growth opportunities and challenges in the videoconferencing market

Growth Opportunities and Challenges in the

Videoconferencing Market

Krithi Rao

Industry Analyst, Unified Communications

March 30, 2010

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Key Factors Impacting GrowthKey Factors Impacting Growth

Impact of TelepresenceImpact of Telepresence

Impending Desktop Video AdoptionImpending Desktop Video Adoption

ForecastForecast

Growth in Videoconferencing MarketsGrowth in Videoconferencing Markets

Agenda

66 Q&AQ&A

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Continued Growth Momentum

� Visual Communications Growth Stats 09

• Endpoints revenues declined by 4.3% (vs. 16.7% growth in 08) and unit growth of 4.1% reflecting economic impact, pricing pressures and tapering impact of HD felt in the previous years

• Revenues for Videoconferencing Infrastructure (MCUs/bridges, gatekeepers, gateways, management tools) showed better performance with more than 25% growth*

• Telepresence - Adoption continues at a strong pace even through tough economictimes (more than 75% growth in revenues in 2009)

• Managed videoconferencing services grew by 26% in 2009 – users increasingly looking to outsource the management of videoconferencing to a third party provider

Total Videoconferencing Systems and ServicesTotal Videoconferencing Systems and Services

A $2.27 billion market in 2009 forecast to reach $5 Billion A $2.27 billion market in 2009 forecast to reach $5 Billion

(2014) (2014) -- 5 Year CAGR is 17.7%5 Year CAGR is 17.7%

*Draft numbersAll figures are rounded. Source: Frost & Sullivan

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Drivers Restraints

Focus on reducing carbon

footprint

Availability of HD

videoconferencing at lower

price points

Increasing vendor focus on

the SMB

Global and remote workforce

– cut travel costs

Lingering effect of uncertain

economic conditions

Cost and Complexity of

Solutions

Key Factors Impacting Growth

Source: Frost & Sullivan

Volatile competitive landscape

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Avaya, Siemens bolstering videoconferencing strategy

through a close joint partnership with

videoconferencing vendors

HP’s strategic partnership with Tandberg likely to breakdown leaving only

Halo at the top end. Arming itself with a close partnership with Polycom.

Currently focusing on desktop video software,

and will probably continue partnering with a

number of vendors for hardware endpoints.

A video vendor acquisition may not be a great fit, but are they worried

that partner opportunities may close if vendors all bought up by rivals?

Left-field: Telcos, smaller

equipment manufacturers

and private equity investors see VC is hot

and prepared to place a bet

?

Europe

Evolving Competitive Landscape


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Asia Pacific

26.9% in 2009

vs.

24.4% in 2008

EMEA

30.8% in 2009

vs.

33.4% in 2008

CALA

3.3% in 2009

vs.

3.6% in 2008

North America (NA)

39% in 2009

vs.

38.6% in 2008

Videoconferencing Endpoints Market: Revenue Contribution by Region (World), 2008–2009

All figures are rounded. Source: Frost & Sullivan

Videoconferencing Endpoints Market Revenues by Region

Revenue Growth in 09 Revenue Growth in 09 ––

Americas: (4.1%)Americas: (4.1%)

EMEA : (11.7%)EMEA : (11.7%)

APAC: +5.6%APAC: +5.6%

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The Immersive Telepresence Factor

� Telepresence means different things to different people - the term “Immersive Telepresence” will help differentiate it from traditional videoconferencing market

� Immersive Telepresence - “high end visual communications in a completely integrated environment; immersive video experience backed by tight network management and service delivery” - focusing on multi codec multi screen telepresence rooms that provide an “almost being there” experience

� A fast emerging market for non “shrink-wrapped” Telepresence by AV integrators offer high end experience at lower costs with room design flexibility

� An estimated $300.5M market in 2009, complemented by additional revenue from sales of kits and codecs to custom TP solutions, telepresence is forecast to grow to close to $822.7M by 2014 (CAGR- 67.7%).

� Sales of telepresence systems creating significant opportunities for service providers, network operators and systems integrators.

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Interoperability Outside corporate Boundaries and Between Vendors

Interoperability with Enterprise Communication Infrastructure

PC-basedSoftware

Videophones, Desktop

Appliances

RoomSystems

Telepresence Systems

CustomSolutions

PersonalMobile Executive

GroupImmersive

Application

Interoperability Required Across Endpoint Portfolio

Interoperability leads to Adoption


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� Core videoconferencing equipment vendors are focusing on the low-hanging fruit-extension of traditional room conferencing to remote workers and telecommuters.

� Skype’s recent announcements of HD video and Google’s free videoconferencing feature all point at how desktop video will go nowhere but mainstream.

� True adoption for desktop video will happen as part of UC/collaboration solutions

� Today while the video clients themselves are well developed, the challenge is to connect these clients and manage a wide scale desktop deployment effectively and cost efficiently

� Provisioning, control and network management at a low cost are areas where we expect to see considerable developments.

2007 2008 2009 2010 2011 2012 2013 2014

Video-centric Desktop Video

UC/Collaboration-centric Desktop Video

Desktop Video is Coming


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Le

vel

of

Inte

gra

tio

nL

evel

of

Inte

gra

tio

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Number of UsersNumber of Users

Consumer Video

Consumer Video


Stand-alone PC

Client Software

Stand-alone PC

Client Software

Server/ Bridge-based

Desktop Video Client

Server/ Bridge-based

Desktop Video Client

Converged Conferencing Software with

Desktop Video

Converged Conferencing Software with

Desktop Video

Unified Comm-

unications Platform

Unified Comm-

unications Platform

Desktop Video - Solutions Options

Business desktop video currently available in several forms - Video centric solutions; UC/collaboration-centric solutions offered as part of UC and IPT; Peer-to-peer video chat

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Technology enhancements – SVC, High Profile, 720p 60Technology enhancements – SVC, High Profile, 720p 60

Over 65% of systems shipped are HD, but many are still being used in SD modeOver 65% of systems shipped are HD, but many are still being used in SD mode

Decision shifting from just IT - key stakeholders included in decision makingDecision shifting from just IT - key stakeholders included in decision making

Verticals – Federal Government has increased spendingVerticals – Federal Government has increased spending

Increasing SMB focus - pricing and service delivery is keyIncreasing SMB focus - pricing and service delivery is key

Economic Recovery in sight – Markets starting to see a glimmerEconomic Recovery in sight – Markets starting to see a glimmer

Other Key Developments

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Growth Outlook for Videoconferencing Markets

All figures are rounded. Source: Frost & Sullivan

$1.25B

$3.13B

Endpoints - CAGR (2009-2015)

in revenues of 16.5 percent.

Infrastructure* - CAGR (2009-

2015) in revenues of 18.2 percent.

$440M*

$1.2B*

*Draft numbers

2007 2008 2009 2010 2011 2012 2013 2014 2015

Rev

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Mil

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(%

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2007 2008 2009 2010 2011 2012 2013 2014 2015

Rev

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Next Steps

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Tues, April 6, 2010, 2 pm ET (http://www.frost.com/growth)

� Register for Frost & Sullivan’s Growth Opportunity Newsletters and keepabreast of innovative growth opportunities(www.frost.com/news)

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For Additional Information

Jake Wengroff

Global Director

Corporate Communications

(210) [email protected]

Craig Hays

Sales Manager

Information & Communication Technologies

(210) 247-2460

[email protected]

Roopam Jain

Principal Analyst

Videoconferencing

(973) 379-4622

[email protected]