Video communication: the changing landscape

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With video communication entering the mainstream, the key players are jockeying for position. VC News looks at the mergers, acquisitions and alliances, drawing conclusions about the market and the implications for the current players.

So Cisco bought Tandberg, Logitech bought LifeSize, Microsoft bought Skype and Polycom bought HP’s video communications (VC) business – that’s it then, the battle lines are drawn? Well not quite, it’s a bit more complicated than that – and here’s why.

Polycom’s new OTX100 - designed for smaller meeting rooms and offices in the middle market.

Video communication’s slow march toward being all-pervasive has suddenly turned into a sprint. At the consumer level, Skype has attracted 663 million registered users, and yet hasn’t made any significant money from video. It also suffers from the kind quality and performance issues that amount to a barrier to adoption by the mainstream business community.

At the high-end, the quality and performance issues disappear – but at a cost. The return-on-investment and the ability to absorb high upfront costs have limited the rate of adoption for videoconferencing and telepresence.

The real potential for the VC market is to be found at the desktop, where video is the next destination on the route from telephony, voice conferencing and data conferencing and instant messaging.

There are many contenders for control of this unified communications space (UC), all of whom believe they have a legitimate claim. Among others, there are: the dominant players in networking (Cisco); servers and PC hardware (HP); operating systems and software applications (Microsoft); and cameras and camera hardware and accessories (Logitech).

Leaders

While Polycom ships the most dedicated VC hardware units, Cisco, according to Infonetics Research, Cisco, thanks to the Tandberg acquisition, is the overall market leader in enterprise videoconferencing, with a 50% revenue share in 2010. The research company found that the market for enterprise videoconferencing and telepresence systems last year grew 18% to $2.2 billion. The firm expects the enterprise videoconferencing and telepresence market to more than double by 2015 to $5 billion.

Infonetics Research goes on to say that: “Vendors offering systems that are multi-modal, visual and support the collaboration requirements of globally distributed companies will be the ‘biggest winners’ in the enterprise communications market.” So the prize is big enough to attract some of the world’s leading technology companies. While room systems currently account for the majority of enterprise videoconferencing spend, software-based endpoints out-ship hardware by 10:1..

But it gets even more interesting. Cisco says video will account for over 90% of all global consumer IP traffic in 2014. With a market this big, the technologies and infrastructure required for universally accessible, interoperable VC solutions mitigate against any one company providing the complete package. The lack of commonly agreed standards has prompted a fight between various alliances to impose standards which favour their members.

Pole position

In recent months we have seen the protagonists squaring up to each to each other. Behind the scenes, there are battles to be fought – one at the high-end, between Cisco and everybody else, and one at the entry-level between Microsoft / Skye and Google. And there is the free-for-all in the middle market – the SMB space.

Corporate users want seamless integration between the telepresence suite, the desktop and mobile devices.

Here, business owners and managers will either decide in favour of upgraded software / web applications (running on standard desktop or mobile devices), or hardware and software solutions from VC specialists who traditionally play in the corporate space. They could, of course, go for a mix of the two which we believe will be the preferred option for many.

The video love fest staged by Polycom to announce the recent buyout of HP’s video communication business played out the whole issue in microcosm. Polycom’s view of the acquisition is that it gives them access to HP’s Halo customers at the high-end of the market, and also a platform (WebOS) for its mobile VC technology among HP’s thousands of corporate employees.

While the upside for Polycom is apparent, a different reading of the situation has HP shedding non-core businesses at the insistence of new CEO Leo Apotheker, under pressure to address some of the company”s current woes. Casting off the niche high-end VC business, while keeping Halo customers happy with support from Polycom, could be a smart move.

Sticking with the positive view, it is Polycom’s belief that the HP acquisition will help realise the company’s ambition to target smaller businesses, and even consumers with its videoconferencing applications for mobile devices and home telepresence system. But Polycom and HP are far from only game in SMB town.

Mass market adoption

For a start, there’s Microsoft. The payback for its $8.5 billion acquisition of Skype is unlikely to come Aunty Mable online casino Skyping her niece in Perth. There is talk of a charging regime for Skype, but our view is that the service’s new owners are unlikely to implement such an unpopular move in the honeymoon period. Much more likely is the development of premium business services integrated with Microsoft’s unified communications solutions, supporting video communication from workers” desktop and mobile devices.

With all the attention on Skype and Microsoft, and indeed on Skype and Facebook, Google has been working away in the background, desperate not to lose out on video communication in the same way it has in social networking. Google already offers voice and video chat through Google Mail, iGoogle or orkut, with Logitech as Google’s camera hardware vendor of choice.

Google’s video chat technology has been licensed from Vidyo. Vidyo says that its technology provides a more reliable solution to Google, as well as support for multiparty sessions and higher quality video.  As the enterprise sector becomes increasingly reliant on mobile devices, Vidyo says it is well placed to meet the demand.

But Google itself isn’t standing still, and certainly doesn’t have all its bets on one horse. Last month the company announced that it will be integrating web and videoconferencing directly into the Chrome web browser. This was, in part, enabled by Google’s acquisition of Global IP Solutions (GIPS), an Internet telephony and videoconferencing company.

A year on, Google has announced WebRTC – an open-source platform designed to create browser-based peer-to-peer communication tools using common programming languages like JavaScript and HTML. WebRTC is open-source and royalty-free, and so could be used by anybody to create their own mini-Skypes as a web-based application.

For now, Google has announced that WebRTC can be used to incorporate audio and video chats into Gmail which will not need a plug-in. Serge Lachapelle, senior product manager for Google (Sweden): was reported as saying:

“Until now, real time communications required the use of proprietary signal processing technology that was mostly delivered through plug-ins and client downloads. With WebRTC, we are open sourcing the voice and video engine technologies from our acquisition of GIPS, giving developers access to state-of-the-art signal processing technology, under a royalty-free Berkeley Software Distribution (BSD) style license. This will allow developers to create voice and video chat applications via simple HTML and JavaScript APIs.”

Destination

The point is that it will be emerging technologies, from the likes of Microsoft and Google, that will drive mass adoption of video communication in a way that specialist VC vendors never could.

The market will demand seamless integration between the solution in the telepresence suite, the desktop and in the hand. There is considerable development needed to bring current mass market solutions to a commercial standard, and no less to work to provide seamless integration of web-based solutions and high-end room systems.  But the vast community of Skype and Google video users will be enough to focus the minds of the VC specialists on interoperability, rather than giving up the middle market to Skype, Google and whatever might follow.

Consumer level videoconferencing from Skype – integration with Facebook provides access to a huge user community.

Corporate users want seamless integration between the telepresence suite, the desktop and mobile devices.


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