12 Forces Shaping the Future of Videoconferencing12 Forces Shaping the Future of Videoconferencing

Since the first real commercial introduction of videoconferencing systems for business in the mid-1980s, the world has marveled at these futuristic devices while remaining skeptical of their performance, reliability, and ability to provide a return on investment. Videoconferencing today is largely a technology deployed by the Global 2000, although rarely very broad or deep within these enterprises, and hardly at all by small-medium businesses. This article provides a snapshot of the current video market status, a short description of some of the obstacles the technology has faced in the past and where they stand today, and a discussion of the twelve forces that are shaping the future of video.

THE VIDEO OPTIMIST

Folklore has long insisted that humans are visual beings, and that given the opportunity, people would prefer to see their colleagues on the other side of a call rather than just hearing them and/or seeing their data. For over 25 years, the thinking has been that videoconferencing usage will explode as soon as the price falls below X, or as soon as the cost of network services falls below Y, or as soon as all systems can interoperate. Figure 1 illustrates the ever moving sales hockey stick predicted by the videoconferencing optimist.

Figure 1: The moving “video explosion” inflection point

The explosion in adoption always seemed to be just around the corner, but the big bang has failed to materialize, leaving many industry vendors disappointed, and wave after wave of video innovators broke or struggling.

THE DATA SHOWS A TRANSITION MAY BE OCCURRING...

Wainhouse Research has been collecting data on the worldwide shipments of modular room and executive videoconferencing systems for over a decade, and the results show that the industry growth rate is changing. As illustrated in Figure 2, for the first half of the last decade, revenues for the videoconferencing industry were flat, despite growth in units shipped. But things have recently turned around. The compound annual growth rate (CAGR) over the last four years is 22% for revenues and 23% for units, and this growth rate is accelerating. In 2007, the CAGR is 39% for revenues and 30% for units. Clearly, the value of videoconferencing is being received by more customers while the impact of HD and telepresence is helping to solidify average selling prices.

Figure 2: Modular/executive room videoconferencing 10-year sales history

CURRENT VIDEOCONFERENCING MARKET SEGMENTS

Figure 3 reflects our view of the current structure of the videoconferencing market. We have divided the market into three segments: the experience, the products, and the environment. As illustrated in the figure, there is significant blurring between the elements in each segment.

Figure 3: Videoconferencing market segments

At the high end of the product scale are solutions we have labeled “Multi-codec” systems. These are standard products available with a single part number (rather than piece parts integrated by a channel partner). This market segment is represented by multi-camera, multi-display systems such as the Cisco CTMS 3000, Polycom’s RPX and TPX systems, Tandberg’s Experia, HP’s Halo Collaboration Suite, and similar products from Teliris. These systems embed intelligence in the “operating system” that decides how to handle incoming point-to-point and multipoint calls, whether from another multi-codec system or from an industry-standard H.323 system; which images to display on which screen; whether to zoom the camera or not; how to handle multiple audio signals and provide echo cancellation, etc.

Room videoconferencing systems are single-codec, professional products suitable for use in shared environments like conference rooms and board rooms. Most room systems are appliances; that is, they are videoconferencing systems and not general purpose computers. We track these traditional group systems in two categories: Executive systems, i.e., all-in-one designs which include an embedded LCD display and are used both as small conference room systems and personal systems; and Modular systems, which basically includes all other types of group conferencing systems. Modular room systems generally range from $5K for a codec-only to $60K for a fully-integrated system with high-end sound and display systems. Executive systems range from $3K to $10K. Today’s room systems market is rapidly moving to high-definition while continuing to provide both price and price/performance gains every year.

Desktop videoconferencing (DVC) systems, also known as personal conferencing systems, were first introduced in 1994. The early DVC systems required the user to open the computer case and install multiple boards to support the audio and video compression requirements as well as to provide ISDN network connectivity. Some big players entered this market, including Intel. The high cost ($5K), requirement for running ISDN to the desktop, non-scalable installation process, and complexity of working in the early Microsoft Windows environments doomed these DVC products to failure.

