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Enterprise videoconferencing has been through a number of hype cycles over the past few decades and has failed to become culturally integrated into the fabric of business processes and communications. ...

Enterprise videoconferencing has been through a number of hype cycles over the past few decades and has failed to become culturally integrated into the fabric of business processes and communications. However, IDC believes that only recently have the technologies delivered to end users' experiences worthy of initiating a videoconference over a phone call or conducting business across locations that in the past required travel.

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    Idc worldwide ent video forecast Idc worldwide ent video forecast Document Transcript

    • MARKET ANALYSIS Worldwide Enterprise Videoconferencing and Telepresence 2010–2014 Forecast Jonathan Edwards IDC OPINION Enterprise videoconferencing has been through a number of hype cycles over the past few decades and has failed to become culturally integrated into the fabric of business processes and communications. However, IDC believes that only recentlywww.idc.com have the technologies delivered to end users experiences worthy of initiating a videoconference over a phone call or conducting business across locations that in the past required travel. IDC believes the following three factors will shape the enterprise videoconferencing market over the next five years:F.508.935.4015  Technology capability and market awareness. The ways in which we interact with video (be it YouTube content accessed on our iPhones or a Skype video call with a grandparent) are more abundant and advanced than ever. This trend is only accelerating as partnerships like Skype and HDTV manufacturer Panasonic form. From an enterprise standpoint, quality, productivity, and level ofP.508.872.8200 engagement per interaction over video are primary keys to usage and adoption, and only within the past three years has the technology become capable (epitomized by high-end telepresence systems) to deliver here. Furthermore, market awareness has never been greater as vendors like TANDBERG, Polycom, LifeSize, and Cisco have successfully catalyzed awareness andGlobal Headquarters: 5 Speen Street Framingham, MA 01701 USA demonstrated the value of videoconferencing to their growing customer bases and to their strategic and channel partners.  Bandwidth availability. The most significant impediment to videoconferencing adoption is bandwidth. Interviews with a major IT systems integrator/consultancy indicated that on average every $1 spent on videoconferencing requires roughly $3 on network upgrades. In comparison with IP telephony, which requires on average $0.80 for network upgrade on every $1 spent, the overall costs of investing in videoconferencing are high. Cisco alone has upgraded its network four times in roughly three years since rolling out companywide access to telepresence and other video endpoints.  Interoperability. While vendors like Polycom and TANDBERG have demonstrated videoconferencing and telepresence interoperability from an equipment standpoint for some time, interoperability between all forms of conferencing systems (Web conferencing, audioconferencing, etc.) will greatly impact the way enterprises evaluate the ROI of the application. There are multiple levels of interoperability that will take time to address, but all will significantly impact adoption and help accelerate the tenets of Metcalfes law. These levels include system type to system type (e.g., Web based to telepresence), legacy to next generation, vendor to vendor, carrier network to carrier network, and business to business (B2B). Filing Information: March 2010, IDC #221356, Volume: 1 Enterprise Communications Infrastructure: Market Analysis
    • TABLE OF CONTENTS PIn This Study 1Methodology ............................................................................................................................................. 1S i t u a t i o n O ve r vi ew 1Industry Consolidation .............................................................................................................................. 2Adoption Trends ....................................................................................................................................... 2Future Outlook 3Forecast and Assumptions ....................................................................................................................... 4Market Context ......................................................................................................................................... 25Essential Guidance 25Learn More 25Related Research ..................................................................................................................................... 25#221356 ©2010 IDC
    • LIST OF TABLES P 1 Key Forecast Assumptions for the Worldwide Enterprise Videoconferencing and Telepresence Market, 2010–2014................................................................................................ 5 2 Worldwide Enterprise Videoconferencing Revenue and Endpoints, 2009–2014.......................... 23 3 Worldwide Enterprise Telepresence-Only Revenue, Number of Telepresence Rooms/Systems, Room/System Install Base, and Number of Screens, 2009–2014.................... 24©2010 IDC #221356
