RECENTLY at Hewlett-Packard’s ink jet lab in San Diego, engineers met with colleagues in Barcelona, Spain, face-to-face – with neither group ever stepping on an airplane.

Hewlett-Packard engineers in San Diego used the Halo video-conferencing system to meet with colleagues in Oregon. Well, virtually face-to-face. The engineers gathered using HP’s Halo Collaboration Studio technology – a new video-conferencing system with Ferrari-like performance at a Ferrari-like price that is being greeted by the industry with both admiration and bafflement.

Halo, developed in partnership with DreamWorks Animation SKG, gets kudos for making it feel like people thousands of miles apart are actually sitting across the table from each other. That level of performance has sometimes eluded video-conferencing systems, which can suffer from sometimes spotty images.

But Halo also is expensive. Each room costs US$550,000, and companies need at least two of them. There’s also an $18,000-a-month network maintenance and management fee. That means only the largest companies are likely customers for the system.

“I think Halo is one of the best video-conferencing solutions out there, clearly,” said Crawford Del Prete, an analyst with industry research firm IDC in Framingham, Mass. “It’s like a virtual extension of a room. But given its price point, it’s not for the mass market.”

Andrew Davis, a video-conferencing analyst with Wainhouse Research in Boston, has gone as far as calling the Halo system silly – in part because, despite the expense, it can’t link into existing video-conferencing systems and doesn’t allow conferences from more than two locations at once.

“It’s a Halo-to-Halo system only,” Davis said. “It would be like buying a Toshiba fax machine that could only fax to other Toshiba fax machines … You add to that what I think is a ridiculous price, and I’m just really surprised that a company as technically savvy as HP would come out with a system like this.”

Other analysts and customers say Halo’s advantage is that the high-quality experience allows for real-time, person-to-person interaction almost as if everyone was in the same room. “We don’t even consider it a video-conferencing system. It’s in a whole different category,” said Drew Prairie, a spokesman for chip maker Advanced Micro Devices, which has two Halo rooms. “Just because of the technology, you can do things like job interviews that you can’t do over traditional video-conferencing systems.”

Video conferencing is certainly not new. Everything from $40 web cams to sophisticated custom systems for corporations have been around for years.

But for businesses, video conferencing has never lived up to its promise. Early systems sometimes were unreliable. Software to run the operations could be overly complicated. Many top executives, who invested in systems betting video conferencing would change the way they did business, wrote off the technology as not ready for prime time.

With Halo, HP aims to chip away at video conferencing’s reputation.

The initiative falls under the umbrella of HP’s Imaging and Printing Group, which is run by San Diego-based Executive Vice-President Vyomesh Joshi. Along with DreamWorks’ Jeffrey Katzenberg, Joshi introduced the system this past winter.

In addition to AMD, PepsiCo, DreamWorks and HP itself are using the Halo studios. Other firms have signed up, including a large undisclosed pharmaceutical company, said Ray Siuta, HP’s marketing manager for Halo.

HP began working on the system when DreamWorks sought to outfit its California studios in Redwood City and Glendale with video conferencing that was crisp enough to show the emotional reactions of animators to scenes in upcoming films such as Shrek 2, said Siuta.

Afterward, HP saw the potential of selling the systems as a video-conferencing tool.

HP says businesses get a payback when they purchase the pricey studios: reductions in travel expenses and in wasted time for high-salary executives waiting in airports. The travel budget for HP, for example, is about 1 per cent of its $80-billion in revenue. For large corporations like HP, cutting back even slightly on travel more than pays for the hefty costs of Halo rooms.

But that’s only a small part of the sales pitch HP relies on when selling the systems. Its main focus is increasing productivity.

Mark Gorzynski, HP’s chief scientist on the Halo project, said corporations have been very good at creating efficient networks to move valuable data around the world. But they’ve been slow to tap into ways to efficiently use the time of their valuable executives and engineers.

“We’ve spent billions of dollars (on networks) to ship data around the globe,” he said. “But we still mail our executives in aluminum tubes.”

Halo rooms help make workers more productive by allowing more frequent collaboration, without the fatigue associated with travel.

That leads to better, quicker decisions. HP said one example was its recent relocation of a production line from its Corvallis, Ore, plant to its Singapore facility.

The project took just six months, a shorter time frame than usual, which the company attributed in part to Halo rooms allowing better collaboration between the two plants. At the 13 HP locations worldwide with Halo rooms, usage runs about 150 hours to 200 hours a month, said Bill Wickes, the Corvallis-based research and development manager for the project.

Typical video-conferencing systems are used for 10 to 15 hours a month, he said. “All of the initial customers within a few months have come back to ask for more rooms,” Wickes said. Advanced Micro Devices, for example, expects to add Halo studios at plants in Germany and Asia to the ones it has now in Austin, Texas, and Sunnyvale, Calif.

The rooms aren’t always used for business. When Wickes’ daughter, a graduate student at USC, was preparing for her wedding last winter, she wanted the minister from her hometown church in Corvallis to perform the ceremony.

Leading up to the event, she and her fiance’ drove to the Halo studio at DreamWorks’ site in Southern California, while the minister went to the studio at HP’s Corvallis plant so the couple could receive premarital counselling via Halo. The rooms themselves have been designed by DreamWorks. HP provides the hardware, software and a dedicated network, all fibre optic, that carries the huge bandwidth necessary to create high-quality audio and video without jittery pictures or noticeable delays.

“HP is a solution in a kit,” said Ira Weinstein, a partner in Wainhouse Research. “They control the whole experience. You get HP chairs, HP tables. I’m not faulting that. But there is a cost to it.”

Halo studios can hold up to six people. Three 50-inch plasma screens project images of participants at the meeting. A fourth plasma screen overhead is dedicated to PowerPoint and other presentation material.

“I would say the experience is strong, but it’s not so much better than the alternatives other companies have out there,” Weinstein said.

Marc Trachtenberg, chief executive of Teliris, offers a video-conferencing system at about one-third the price of Halo. He said he thinks the technology giant’s marketing muscle is boosting awareness of video conferencing overall. Customer leads and sales at Teliris are up since HP launched Halo, he said. “Guys like HP and Cisco look at this space and say, ‘Hey, there’s a real value. We should get into this space,'” Trachtenberg said. “Teliris has been in business for five years. It doesn’t hurt to have HP validate the space.”

HP has about 30 Halo rooms installed at customer sites worldwide. It expects to have more than 100 running by year’s end. The company is working on some product improvements, such as allowing multiple sites to join a single conference, but it has no timetable for upgrades.

Weinstein, the Wainhouse analyst, said the key question is whether HP will continue to keep prices up or look for ways to squeeze costs out of the system and lower its prices. “Right now this is the highfliers club. That’s the way HP has positioned it,” he said. “But I think they will be dropping the price over time.”