Today’s DVC market is characterized by products in many different shapes, sizes, and prices. These include:

1.) standalone software applications running on a PC or Macintosh that require only the installation of a simple webcam (i.e. NetMeeting, Polycom PVX, Microsoft OCS, Lotus Sametime, Mac iChat); 2.) dedicated videophone appliances that require only an IP network connection; 3.) client-server applications (portals) or Internet-based videoconferencing services available with several licensing models (i.e. SightSpeed); 4.) video-enhanced web conferencing products and services that are oriented more towards collaboration than outright videoconferencing; 5.) video-enhanced chat services such as AOL, Yahoo, Skype, and MSN, generally consumer-oriented; and 6.) video-enabled PBX handsets.

Some of these DVC applications appear in both the enterprise DVC space as well as in the consumer market. The huge variety of DVC configurations, the fact that some of them have no revenue associated with video, and the observation that some of the applications, such as web conferencing and Skype, use video only a small percentage of the time, make tracking the size of the DVC market an exercise in futility.

Telepresence, on the other hand, is an experience based on videoconferencing. Systems that support telepresence are relatively new. Generally costing from $80 to $500K per system, systems creating a telepresence effect provide life-size images of the face and upper body of the remote participants while maintaining a visual position and proximity perspective that allows the remote participants to appear to be sitting on the other side of a conference room table. To make the telepresence effect as real as possible, these systems tend to use very-high-quality audio and video subsystems and are often deployed in rooms where lighting and sound are carefully controlled.

When these five types of videoconferencing products are mapped into targets environments, there is significant overlap, as shown in our segment diagram. Some room systems wind up being deployed in executive offices; some desktop systems are deployed in small conference rooms as well as in home offices and cubicles; and some consumer products have worked their way into the enterprise. Cisco’s recent announcement of the CTS 500 personal telepresence system blurs the market even more.

SEVEN OBSTACLES OF THE PAST

The videoconferencing industry has overcome many challenges in its 25-year history. It is worth reviewing some of the major issues of the past when contemplating how these are or are not different when heading into the future.

Interoperability. Early systems used proprietary algorithms so that devices from one vendor could not communicate with those of another. Even after the ITU standards became de-rigueur for every vendor, the standards themselves contained enough leeway that interoperability was often not achieved. Today, these issues in the worlds of H.323 (IP) and H.320 (ISDN) video are largely behind us, and when they do crop up, they are solved by industry-supported interoperability testing events in which engineers from competing vendors work to resolve connection problems. Interoperability testing works well in principle, but each vendor still has some proprietary hardware or unique features designed to provide competitive advantage.

Moving forward, we would expect to see the same situation develop in the growing world of SIP-based videoconferencing--that is, a move to establish interoperability between all SIP-based solutions. We still expect to see some desktop solutions that do not interoperate with systems that enterprises have deployed in their conference rooms (Skype is a prime example). This leads to two islands of communications – desktop and room. Most of the enterprise desktop solutions available today do support protocols to communicate with their room system sisters, a capability that always ranks high on the requirements list of enterprise users; however, the videoconferencing vendors have also had to develop interoperability software for their systems to work with OCS 2007. For highly deployed desktop solutions, like Skype, we anticipate that some enterprising vendor somewhere will build a Skype to SIP or H.323 gateway (we are aware of one such gateway developed by RSDevs.

Low Quality Experiences. Early videoconferencing systems suffered from poor quality video, low fidelity audio, and great difficulties in establishing and maintaining connections for the duration of calls. Many early videoconferencing essayers decided that the experience simply was not worth the aggravation one endured as compared to a normal voice call; nor did it provide the “connectedness” needed to avoid travel. Most of these issues have evaporated with advances in processor speed, audio and video algorithm sophistication, and network reliability. Today’s videoconferencing systems can provide up to HD video, wide-band CD quality audio, and can operate on reliable, always-on IP networks.