    • LIST OF FIGURES P 1 Worldwide Enterprise Videoconferencing Revenue, 2009–2014 ................................................. 23 2 Worldwide Enterprise Telepresence-Only Revenue, 2009–2014................................................. 24#221356 ©2010 IDC
    • IN THIS STUDYMethodologyThe quantitative and qualitative information contained in this study results from IDCsongoing videoconferencing research. Both primary and secondary sources ofinformation were used in the development of this study. Primary sources includeinterviews with videoconferencing vendors and IDC survey data. Secondary sourcesinclude vendors publicly registered financial statements, news releases, vendor-provided marketing material, and consultation with other IDC offices.All revenue figures are IDC estimates that refer only to videoconferencing equipmentand exclude services (installation, professional, and managed). Consideredvideoconferencing equipment includes multipoint control units (MCUs), video codecs,gateways, cameras, screens, and associated audio components. These figures donot include PC/Web-based systems, Webcams, or videophones. The telepresencerevenue, room/systems, and screens figures refer only to the highly immersivevideoconferencing systems that deliver near-in-person experiences via HD video,wideband audio, echo cancellation, zero latency, and spatial relativity. These systemsdo not need to be installed as preconfigured room-based units but instead are trackedand forecast based on the experience the infrastructure delivers not the setting or theapplication. IDC expects the number of applications telepresence technology isbrought to in the later years of this forecast will be the primary revenue drivers.These estimates were modeled based on primary and secondary research. Sourcesinclude but are not limited to vendor statements, vendor financials, briefings, pressreleases, interviews, conferences, and internal forecast models. Shipment informationmay have been provided by the vendor, when available.Note: All numbers in this document may not be exact due to rounding.SITUATION OVERVIEWIDC predicted that 2009 would be the year of the great enterprise video experiment,and given the macroeconomic challenges that enterprises faced this year, the marketwas able to maintain 16.7% year-over-year growth. IDC considers this prediction tobe validated by the success of Cisco (which claims 100% year-over-year growth intelepresence revenue), Polycom, and TANDBERG among others in 2009 as well asthe increasing levels of interest in videoconferencing among enterprises validated byend-user interviews, surveys, and conversations with IT communicationsimplementation consultants. In 2009, videoconferencing received a great amount oftraction in the media and in marketing materials as a means to cut travel costs andscale human capital. Cisco has also pushed its telepresence line into the mainstreammedia, with equipment appearances on NBCs 30 Rock as well as in televisioncommercials starring actress Ellen Page.©2010 IDC #221356 1
    • Industry Consolidation2009 brought about vendor consolidation, most notably Ciscos October acquisition ofTANDBERG (finalized in December). This acquisition not only solidified Ciscoscommitment to enterprise video beyond telepresence (particularly but not limited toconferencing) but also is indicative of where the market needs to go, namely theblurring of lines between low- and high-end videoconferencing system silos and theinteroperability and interconnectivity between them. Couple TANDBERG with CiscosWebEx assets, and the networking giant is now capable of offering end-to-endvideo/Web conferencing solutions.Another example is PC peripheral provider Logitech (a company with a market cap ofnearly $3 billion) acquiring videoconferencing provider LifeSize on December 11,2009, for $405 million. LifeSize was founded in 2003, currently serves over 9,000customers in 80 countries, and is known for its affordable telepresence offerings.Logitech on the other hand has been a market leader in Webcams for years and inJune 2009 announced its Web-based video call service Vid. While Vid is primarilytargeted at consumers and as a complement to Logitechs Webcam business, Skype,Google, and ooVoos Web-based videoconferencing services are used frequently forbusiness use. Note: While Web-based videoconferencing services are not included inthis IDC forecast, these services are aiding the adoption and visibility ofvideoconferencing overall and are therefore noteworthy. In contrast with Cisco, whichacquired TANDBERG to move downstream from telepresence, Logitech willconversely attempt to move upward from PC-based video calling/conferencing.Polycom now remains the last major independent market player with a significantvideoconferencing install base and an extensive product portfolio. IDC does notexpect Polycom to be acquired in the near future as it can play the Cisco-alternativecard now that TANDBERG is a Cisco asset and has formed a number of strategicpartnerships to support its efforts against Cisco (partnerships include those with IBM,Siemens, Juniper, and BroadSoft). Moreover, some of Ciscos primary competitors inIT/networking (HP) and IP communications (Avaya) have been busy themselves (in2009, HP acquired 3Com and Avaya acquired Nortel). HP appears to be the mostlikely suitor though, given the level of disruption in enterprise networking, theconvergence of enterprise communications and