This article originally appeared in the October 2012 issue of INTERNET TELEPHONY
All products follow a similar lifecycle arc, and in today’s world of IP communications, the cycles are shorter than most industries, and getting shorter with each wave of innovation. To illustrate, I’ll start at the beginning in this space – which for me is VoIP, and from there I’ll move to video, which is now following a similar path.
Both VoIP and video fit the profile for the focus of my column – rethinking communications – in that they have disruptive elements and change the way we work. They are still a long way from reaching their potential, but have already passed through some important lifecycle milestones. As mentioned, I’ll start first with VoIP.
When VoIP emerged in 1995, its technological shortcomings limited adoption to hobbyists and early adopters. The business value was weak, as few businesses were willing to compromise quality and reliability for the cost savings. TDM was the gold standard, and businesses understood they were paying a premium, but getting a very solid product. VoIP was simply not business grade, making it practically a non-starter. As VoIP matured, however, quality improved and the economics become more compelling.
At that point, VoIP should have accelerated on its lifecycle arc, but business adoption stalled because the high cost of IP handsets offset much of the savings. In time, however, growing volumes have driven down handset costs, and now the economics of VoIP make a lot of sense all around. Today, VoIP services cost less than TDM, and the same can be said of the IP handsets. The quality may not be 100 percent on par with TDM, but it’s good enough for many businesses to justify using.
There are many parallels worth noting with video. Business video has been with us for decades, but as with telephony, legacy services were expensive, proprietary and inflexible. These are not the hallmarks of innovation or disruption, but IP-based video has changed all that. Video is more complex than telephony, and not surprisingly, the first disruptive iterations came at the top end of the market in the form of telepresence.
Being a visual medium, the core appeal of video lies in its ability to deliver a life-like and even life-size experience. Bigger is better in this case, and that’s exactly what the early telepresence offerings provided, especially those from Cisco and HP. This was state-of-the-art for business video, and the complex technology behind it came with a price tag (News - Alert) to match. Certainly, the Fortune 500 club had the means to embrace telepresence, and power users could even make a strong business case to justify the investment. If the experience served as a valid proxy for being there, business travel could be reduced. Similarly, the wow factor can do wonders for sales calls or executive meetings, and if this gets the big deal done faster, telepresence will earn its keep.
The advantage of setting the bar high early in the game and delivering on your promise is having the luxury to charge – and get – a premium price. On one hand, this keeps telepresence in the domain of near exclusivity, which brings highly coveted brand cachet, something Cisco (News - Alert) has exploited effectively via product placement in movies and TV shows. Conversely, you end up serving a small market that doesn’t take long to saturate. For the rest of the TAM – total available market – telepresence ends up seeding demand for competitors who will find ways to serve these businesses with a scaled down solution.
This brings us to desktop video, which has long existed with free or near-free offerings, primarily for consumers. As with VoIP, technology developments on many fronts have allowed video to move along the lifecycle curve to the point where many solutions now exist that are suitable for businesses. Early on, the desktop was not seen as a destination for video since the small screen could not compete with room-based systems, which are designed for groups. Until recently, bandwidth was not plentiful enough to support personal video sessions on PC screens, especially when the experience was far removed from room-based group environments.
Now, as bandwidth is more accessible, and desktop video has more advanced compression codecs, better cameras, higher resolution screens, HD quality, etc., the overall experience is vastly better than in the past. Of course, aside from technology improvement, the concept of personal video has become more acceptable – and even desirable – thanks to our changing consumer habits. The adoption of new communications tools always accelerates when the underlying technologies improve, especially when they become easier to use. However, nothing drives adoption like bottom-up demand, and that’s a big part of making desktop video more popular now with businesses.
Desktop video is still far from being mainstream, but this phase of lifecycle development has happened rather quickly, and several vendors have come to market, primarily offering cloud-based services. Not only does the cloud offer a low-cost platform to enable new entrants, but they can come to market rapidly and easily scale to meet demand. This form of video is not a capital-intensive foray like telepresence, and with this comes a new pool of offerings, with Vidyo (News - Alert), Vidtel, Blue Jeans and LifeSize being just a few. To ensure they don’t miss out on this opportunity, Cisco has retooled its video portfolio and now offers Jabber Callway as a scaled down telepresence service for the desktop.
Every segment of a market responds to a different value proposition, and that brings us to good enough. Cloud-based desktop video cannot match the immersive telepresence experience, but is perfectly fine for many forms of communication. There’s another value dimension in terms of the mobility of desktop video. End users can use it from any broadband connection, and in most cases, the provider can ensure QoS for a consistent experience that is far more reliable than the aforementioned consumer video services.
As such, desktop video enables ad hoc collaboration, where it becomes very easy to run video meetings on the fly. This is a very different mode of working than room-based video, where meetings are often planned events. Desktop video speaks more to the needs of mobile workers, and especially those who work from home, which is another trend driving the demand for video communication.
This is really a classic tradeoff between price and quality, and while high-end telepresence will never fly with SMBs, there is clearly a demand for the inherent benefits. To reach this much broader market, price has to come way down, and to do that, something has to give. That’s where we are today, and the offerings cited above are examples of where a good enough experience is good enough. When the right balance between price and quality is struck, the buyers will come, and that’s what we’re seeing now.
The business desktop video market wouldn’t be at this point without telepresence, and both offerings will find a customer base. Together, this makes for a much bigger TAM, and that’s good for SMBs, as we’ll keep seeing new entrants, better pricing and more innovation. We’re just at the beginning of what’s possible with video, and the evolution path has many parallels to VoIP. I’m not sure what the next technology is that will follow this path, but the main message here is that we now have business-grade video solutions for all ends of the market, which makes mass adoption finally possible. So, when you start to rethink your communications needs, video had better be in the conversation.
Jon Arnold (News - Alert) is principal of J Arnold & Associates, an independent telecom analyst and marketing consultancy with a focus on IP communications, and writes the Analyst 2.0 blog. Previously, he was the VoIP program leader at Frost & Sullivan (News - Alert).
Jon Arnold is principal of J Arnold & Associates, an independent telecom analyst and marketing consultancy with a focus on IP communications, and writes the Analyst 2.0 blog. Previously, he was the VoIP program leader at Frost & Sullivan.
Edited by Brooke Neuman