ISDN. While popular in Europe, ISDN in North America was implemented in a haphazard fashion and with sporadic availability. In some cases, users on one ISDN network could not communicate with systems on another carrier network. In most cases, ISDN was expensive to operate, with both a fixed monthly connection charge plus a per minute usage cost, a definite disincentive for customers to use their video systems. Higher-bandwidth ISDN calls required the bonding of multiple B channels, which proved to be a major contributor to connection problems and dropped calls. While ISDN services have improved in North America and remain strong in Europe, much of the customer base for videoconferencing is migrating to IP networks for videoconferencing. Broadband IP is very low cost on the local area network and becoming much more reasonable and available for wide area connections; furthermore, there is no per minute charge, which lets people enjoy all-you-can-consume video.

Island Isolation. Videoconferencing historically has been an island of communications in a sea of enterprise workflow. Traditionally, videoconferencing has required users to make cumbersome reservations and then go to special meeting rooms where they could use special video equipment deployed on a separate network. It should be no surprise that many knowledge workers found it easier to NOT use videoconferencing than to use it.

This “isolation” barrier is rapidly dissolving. With the pervasiveness of IP in virtually every office and meeting room, and with no per minute costs, enterprises are moving to reservation-less videoconferencing at both the desktop and room levels. In addition, vast changes in user interface designs are bringing videoconferencing into the workflow process and making video easier to use than ever. Nortel, Cisco, Avaya, and Siemens allow room video units to be integrated with their PBXs, enabling short extension dialing and easy integration of audio-only participants in a video-enabled meeting.

Desktop Complexity. Bringing videoconferencing to the desktop at one point in time was a complex issue. Early systems required tinkering with both the hardware and the Windows operating system drivers. In most enterprises, the desktop support staff could not support video, and the video support staff could not support the desktop. Today’s systems, in contrast, are much easier to use and support on a variety of fronts:

1.) They are all based on IP networking.

2.) Most use a webcam that simply plugs into the USB bus available on virtually every desktop and laptop. Even easier, many laptops now have a camera embedded in the bezel so that there is no additional hardware needed.

3.) Today’s videoconferencing applications are “all software” solutions that can configure themselves almost automatically and are generally well-tested against Windows XP and Vista environments. Some desktop solutions are browser-based, which means there is no software installation required; a simple browser plug-in will do. And some solutions are based on a client-server architecture where the server can provide automatic updates, multipoint capabilities, and a “click-to-call” list of other registered users, driving ease-of-use to new levels.

4.) Large companies like Microsoft, Cisco, IBM, Nortel, Siemens, and a host of others are heavily promoting click-to-connect desktop videoconferencing through their unified communications desktop clients.

ROI Recognition. Understanding the return on videoconferencing investments has been a challenge. Wainhouse Research has characterized conferencing benefits in two categories, hard and soft. Hard benefits are those that are easy to identify and quantify; hard benefits lend themselves to spreadsheet analysis with pretty firm numbers. The best example of a hard benefit is travel savings where a manager can calculate and substantiate his savings in airfares, hotels, taxis etc. Our research however indicates that the soft benefits of videoconferencing generally outweigh the hard benefits, but the soft benefits are far more difficult to quantify and prove.

Examples of soft benefits are:
1) faster decision making leading to faster project completion and shorter time-to-market,
2) reduced executive stress from travel,
3) less professional time wasted with the inefficiencies of travel,
4) better work-family life balance,
5) ability to recruit over a wider geographic base with less cost and less wasted time coordinating multiple schedules.

What is changing as we head into the future is that soft benefits are being recognized by more and more enterprises who are attempting to accomplish more with fewer resources.

Cultural and Social Shifts. Many people in the past have expressed discomfort with being on video. Often this was exacerbated by the audio-video delays that caused lip sync issues and occasional video freezes that occurred during a video call. Employees entering the workforce today have grown up with the Internet, web-chat, video-chat, streaming archives, Skype, mobile handsets, YouTube etc. For many of these workers, video is a part of life and having a desktop webcam is as natural as having a telephone handset.

TWELVE FORCES SHAPING THE FUTURE OF VIDEOCONFERENCING

We have identified twelve business, technology, cultural and environmental shifts that are driving interest in and adoption of videoconferencing and collaboration solutions. The energy from these forces is coming together in such a way that the video optimist within us believes that videoconferencing adoption is sure to “explode over in the next 3-5 years”.