collaboration applications, and thelucrative opportunities in enterprise video at stake; companies such as Dell and IBMhave likely entertained the thought.Adoption TrendsGiven the trending of an increasingly distributed workforce within a globallyinterdependent economy, the business case for videoconferencing has never beenclearer. The need to reduce travel costs has been a primary driver of adoption in2009, validating November 2008 (post–economic crash) survey data from IDCseVideo QuickPoll, which indicated that the number 1 reason for adoptingvideoconferencing was cost savings/avoidance followed by improving teamcollaboration, improving customer service, and improving employee work/life balance(sequentially). Because of the bandwidth requirements for videoconferencing, largercompanies with higher network capacities have been the heaviest adopters of the2 #221356 ©2010 IDC
    • application, especially the high-end telepresence systems. Larger companies tend tohave a greater number of global locations as well, which makes videoconferencing avaluable way to connect distributed employees. Financial services, government, andhealthcare have been the most prominent adopting verticals, though the educationsector is showing dramatic increases in interest early in 2010.Beyond cutting travel costs, the soft ROI of scaling human capital across multiplelocations in a highly engaging manner is cited as a primary benefit ofvideoconferencing. 23% of respondents to a recent IDC survey indicated that the topreason they find videoconferencing valuable is it increases the effectiveness ofmeetings.Though IDC has seen double-digit growth in videoconferencing revenue over the pastthree years, significant adoption barriers remain. Bandwidth remains a primary barrierto mass-market adoption, though Polycom for example recently announced itssupport for H.264 "High Profile" to deliver HD video starting at just 512Kbps. IDCexpects coding and compression technology efficiencies to improve significantlywithin the forecast period.Beyond bandwidth, cultural adoption has proven to be one of the most difficultobstacles. Unlike Web and audioconferencing, videoconferencing has traditionallybeen supported by A/V staffs within enterprises and has not integrated withcalendaring and scheduling systems for example, making it difficult for end users toreserve or even consider these resources in many cases. Multiple systemsintegrators and videoconferencing vendors have indicated to IDC that the ability toschedule a videoconference within Microsoft Outlook/Lotus Notes and/or reserveequipment within these applications is one of the initial applications — if not the initialapplication — integration customers are requesting.Another cultural barrier is getting employees to consider leveragingvideoconferencing resources instead of traveling if and when possible. This aspect ofcultural adoption takes time but will accelerate as the number of videoconferencingsystems grows (including public sites). This issue should be handled at the C-level,and providing incentives is highly recommended. Other barriers include the inability tovideoconference B2B currently in the ways businesses can via audio bridges anddedicated conference lines.FUTURE OUTLOOKThe future is bright for videoconferencing vendors, but a number of recentlyestablished business models and go-to-market strategies that have yet to be provenmay or may not accelerate the pace of adoption.For example, Tata Communications launched its telepresence managed service andpublic room offering in 2008. Tata Communications goal is to remove the high capexof telepresence by offering onsite but Tata Communications–managed equipmentand telepresence services as well as public/shared telepresence facilities at hotelsand other locations. Tata will also host a telepresence directory listing businessescapable of meeting over telepresence (on- or offsite). While Tata Communicationstelepresence business is in its infancy with just 10 public rooms to date and only a©2010 IDC #221356 3
    • handful of managed service clients, the prospect of lowering cost barriers to adoption,establishing a global network of connected telepresence systems, and offeringtelepresence as a managed service with no equipment purchases required ispromising. Even more encouraging is Tata Communications telepresence advisoryservices it couples with its managed services. Tata Communications, with its partnersCWT and AmEx, has demonstrated the ability to help customers drive user adoptionand create bottom-line cost savings by layering travel schedules, most commonlycollaborating/conferencing city pairings and other data to come up with the moststrategic ways in which telepresence can be leveraged within a business.Cisco has also established a hosted telepresence directory that according to TataCommunications will be cross-listed with the telepresence directory TataCommunications itself hosts. Cisco also has established a SIP-like standard it iscalling TIP for enabling telepresence-to-telepresence interoperability at the necessaryQoS levels. Cisco demonstrated WebEx/telepresence interoperability at itsCollaboration Summit as well, and the extent to which these two solutions canaccelerate the adoption of one another remains unknown. Integration between audio,Web, and videoconferencing as well as with application sharing and whiteboardingfunctionality is already happening, but it will take three to five years