For the past decade, carriers and OEMs have invested billions of dollars in building IP networks as a way to reduce costs and they continue to do so. Cost, however, is no longer sufficient justification for deployment of IP communication networks. IP networks are attractive not only because theyre less expensive to develop and maintain, but because they enable convergence of different media types, different communication methods, and different devices all in the form of new valued-added applications. Consequently the greater value of Internet communications has yet to be realized. Simply put, by focusing primarily on reducing costs, carriers and OEMs are missing out on opportunities to exploit existing multi-billion dollar markets and grow revenue significantly.
Piecemeal Offerings Abound
While carriers continue to invest billions of dollars in IP networking because of the cost savings associated with VoIP, they have yet to tap the potential of converged applications. Inexplicably, these applications still take a backseat as the primary driver for investment.
But whats most surprising is that the multiple discrete services are being offered without leveraging the convergence opportunity of multi-service IP networks. Some carriers recently came to this realization when they renamed their VoIP programs CoIP because the value is in the communications, regardless of the type of media type being transported voice, data, video, conferencing, and so on.
End users want the ability to tap into information and communication services whenever and wherever they want. The problem is that compelling communication services such as presence, location, conferencing, and messaging are often locked-up in stovepipe silos of functionally within a carriers network. These services are, in turn, delivered to customers piecemeal, making them difficult to use and costly to support.
Consider the enterprise environment. Today most carriers and network equipment providers are deploying a piecemeal strategy for their different service offerings. This approach not only provides a poor and fragmented end user experience, but is expensive and yields poor margins for the retail provider. Carriers, for example, market separate VoIP, audio conferencing, video conferencing, and Web conferencing, yet typically each one of those applications have separate user interfaces, separate billing and back office support, even separate networks, thus costing both the carriers and their customers incremental capital and operating expenditures.
In most cases, newer services, such as Web conferencing and collaboration, continue to ride separate application specific media tone networks of their underlying ASP vendors. These ASP vendors are obliged to demand hefty margins to pay for their standalone application-specific media tone networks. The result is that these services only skim the market instead of encouraging widespread adoption, particularly in the SME market.
This piecemeal approach is a strategic dead end for it fails to provide the carrier and network equipment provider with a migration path to unified communications. Furthermore, maintaining separate application specific networks was precisely what IP networks were supposed to eradicate! Yet they persist and are even garnering further investment.
While its understandable that in the early phases of a market (e.g., Web conferencing) a carrier might offer a service in a side-car approach, non-integrated with their network and back-office, once that market has proven acceptance, its time to provide it as a converged offering. Web conferencing, now a $500 million market with potential to integrate or even subsume another $9 billion in adjacent services, is clearly at that stage. Moreover, the openness of the Internet as a platform for innovative communications should make it much easier to try out new services quickly and easily in an integrated fashion from day one.
Lets consider a collaboration and conferencing example. Some participants are on PCs communicating via VoIP or a traditional public switched telephone network (PSTN), and collaborating via data and video. At the same time, other participants are joining the call via their cell phone or PDA, but they want to join the conference. With true converged communications, carriers can make this possible. The Web conference participants can use location services to pinpoint mobile users, and dial them into the conference, thereby delivering voice, data, video, and mobile services all working together, sharing context and content in a single interface. The ubiquity of Internet bandwidth access across multiple edge devices with Web interfaces PCs, cell phones, PDAs, etc., now makes it more feasible to integrate such offerings. Equally important, using platforms and tools such as Flash that were once relegated only to the Web, it is now possible for the provider to present its brand in a rich and differentiated man ner via a consistent user interface across these different devices, networks, and applications.
The Killer App: Right Under Our Noses
Its not that the carriers and OEMs arent thinking about convergence. They are. They need, however, a killer application that will drive deployment of integrated applications over their IP networks or equipment. But first lets define killer app. This simple definition from http://hostingworks.com may be particularly accurate: The application that actually makes a sustaining market for a promising but under-utilized technology.
The killer app in the enterprise is sitting right under our nosesits converged conferencing the convergence of Web, audio, and video conferencing, along with some aspects of the collaboration and VoIP markets, as well as rich on-demand media. Converged conferencing is often confused with Web conferencing, a subset of the converged conferencing market. Web conferencing is, however, an important application because, as its name implies, it is the first to leverage the Web as its communications fabric, thus enabling the integration of the others, as well as broad market accessibility. It is therefore one of the most strategic applications for a carrier to host within its own network and for a network equipment provider OEM to integrate within its solutions.
According to Wainhouse Research, telecom and audio conferencing service providers will double their market share of Web conferencing services sold at the expense of Web conferencing-centric ASP vendors between now and 2007 by using integrated solutions as a lure. Similarly, OEMs that bundle web conferencing technology as a feature of their larger CPE-based applications will increase their market share from two percent to 30 percent of all CPE-based Web conferencing technology sold because enterprises want integrated solutions, instead of standalone Web or audio conferencing.
Now lets test whether converged conferencing meets the definition of a killer app in terms of market size. If one accepts the hypotheses of the industry analyst experts, its merely a question of quantifying the likely candidate ingredients of a converged conferencing offer. Table 1 illustrates a summary of relevant market sizes based on the authors analysis of the consensus of a few different major market research firms. Readers will find that any major market research firm will not vary much. The order of magnitude is sufficient to support the main argument that its a big market for those who can provide an integrated offering.
Converged conferencing doesnt fit the definition of a killer app just because of its market size. So is it also a promising, but underutilized technology? To be sure, with two-thirds of the market for Web conferencing dominated by North America, its easy to argue that one of the core offerings of converged conferencing is underutilized. Audio conferencing, while more broadly used, is also underutilized in international environments. The promise of all of these applications is enormous considering the growth rate of globalization, offshore outsourcing and international commerce, and the demands for collaborative communications to bridge geographies.
The beauty of converged conferencing is that given the right platform it leverages existing markets and products its just the integration that is new. That makes it easier and more credible to make the claim that its a viable market worth investing in.
So whats the right platform? The platform for converged conferencing has to use the Internet as its communication backbone. Clearly nothing is as ubiquitous or accessible. Private dedicated networks, while acceptable as an on- or off-ramp for the Internet, cannot be effective if operated as closed application-specific media networks. The beauty of the Internet is that if you connect anywhere you connect everywhere. All businesses today need to collaborate instantly and easily with a complex web of supply chain partners and customers that are outside the firewall. Moreover, the openness of the Internet encourages innovation that can be integrated with conferencing solution, further satisfying the end-users demand for integrated solutions.
The initial phase of IP communications was driven by cost reduction. While compelling, this is no longer sufficient to justify the billions being invested. The real opportunity lies in converged applications and media types over the Internet and over a variety of different devices. Yet carriers and OEMs have been slow to capitalize on this opportunity, lacking focus on a killer app. That killer app is a combination of several existing conferencing-related applications that end users want as an integration solution. In aggregate this represents a multi-billion market opportunity. To win in this market, providers must leverage a platform that is Internet ready, uses a ubiquitous rich client and is flexible enough to support third-party integration. Converged conferencing paves the way for an even more exciting range of unified communication services. IT
Eric Weiss is vice president of Telecom Solutions at Macromedia. For more information, please visit the company online at www.macromedia.com.
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