Video Conferencing Revenues Hit By Software Competition, Economy

The video-conferencing market continues to be affected by an uncertain global economic environment and the trend toward lower-cost and software-only solutions, according to analysts at IDC.

However, businesses still view video conferencing as an important and growing part of their larger collaboration efforts, the IDC analysts said in a recent report.

Growing demand

That combination of a growing demand for video and a soft and changing economic environment produced mixed revenue results for video conferencing equipment in the third quarter, they said. Across all segments of the market, revenues were up from the second quarter. However, when compared to the same period in 2012, the numbers declined.

“Interest in video and collaboration technology and applications helped the quarterly revenue numbers,” Rich Costello, senior analyst of enterprise communications infrastructure at IDC, said in a statement. “But the lingering macroeconomic situation – including some softness in emerging markets, the recession in Europe, and the sequestration in the US (i.e. budget cuts) – produced some cautionary IT spending that has impacted year-over-year video equipment revenue growth so far in 2013. In addition and most significantly, we are definitely starting to see the impact of lower-cost video systems and more software-centric products and offerings on the enterprise video equipment market.”

During the third quarter, revenue for video conferencing equipment – including the immersive telepresence offerings – grew 8.2 percent to $576 million (£363m) when compared with the second quarter, but fell 9.7 percent when compared with the third quarter of last year. That trend ran across all segments; for example, revenue for the multi-codec telepresence equipment grew 13.1 percent over the second quarter, while falling 16.3 percent year-to-year. Video infrastructure equipment, including multipoint control units (MCUs), grew 13.7 percent over the second quarter, but fell 16.7 percent from the third quarter in 2012.

The same trend hit room-based video systems and desktop video systems, the analysts said.

Software-based products

Video conferencing pioneers like Cisco Systems and Polycom, which grew their video conferencing businesses on the back of high-end and pricey hardware systems, are adapting to the growing demand for less-costly software-based solutions that enable users to participate in video meetings from anywhere and on any device, including smartphones, tablets and notebooks.

That demand is fueling the drive behind such smaller vendors as Vidyo and Blue Jeans Network, who offer software- and cloud-based solutions. The development of WebRTC also will make it easier for video conferences to be accessed via web browsers.

However, despite the revenue numbers declining year over year, the interest in video conferencing remains strong, according to Petr Jirovsky, research manager of IDC’s Worldwide Networking Trackers unit.

“Video as a key component of collaboration continues to place high on the list of priorities for many organisations,” Jirovsky said in a statement. “IDC believes that among the challenges customers are currently trying to work through are exactly when and how to provision their video deployments, as more software-centric solutions and video cloud service offerings become part of the enterprise video market landscape.”

Unified communications

A growing number of unified communications vendors also are adding video offerings to their solutions, as evidence by such moves as Avaya’s acquisition last year of Radvision and the partnership announced in June between Mitel and Vidyo.

Cisco – the leader in the video conferencing equipment market with a 44.7 percent share – saw revenues that were up 17.9 percent over the second quarter, but were down 7.6 percent over the third quarter in 2012. Polycom saw revenues fall 11.4 percent quarter-to-quarter and decline 14.5 percent year-to-year. The company is still No. 2 in the space, with a 23.9 percent market share.

Huawei Technologies is third, with a 10.1 percent share of the global enterprise video conferencing market. Its revenues grew 43.2 percent over the second quarter and 2.5 percent over the same period last year. Huawei executives said last year that the company intended to challenge Cisco in the space.

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Originally published on eWeek.