before these arefully integrated turnkey solutions.Another area of this market that has yet to be proven is the extent to whichvideoconferencing equipment will be leveraged for applications like digital signage,rich media content streaming, and application sharing. Yet another is how integralvideo will become from a content and knowledge sharing perspective in the wayYouTube has on the public Web. Depending on the size and speed of demand forvideo applications beyond conferencing, the ways in which videoconferencingequipment is deployed and leveraged change the way enterprises will evaluate theROI of these offerings. IDC does expect the number of applicationsvideo/telepresence is brought to over the next five years to dramatically increasebeyond the conference room setting. In the outer years of this forecast, IDCanticipates HD video and telepresence technology to be present in, for example, retailbanks, fast-food drive-thrus, and concierge services of all kinds.At CES 2010, both Polycom (with partner IBM) and Cisco demonstrated hometelepresence solutions. Cisco will enter U.S. home telepresence field trials this spring,with Verizon as an early partner, and field trials in France will start later in 2010, withFrance Telecom as Ciscos early partner. If home-videoconferencing/telepresencesystems become prevalently accessible (e.g., Skype on Panasonic televisions orCisco/Polycom–type offerings), the ways in which consumers can interact withbusinesses, family, and friends from the home changes as well.Forecast and AssumptionsTable 1 provides the key forecast assumptions for the worldwide enterprisevideoconferencing and telepresence market.4 #221356 ©2010 IDC
    • TABLE 1 Key Forecast Assumptions for the Worldwide Enterprise Videoconferencing and Telepresence Market, 2010–2014 Accelerator/ Inhibitor/ Certainty of Market Force IDC Assumption Impact Neutral Assumption Macroeconomics Economy Worldwide economic growth High. A down economy affects will be negative by 2–3% in business and consumer 2009, although forecasting confidence, availability of credit groups expect 2010 to be and private investment, and markedly better. Through the internal funding. A rising year, forecasts for 2010 have economy does the opposite. held up, partly because 2009 has drifted down. IDC will continue to take a mild downside view of GDP   forecasts from Consensus Economics. Assumptions for 2010: United States 2.0%, Western Europe 0.2%, and Japan 1%. This means that worldwide, the global economy will drop 2.5% in 2009 and grow 2.0% in 2010. Fiscal stimulus The economic stimulus plans High. The stimulus packages packages enacted globally seem to have follow in the footsteps of the stemmed the panic and banking system bailouts by economic freefall of 4Q08 and stemming economic panic. 1Q09, but they will have little They will not immediately jump- impact on market demand or start the global economy after employment until well into such a shock. 2010. More of the effects will be   seen in 2010. Our assumption at this point is that these plans will bulwark the economy against getting worse than we expect, so we are not changing our basic assumption about GDP growth. Policy IDC expects to see new High. New regulations could regulation for financial markets drive new demand for IT put in place in 2010. spending; a downside possibility is that this spending   crowds out other IT spending, but that wasnt the case in the post-Sarbanes-Oxley years.©2010 IDC #221356 5
    • TABLE 1 Key Forecast Assumptions for the Worldwide Enterprise Videoconferencing and Telepresence Market, 2010–2014 Accelerator/ Inhibitor/ Certainty of Market Force IDC Assumption Impact Neutral Assumption Profits Consensus Economics High. Compliance spending estimates of U.S. profit growth seems to be funding itself have trended up for 2010 through better-run business   (11.9%) since September 2009. operations and, in fact, is spurring other IT initiatives. U.S. fiscal policy, These areas affect the long- High. A crash of the dollar or deficits, and trade term economic outlook for the the use of economic power to imbalance world; however, their short-term drive U.S. political decisions impact is muted. IDC assumes could affect the world economy.   these areas will not affect short- term ICT forecasts. Inflation Inflation driven by higher oil and High. Low inflation keeps commodity prices has been interest rates low and leads to taken off the table. At the same more capital spending,   time, worries about deflation including spending on ICT. have abated. Exchange rates The financial crisis has caused High. A stable, or even steadily gyrations in dollar exchange falling, dollar makes it easier for rates, which went up in the first vendors to manage supply lines half of 2009 and are now and stabilizes the prices of coming back down. For the imports and exports. purposes of IT forecasts, IDC   assumes no major impact on overall demand. There will be a difference in demand growth, however, and "as reported" vendor revenue. Wild cards We are assuming that there will Moderate. Uncertainty and be wild-card events, but we are political malaise could lead to a predicting no single one. As fall in business and consumer one scientist has put it, there is confidence, which could affect   a high probability of a low- ICT spending. probability event taking place.6 #221356 ©2010 IDC
    • TABLE 1 Key Forecast Assumptions for the Worldwide Enterprise Videoconferencing and Telepresence Market, 2010–2014 Accelerator/ Inhibitor/ Certainty of Market Force IDC Assumption Impact Neutral Assumption Global megatrends Cloud services Cloud services is IDCs name High. The key advantage to for what we believe will become cloud services should be the a new paradigm of computing ability of IT organizations to over the next several decades shift IT resources from — the logical evolution of what maintenance to new initiatives. we have called "dynamic IT" for This, in turn, could lead to new years. It entails shared access business revenue and to virtualized resources over competitiveness. the Internet. A detailed definition of and research about   cloud services can be found at idc.com. IDC predicts that cloud services (public cloud) will increase 35% in 2010 to nearly $25 billion, or about 1.6% of IT spending. That percentage should increase to 2.6% by 2013. Convergence Convergence is a complex High. Convergence will drive phenomenon working at many new competitive dynamics, levels — convergence of the offer new applications and telephone network and the functions to customers, and Internet; communications and strain the legal and regulatory IT technologies; consumer and systems. It will also drive enterprise technologies; and increased ICT spending. even storage, routing, and processing in the datacenter. Of these, perhaps the most overarching is the convergence of voice, video, and data   communications. IDC assumes that this convergence is a permanent phenomenon and that it will pick up pace as the decade wears on. One measure is that IDC expects 1.9 billion users on the Internet and 3 billion users of the phone network by 2012. The overlap will be significant.©2010 IDC #221356 7
    • TABLE 1 Key Forecast Assumptions for the Worldwide Enterprise Videoconferencing and Telepresence Market, 2010–2014 Accelerator/ Inhibitor/ Certainty of Market Force IDC Assumption Impact Neutral Assumption Software industry The software industry is going High. The new software transformation through a major transformation, creation and delivery models from basic architecture should allow for a quantum (service-oriented architecture increase in the ability to deliver [SOA]) and the way software is and integrate new software written (composite applications) functionality to ICT systems. to the way software is delivered This should increase overall (software as a service) and spending even as it lowers   even funded (advertising costs. based). IDC assumes that this transformation will take a decade but that it will, when done, allow for much faster and more dynamic delivery of software functionality. Service industry This is a long, slow process High. These trends portend transformation involving the rise of offshore IT new competitive dynamics in services, the increased the industry — software and integration of IT services inside online services competing with business services, and the traditional IT services — as well advent of new service delivery as new thresholds for delivery. models. Most firms have Online delivery models and developed a multishoring operational standardization, capability and blended pricing from new technologies to model and are now working on remote infrastructure services, ways to standardize on will allow faster and more technologies and efficient translation of service   methodologies, deliver services labor to client deliverable. online or in new form factors, invest in datacenters, and expand into business services. Despite the race to automate service creation and delivery, there is a looming talent shortage. The economic crisis will be good for outsourcing markets but bad for project- based services.8 #221356 ©2010 IDC
    • TABLE 1 Key Forecast Assumptions for the Worldwide Enterprise Videoconferencing and Telepresence Market, 2010–2014 Accelerator/ Inhibitor/ Certainty of Market Force IDC Assumption Impact Neutral Assumption The changing IT The IT domain that was once High. This migration will domain the care and feeding of generate new staffing and skill mainframes has evolved over set demands on IT the years to include the organizations, which will create management of enterprise challenges but create more applications, deployment of ultimate demand for ICT. software and applications to the workforce, and desktop automation. Now it is evolving again to take on responsibility for the phones, building automation, sensors, and RFID, and sometimes even physical security as proprietary systems   migrate to TCP/IP networks. Other new applications, such as Web 2.0 and real-time business analytics, are driving IT-based applications to the point of customer or employee contact and becoming mission critical along the way. This could increase the need for IT to be so close to the business units that it becomes part of them rather than merely a service organization. Green IT This term refers to a basket of High. The adoption of green IT technologies and practices products and practices should designed to minimize power increase demand for new IT costs, carbon output, or products and services. hazardous waste. IDCs coverage of green IT can be found in numerous documents. The major impact of green IT will be on technology choices based on low power, more   attention to asset disposal, and some change in vendor selection. Depending on the country, voluntary adherence to green IT principles could become law. The search for sustainability in areas outside IT will lead to opportunity for IT vendors.©2010 IDC #221356 9