1. Globalization: While much has been written about the positive and negative effects of globalization (highlighted in Thomas Friedman’s 2005 bestseller “The World is Flat”), the fact remains that enterprises today are dealing with customers, suppliers, partners, and competitors on a world-wide scale. These companies need more efficient ways to communicate, both internally and externally. Sending a California-based engineering manager to attend monthly staff meetings with the software team in Bangalore or having the regional manager visit each office to present the new sales plan is no longer considered a smart business practice by conferencing-savvy companies. Videoconferencing and collaboration products and services are helping large and small enterprises deal with the challenges of dispersed teams and global commerce by providing solutions for travel-free, anytime, anywhere rich media communications.

2. The Emergence of Virtual Businesses: Enterprises of the future will have even less of a physical “footprint” than they do today. Bricks and mortar are giving way to a dispersed workforce working from home, from remote offices, and shared office spaces. The virtual business needs better communications tools than the traditional building-based business in order to reduce human latency, speed decision making, and to build a sense of team spirit and belonging.

3. Continuous Video Improvement: Videoconferencing performance improves each year as new products roll out with advanced features, superior audio-video quality, and often lower prices. Recent examples include H.239/VGA connections for laptop-based collaboration, HD video, and wideband audio. Today’s HD videoconferencing systems finally provide the audio-video quality that users have long wished for.

4. Telepresence: Telepresence is an experience in which a videoconferencing system simulates an in-person meeting by providing life-size images and proper contextual positioning. The telepresence experience can be provided by a multi-codec system or by a standard videoconferencing system assuming that system is configured and installed with the right design elements. Telepresence has awakened many videoconferencing customers to the importance of room design and furniture placement. Future videoconferencing deployments will invoke telepresence concepts to provide customers with a far more pleasing experience, thereby driving adoption and ultimately more demand.

5. The “Big Boys” Factor: For most of the past decade, videoconferencing has been an application promoted by relatively small vendor companies. But over the past four years, large suppliers such as Cisco, HP, IBM, and Microsoft have been actively touting the benefits of unified communications, collaboration, and videoconferencing. One result has been a vast increase in business press coverage of visual collaboration solutions and their benefits. Another result is renewed attention on the part of CxOs and IT managers who are now rallying around unified communications, telepresence, and rich media solutions to increase business efficiency. Cisco, HP, IBM, and Microsoft are also suppliers trusted by enterprise IT professionals, the very same people who will be responsible for deploying next-generation collaboration and videoconferencing tools over the corporate network.

6. The Advent of Unified Communications: Many enterprise vendors, including Avaya, Cisco, IBM, Microsoft, Nortel, and Siemens, have been promoting the concept of Unified Communications (UC). UC is a collaborative communications environment that includes elements of presence, instant messaging, telephony, audio conferencing, data collaboration, unified messaging, mobility, and videoconferencing, all accessible through a single-client interface or via an interface embedded in another application. Most companies already have some or all of these individual capabilities within their organizations. Via partnerships with leading videoconferencing suppliers, the UC vendors are integrating video into UC at the same time that UC and its “click-to-call interface” is being integrated into office productivity tools and enterprise workflow. The huge impact UC brings, particularly for desktop video, is that video evolves from a stand-alone application to being a feature easily available in a unified client interface. This evolution will make video both easier to use and ubiquitous.

7. IP Networks: IP networks today have migrated from shared 10 Mbps technology to switched 100 Mbps (and even 1 Gbps) in the enterprise LAN. Network upgrades have been driven by the realization that connectivity has become mission critical, with many workers simply unable to do their jobs without an IP connection, and by enterprise migration to VoIP and an integrated communications infrastructure. For videoconferencing, IP promises higher bandwidths and faster, more reliable connections than were possible with ISDN. While guaranteeing quality of service (QoS) on an IP network remains a concern, several schemes such as MPLS and new bandwidth management solutions will help address these issues. Running mission-critical meetings on the mission-critical network is already a practice at many leading enterprises today and we expect it to be the norm in 3-5 years for most organizations.

The Internet itself is a key driver here, as this world-wide network enters into its next phase with support for real-time voice and video communications and collaboration. Web 2.0 technologies are promising new applications that will transform business models with increasing speed and that will further integrate video into business processes.

