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Guest Editors' Introduction: A Business View of Virtual Reality

Peter Astheimer, Siemens AG
Lawrence Rosenblum, Naval Research Laboratory

Pages: pp. 28-29

The microelectronic revolution at the beginning of the 20th century enabled the development of a large variety of microelectronic-based devices. Software control added another functional complexity level. Thus, the handling of devices soon became a central concern to the end user. Although machine intelligence, ubiquitous information, and the communication infrastructure are evolving, the man-machine partnership remains in its intellectual infancy.

However, virtual reality offers a promising solution for man-machine interface problems. Today, VR has passed beyond the peak of inflated expectations and the trough of disillusionment. It now lies somewhere between the slope of enlightenment and the plateau of productivity. Industry indicates this trend—it's just now beginning to apply VR technology quite successfully in some domains. Likewise, research activities in academia and research laboratories are becoming organized in the tradition of a well-established discipline.


The effective funding of any major field of research such as VR is significantly tied to future business prospects. The more mature the field, the more the demand for results. Anticipated economic success drives funding.

Military and aerospace agencies, especially in the US, have boosted VR research and development. The rapid progress of technology combined with highly automated manufacturing processes enable shorter and shorter product development cycles. Whereas radio took 40 years to reach a 50-million customer base in the US, the World Wide Web needed less than five years. The virtual pet, Tamagotchi—which doesn't depend on a service infrastructure—made it in only 15 months. In addition, software producers post their products on the Web and software downloads on the Internet require only a couple of hours.

However, academic solutions don't necessarily lead to successful commercial products. Neither does mastering a technology such as VR and implementing it into a product.


According to Carl Machover, 1 the market for VR hardware, software, systems, and services is about $3 billion today. This is a niche market compared to computing ($200-billion PC market in 2000) and communication ($700-billion telecommunication services market in 2000) market segments. VR-market players like SGI ($3 billion), Engineering Animation ($100 million), and Division ($5 million) are quite small compared to big information and communication technology companies like AT&T ($53 billion), Compaq ($31 billion), or Cisco ($9 billion) (data in 1998 revenues).

Today, VR technology is beginning to affect a couple of vertical industry segments. In some cases, productive, everyday applications replace vaguely focused field trials. Vertical applications include construction, power plants, industry automation, military, aerospace, automotive, oil exploration, entertainment, retail, broadcast, and medical. Horizontal segments comprise design and development, rapid prototyping, simulation and training, and marketing. Except for games, medicine, retail commerce, and certain military applications, today's VR applications mainly target

  • large-scale engineering objects or processes,
  • product life-cycle optimization, and
  • industry use.

VR-based solutions within these segments have proven costly and customized, requiring highly skilled experts to develop and operate. (See Fred Brooks' article in this issue for elaborate application examples and a detailed analysis of the status of VR today.)


VR has the potential to move on from today's niche state to a more significant market presence. We see two opportunities:

  • Migrate from industry use to mass-market consumer use. Medical, military, and manufacturing are key segments for a larger number of professional users. Retail (product presentation) and games are the first segments with a consumer focus. Addressing the small office-home office and mass consumer market with attractive plug-and-play solutions of general interest based on Internet technologies will lead VR into a mainstream application.
  • Enter the communication and services sector. Although VR-style graphics and audio are becoming a substantial part of PCs (mainly for high-end games), VR-related products currently don't address the communication aspect. Today's bulk of interpersonal communication occurs through voice transmission (and even about 80 percent of the world population still has no private access to that).
  • A huge potential exists to expand existing narrowband voice communication to higher quality and additional modalities with the help of VR technology. We estimate the needed bandwidth for full-sense interpersonal communication at about 250 Mbits per second. With the advent of broadband access technologies like cable, satellite, and digital subscriber line (xDSL) and the proliferation of fiber-optic core networks, the required infrastructure will be in place within the next couple of years. (Mobile communication will achieve these rates shortly thereafter but will continue to lag behind wired networks in bandwidth.) Image and video transmission will be the next major communication application. This will occur not so much because you save travel overhead or for other claimed benefits, but rather because the service will be readily available at a marginal cost.

To extend the impact and significance of VR, solutions must profit from much larger market segments such as the consumer and communications markets. Until we can buy products at a Radio Shack, Dell, or Mediamarkt, VR will remain a niche market.

Emerging research and business fields

Two other, related fields are rapidly developing, which may help drive VR beyond the niche status:

  • Augmented reality integrates computer-generated and real-world information using a see-through display. Key augmented reality issues include integrating both kinds of information and accurately registering computer-generated images with the real world. (For more information see the Second Annual IEEE and ACM International Workshop on Augmented Reality Web site at
  • Wearable gear promises mobile information and communication at its best—unobtrusive, always available and connected, and easy to wear. Key expertise issues are miniaturization and wearability, effective power management, ad-hoc network building, mobile interaction, and distributed information management. (For more information see the International Symposium on Wearable Computers Web site at

The combination of VR, augmented reality, and wearable computers opens a wealth of new applications. In the military, the dismounted warrior will be equipped with mobile or wearable augmented reality gear to obtain additional information such as street and building names, routes, and threat locations (see Military headquarters will receive personal information (such as health and equipment status) and reconnaissance data. For industry, wearable intelligence enables hands-free operation and multivendor, multiproduct service for teleservice workers (see, in German). Telecom companies are investigating location-dependent services within public cellular networks for a multitude of purposes such as mobile navigation for business locations and tourist sights or person finders. Personal applications include health monitoring and retrieving information on the fly. After all, who wouldn't want to spend some money on mobile or wearable augmented reality gear to appear smarter?


About the Authors

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Peter Astheimer is a project leader within the innovation field for information and communication at Siemens AG Corporate R&D in Munich, Germany. His job is to implement innovative business opportunities within Siemens in cooperation with strategic marketing and product departments of business units. He has many years of hands-on experience with VR from his time with the Fraunhofer Society. He received a PhD from the Technical University of Darmstadt, Germany.
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Lawrence Rosenblum is Director of Virtual Reality Systems and Research in the Information Technology Research Division of the Naval Research Laboratory and Program Officer for Visualization and Computer Graphics at the Office of Naval Research. His research interests include VR, augmented reality, scientific visualization, and human-computer interfaces.
Rosenblum received a BA in mathematics from Queens College (CUNY) and MS and PhD degrees in math from the Ohio State University. He serves on the advisory board of IEEE Transactions on Visualization and Computer Graphics and the editorial boards of Virtual Reality and IEEE CG&A, where he edits the Projects in VR Department. He is a senior member of the IEEE and a member of the IEEE Computer Society, ACM, Siggraph, and American Geophysical Union.
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