    • TABLE 1 Key Forecast Assumptions for the Worldwide Enterprise Videoconferencing and Telepresence Market, 2010–2014 Accelerator/ Inhibitor/ Certainty of Market Force IDC Assumption Impact Neutral Assumption Technology/ service developments 10GbE adoption 10GbE is becoming a staple in High. 10GbE enables the the high-end datacenters — aggregation of numerous even into the aggregation layer gigabit ports in high-end in networks with server clusters environments. In the near term, and very high-end users. the most significant revenue Products will continue to impact of 10GbE will be to drive mature with declining ASPs sales of gigabit ports in server owing to new product clusters as well as those being introductions by existing used by carriers for the Internet vendors with greater port core backbone. 10GbE will   densities as well as new continue to play a significant vendors entering the market. role in the datacenter 10GbE will also benefit as a movement toward consolidated low-cost alternative to SONET and dense datacenters, while transport in the WAN. storage, grid, and WAN applications will begin to add significant growth in the later years of the forecast period. Gigabit Ethernet Gigabit Ethernet is primarily a Moderate. Gigabit ports will (1,000Mb) server connectivity technology represent 60% of spending on today. The bulk of development Ethernet switches. While most efforts in the switch, OEM, and customers are not significantly semiconductor vendor bandwidth constrained in the communities are focused on wiring closet, the security, 10GbE and Gigabit Ethernet. wireless, and traffic control Most importantly for Gigabit features found in newer (most Ethernet, new traffic types such often Gigabit) switches are very as video and software as a attractive. Video is the most   service are beginning to drive likely candidate to pressure utilization rates up and, as a network capacity to the result, enabling Gigabit to truly desktop. Additionally, server challenge Fast Ethernet in the virtualization and dense wiring closet. computing is clearly driving Fast Ethernet out of the datacenter in favor of Gigabit connections.10 #221356 ©2010 IDC
    • TABLE 1 Key Forecast Assumptions for the Worldwide Enterprise Videoconferencing and Telepresence Market, 2010–2014 Accelerator/ Inhibitor/ Certainty of Market Force IDC Assumption Impact Neutral Assumption Impact of WLAN on WLAN access devices are Moderate. Enterprise adoption edge deployed at a ratio of 1:10 or of WLAN is growing. Most more users. In facilities where importantly, WLAN as the WLAN becomes the primary primary network access method of network access, technology is taking hold in demand for edge switch ports education and healthcare. As will wane late in the forecast the number of enterprise and period. This downward small business clients pressure on ports is somewhat provisioned only on a WLAN offset by a rise in the begins to accelerate, demand importance and demand for for switch ports at the edge of   advanced capabilities in the the network will decrease remaining ports. slightly despite some buttressing from wired devices that require more bandwidth or more reliable connections than a wireless network can provide (IP phones, IP video surveillance, graphics and engineering workstations, and RFID readers). Impact of WLAN on Enterprise adoption of WLAN Low. Enterprise WLAN LAN switching will grow over the next five deployments are still largely years. Increasing coverage and overlay networks that are not additional applications on the heavily integrated with the WLAN will increase enterprise wired network. Despite the reliance on the network as a current state, WLAN is now a whole and drive new mature enough technology to investments in network influence the deployment intelligence in both the core and strategies of wiring closet   edge of the network. switches. WLAN-induced traffic changes in the form of mobility, identity management, and RF management demands will continue to drive network intelligence investments at the edge and traffic into the core.©2010 IDC #221356 11
    • TABLE 1 Key Forecast Assumptions for the Worldwide Enterprise Videoconferencing and Telepresence Market, 2010–2014 Accelerator/ Inhibitor/ Certainty of Market Force IDC Assumption Impact Neutral Assumption IP voice Deployment of IP voice on High. Most customers still plan enterprise networks will drive on upgrading the network significant sales of new and before a full IP voice rollout. upgraded network equipment. However, we believe network spending directly tied to voice deployments will decrease as   tools to assess voice readiness proliferate and voice preparation becomes part of normal network planning. IP video Video is finally here. Moderate. These applications Nonbusiness consumption of are all in early stage formal use Internet video from sites such in many companies, but the as YouTube.com and IP video move to IP voice could hasten surveillance are clearly leading the ability to deploy increasing the charge in the near term. levels of video on the network. IDC believes that in the However, continued network 2009–2014 time frame, video upgrade and management on the enterprise network will costs as well as WAN become a significant form of bandwidth and storage costs   enterprise communications remain a concern for this