8. Mobility: The use of mobile devices and mobile networks has long been considered a trend that runs counter to the use of video. Videoconferencing has been associated with fixed devices in special rooms with wired connections. But we are entering the age of 3G wireless networks and mobile handsets that support video. While two-way interactive video calling from a mobile phone may be 5-10 years away from being commonplace, one-way video will be common in the 2-5 year picture, supporting a wide variety of customer service applications. With unified communications and video as a simple add-on, people on cell phones will be able to join a meeting via audio or video in a seamless fashion.

9. New Generation of Workers: There is no question that the new generation of workers coming into the workforce over the next 5-10 years will be much more video-savvy than their forbearers. Many current managers and executives are video-phobic, just as their predecessors were email- or voice mail-phobic. But time and experience will change everything. Next-gen enterprise knowledge workers will expect visual collaboration tools to be part of their everyday experience. Workers entering the workforce today have a growing interest in maintaining a work-life balance and in using tools that help them avoid unnecessary travel, be home for holidays and special family events, and yet maintain a connection with their colleagues and business partners. At the same time, many of these individuals have grown up in a culture of “always-on, always-connected.” UC, with and without its video enhancements, will be a natural application for many of these people.

Besides the technology and social issues described above that are driving enterprises towards the use of conferencing and collaboration solutions, there are political, environmental, and economic challenges that are pushing planners and decision makers in the same direction.

10. Disruptions to travel - man-made and natural calamities: Since 2001, business travel has lost what little glamour it had. Besides the indignity of standing in line to pass through a security screen in a partially undressed state and having personal grooming products confiscated while finding out their flight has been delayed, travelers are finding that airline services themselves have become less enjoyable, more stressful, and often downright unpleasant while becoming more costly at the same time. Videoconferencing as a replacement for business travel has never looked so good.

A travel-related calamity that would increase videoconferencing use would be the outbreak of some contagion whether from bio-terrorism, as a side-effect of global warming, or from some innocent person with a highly contagious disease traveling on an airplane. Any of these would motivate businesses to look to video as a way to conduct meetings without moving.

11. Rising costs of energy and macro-economic declines: The rising cost of energy will change the world economy. Right now the question concerning most businesses is how deep the recession will be and how long customers will pull back their buying patterns. Hence, the pressure to cut operating costs has never been greater, sometimes driven by a need to be competitive, and other times by a need to survive. Conferencing and collaboration solutions can step into this breach, helping customers improve internal collaboration as well as communications with customers while reducing overall costs. In addition, visual collaboration tools can enable enterprises to implement teleworker programs. Having employees work from remote or home offices while staying connected with their colleagues can have multiple benefits: lower consumption of automobile fuel, lower greenhouse gas emissions, improved work-life balance and employee morale, reduced need for office space and utilities. A separate issue is the possibility of a serious energy crunch whether initiated by economic, military, political, or other forces. In this event, either market forces (high prices) or government action (rationing) could force people to seek alternatives to all kinds of travel--local and long distance.

12. Climate change concerns: Concerns about climate change and global warming are growing every month. Organizations today are beginning to investigate their “carbon footprint” and look for ways to improve the situation. Using videoconferencing and other collaboration solutions allows any enterprise to be more eco-friendly at two levels: a reduction in long distance business travel (airplane emissions) and a reduction in local travel and local greenhouse gases (automotive) by reducing commuter traffic.

SO WHAT'S AHEAD?

There’s a natural tendency to overestimate what we can do in two or three years while under estimating what we can do in ten years or more. In the past 30 years, the price of computer memory has come down by a factor of roughly 500,000 while processing power and other electronic measures of success have improved at similar but not quite so lofty rates. Given that so much of the videoconferencing world (camera, codec, microphone, display) is driven by silicon technology, it is dangerous yet intriguing to imagine where the industry might be heading.

The 3-5 Year Prediction

Over the next 3-5 year period, we believe the growth rate of videoconferencing systems to enterprises will maintain the heady rate of the past 1-2 years and possibly accelerate towards the end of the period. Major developments that will bring videoconferencing to near ubiquity include: