Frost & Sullivan analysis of the Growth Opportunities and Challenges in the Videoconferencing Market.

1. Growth Opportunities and Challenges in the
Videoconferencing Market
Krithi Rao
Industry Analyst, Unified
Communications
March 30, 2010

2. Agenda
1
1 Growth in Videoconferencing Markets
Growth in Videoconferencing Markets
2
2 Key Factors Impacting Growth
Key Factors Impacting Growth
3
3 Impact of Telepresence
Impact of Telepresence
4
4 Impending Desktop Video Adoption
Impending Desktop Video Adoption
5
5 Forecast
Forecast
6
6 Q&A
Q&A
2

3. 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 economic
times (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 Services
A $2.27 billion market in 2009 forecast to reach $5 Billion
(2014) - 5 Year CAGR is 17.7%
*Draft numbers
All figures are rounded. Source: Frost & Sullivan
3

4. Key Factors Impacting Growth
Drivers Restraints
orkforce
Global a nd remote w
costs
– cut travel
plexity of
of HD Cost and Com
Availability Solutions
ing at lower
vid eoconferenc
price points g effect of u
ncertain
n Lingerin onditions
ndor focus o economic c
Increasing ve
the SMB
ndscape
Volatile competitive la
g carbon
Focus on reducin
footprint
Source: Frost & Sullivan
4

5. Evolving Competitive Landscape
Currently focusing on
desktop video software,
and will probably
continue partnering with a
number of vendors for
hardware endpoints.
HP’s strategic partnership
with Tandberg likely to
breakdown leaving only
Halo at the top end.
Arming itself with a close
partnership with Polycom.
Europe Left-field: Telcos,
smaller
equipment
Avaya, Siemens bolstering manufacturers
? and private
videoconferencing strategy
through a close joint A video vendor acquisition may not equity investors
partnership with be a great fit, but are they worried see VC is hot
videoconferencing vendors that partner opportunities may close and prepared to
if vendors all bought up by rivals? place a bet
Source: Frost & Sullivan
5

6. Videoconferencing Endpoints Market Revenues by
Region
Videoconferencing Endpoints Market: Revenue Contribution by Region (World), 2008–2009
North America (NA)
39% in 2009 EMEA
vs.
30.8% in 2009
38.6% in 2008 Asia Pacific
vs.
26.9% in 2009
33.4% in 2008
vs.
24.4% in 2008
CALA
3.3% in 2009
vs.
3.6% in 2008
Revenue Growth in 09 –
Americas: (4.1%)
EMEA : (11.7%)
APAC: +5.6%
All figures are rounded. Source: Frost & Sullivan
6

7. 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.
7

8. Interoperability leads to Adoption
Interoperability with Enterprise Communication Infrastructure
Interoperability Outside corporate Boundaries and Between Vendors
Interoperability Required Across Endpoint Portfolio
Mobile Executive Immersive
Personal Group Application
Videophones,
PC-based Room Telepresence Custom
Desktop
Software Systems Systems Solutions
Appliances
Source: Frost & Sullivan
8

9. Desktop Video is Coming
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.
2007 2008 2009 2010 2011 2012 2013 2014
True adoption for desktop video will happen
Video-centric Desktop Video as part of UC/collaboration solutions
UC/Collaboration-centric Desktop Video 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. Source: Frost & Sullivan
9

10. 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
Unified
Unified
Converged
Converged Comm-
Comm-
Conferencing
Conferencing unications
unications
Software with
Software with Platform
Level of Integration
Platform
Level of Integration
Server/
Server/ Desktop
Desktop
Bridge-
Bridge- Video
Video
based
based
Desktop
Desktop
Video
Video
Stand-
Stand- Client
Client
alone PC
alone PC
Client
Client
Software
Software
Consumer
Consumer
Video
Video
Number of Users
Number of Users Source: Frost & Sullivan
10

11. Other Key Developments
Increasing SMB focus - -pricing and service delivery is key
Increasing SMB focus pricing and service delivery is key
Technology enhancements ––SVC, High Profile, 720p 60
Technology enhancements SVC, High Profile, 720p 60
Over 65% of systems shipped are HD, but many are still being used in SD mode
Over 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 making
Decision shifting from just IT key stakeholders included in decision making
Verticals ––Federal Government has increased spending
Verticals Federal Government has increased spending
Economic Recovery in sight ––Markets starting to see aaglimmer
Economic Recovery in sight Markets starting to see glimmer
11

12. Growth Outlook for Videoconferencing Markets
$3.13B
Revenue Growth Rate (%)
Endpoints - CAGR (2009-2015)
Revenue in $ Millions
$1.25B
in revenues of 16.5 percent.
2007 2008 2009 2010 2011 2012 2013 2014 2015
$1.2B*
Revenue Growth Rate (%)
Revenue in $ Millions
$440M*
Infrastructure* - CAGR (2009-
2015) in revenues of 18.2 percent.
*Draft numbers
2007 2008 2009 2010 2011 2012 2013 2014 2015
All figures are rounded. Source: Frost & Sullivan
12

13. Next Steps
Request a proposal for a Growth Partnership Service to support you and your
team to accelerate the growth of your company. (myfrost@frost.com)
1-877-GoFrost (1-877-463-7678)
Join us at our annual Growth, Innovation, and Leadership 2009: A Frost &
Sullivan Global Congress on Corporate Growth, September 2010, Silicon
Valley, California (www.gil-global.com)
Register for the next Chairman’s Series on Growth:
Accelerating Growth through Vertical Market Expansion: A How-To Primer
Tues, April 6, 2010, 2 pm ET (http://www.frost.com/growth)
Register for Frost & Sullivan’s Growth Opportunity Newsletters and keep
abreast of innovative growth opportunities
(www.frost.com/news)
13

14. Your Feedback is Important to Us
What would you like to see from Frost & Sullivan?
Growth Forecasts?
Competitive Structure?
Emerging Trends?
Strategic Recommendations?
Other?
Please inform us by taking our survey.
14

15. Frost & Sullivan on Twitter
Follow Frost & Sullivan on Twitter
http://twitter.com/Frost_Sullivan
15

16. For Additional Information
Jake Wengroff Craig Hays
Global Director Sales Manager
Corporate Communications Information & Communication
(210) 247-3806 Technologies
jake.wengroff@frost.com (210) 247-2460
chays@frost.com
Roopam Jain
Principal Analyst
Videoconferencing
(973) 379-4622
rjain@frost.com
16