company messages to the marketplace, or more coverage from the press and analysts. While quantifiable, Aberdeen did not at- tempt to include these softer benefits in the analysis because it would require us- ing proprietary information on HP products, and it would involve using arbitrary methods for allocating the benefits generated by streaming media. Findings The ROI analysis is summarized in Table 1, below. Aberdeen’s found that HP needed to invest approximately $60,000 in the first year to implement streaming media. In return, HP was able to save approximately $1.2 million in direct cost savings relative to other options. As a result HP received an 1800% ROI in its first year (using discounted cash flows) and payback time of less than one month. © 1999 Aberdeen Group, Inc. Telephone: 617 723 7890 One Boston Place Fax: 617 723 7897 Boston, Massachusetts 02108
  8. 8. Hewlett-Packard Company 8 Table 1: ROI Analysis of Streaming Media Cash Analysis Year 1 Year 2 Total Investment $60,000 $0 Net Savings $1,200,000 $1,200,000 Return on Investment 1800% Payback Time <1 month Source Aberdeen Group, October 1999 © 1999 Aberdeen Group, Inc. Telephone: 617 723 7890 One Boston Place Fax: 617 723 7897 Boston, Massachusetts 02108
  9. 9. Hewlett-Packard Company 9 The major costs were building the webcast studio and the cost of outsourcing the encoding and hosting of the streams. The major benefits of deploying streaming media within HP are derived from reducing the number of live events associated with a product launch. The cost savings for these types of events can be signifi- cant — a product launch road show for many Global 1000 companies typically costs between $25,000 to $35,000 per city — while webcasts cost approximately the same amount as one city. Therefore, a company can save approximately $1 million by reducing 40 cities from its yearly road show schedule. Furthermore, companies can enjoy additional savings by reducing the use of audio conference bridges and satellite transmissions — which can cost between $5,000 and $15,000 per event. Aberdeen Conclusions Based on HP’s experience with utilizing streaming media technology for business use, Aberdeen concludes that the business case for this new technology — even using conservative assumptions — is extremely compelling. Although individual enterprises will need to perform their own business case analysis, Aberdeen be- lieves that they will find cost-benefit ratios and payback periods similar to what HP experienced. Moreover, the business case presented in this document only quan- tified cost savings and did not include any revenue or profit that would arise from getting to market faster. Therefore, we expect that most companies that include the revenue impacts of implementing media technology into their business case will see even greater ROI. Aberdeen expects that enterprises’ adoption of stream- ing media as a new communication medium will increase dramatically over the next 18 months. In addition, Aberdeen sees many similarities between streaming media and the early days of PC adoption — streaming media users are rapidly de- veloping new and innovative applications and uses that will propel the growth and acceptance of the technology beyond original expectations. Aberdeen Group, Inc. Aberdeen Group is a computer and communications re- One Boston Place search and consulting organization closely monitoring Boston, Massachusetts enterprise-user needs, technological changes and mar- 02108 ket developments. USA Based on a comprehensive analytical framework, Aberdeen provides fresh insights into the future of Telephone: 617 723 7890 computing and networking and the implications for Fax: 617 723 7897 users and the industry. Aberdeen Group performs specific projects for a select © 1999 Aberdeen Group, Inc. group of domestic and international clients requiring All rights reserved strategic and tactical advice and hard answers on how to October 1999 manage computer and communications technology.