including training, telepresence, market. If travel delays from and conferencing, as well as security threats spike beyond internal and external corporate the current trends of continued communications. All of these intensity, the demand for video video types are growing quickly will rise faster than that and placing a more significant presented in IDCs current burden on the network. forecast. Unified UC is a common infrastructure Moderate. VoIP applications communications to deliver, manage, and support are increasingly becoming the a wide range of predominant driver for IP communications applications, telephony adoption. Businesses including IP telephony calling are looking to increase and management; Web, productivity and collaboration audio-, and videoconferencing; and believe that such voice, email, and text applications are the solution.   messaging; presence/IM; click- Companies will not only adopt to-dial and event-driven more communication-rich communications. applications but also seek to integrate other primary business-critical operation solutions with this new communication infrastructure.12 #221356 ©2010 IDC
    • TABLE 1 Key Forecast Assumptions for the Worldwide Enterprise Videoconferencing and Telepresence Market, 2010–2014 Accelerator/ Inhibitor/ Certainty of Market Force IDC Assumption Impact Neutral Assumption Voice, video, and VoIP applications are High. If applications vendors data application increasingly becoming the and systems integrators can integration predominant driver for IP build the necessary APIs for telephony adoption. Businesses integration efforts, they will are looking to increase grant themselves access to a productivity and collaboration large installed base of users and believe that such and businesses that have applications are the solution. already deployed common Companies will not only adopt business applications.   more communication-rich applications but also seek to integrate other primary business-critical operation solutions with this new communication infrastructure. Vendors will begin to acquire voice-centric solution vendors. Mobile PBX Many enterprises also lack Moderate. IDC suggests that if extensions corporate control over mobile enterprises are looking to devices that are being used in provide greater mobility to their the corporate environment. employees while leveraging the First, there is rarely a standard robust functionality of their IP corporate account and/or PBXs, they should look toward centralized billing for corporate those off-the-shelf mobile PBX mobile phone usage. Second, solutions that allow for single- the independence of number dialing that can help employees and their mobile them begin to regain control of phones does not allow for true their enterprise mobility costs.   separation of personal and professional phone usage. This makes enterprises particularly vulnerable in the case of the loss of an employee through termination or move to another job. The mobile device is rarely recaptured, and the phone number assets are often lost to the enterprise.©2010 IDC #221356 13
    • TABLE 1 Key Forecast Assumptions for the Worldwide Enterprise Videoconferencing and Telepresence Market, 2010–2014 Accelerator/ Inhibitor/ Certainty of Market Force IDC Assumption Impact Neutral Assumption VoIP application As the number of voice High. Start-ups like LiteScape, development applications on the network IPcelerate, and Cistera platforms grows, the focus on voice in the Networks are helping VoIP IT realm will be to segregate customers build applications into two areas of responsibility. over their converged networks The first area is to maintain a to maximize their customers high level of reliability for dial return on IP telephony tone and quality of service. The investment. These second area will be to develop, communications mashups and grow, and manage the IP voice integration with existing system as a platform for business applications efforts application development. Major are fairly small applications that network vendors will either drive significant hard-dollar   partner or acquire VoIP ROI. Given the skill sets development platform solutions needed across industry-specific that allow customers to quickly business issues, build and deploy applications communications technologies, over their converged networks. and IT expertise, vendors, (Examples are Avayas consultants, and those with the Communications Enabled ability to bring these capabilities Business Processes [CEBP] to market will be highly platform and Ciscos Unified disruptive. Application Environment [UAE].) Server Enterprise customers are Moderate. LAN switch architectures building mission-critical infrastructures that support architectures on commodity server farms and clusters servers, virtual servers, and require higher bandwidth and blade servers. In addition, individual support for each blade servers and server virtual machine. New virtualization will drive the applications that require greater importance of server levels of computational power connections up as the growth in will be supported by Gigabit   physical servers slows, while connections aggregated with growth in virtual servers 10GbE uplinks. Increased use increases. of commodity servers and virtualized servers places a focus on the costs of redundancy and management operations in the network.14 #221356 ©2010 IDC
    • TABLE 1 Key Forecast Assumptions for the Worldwide Enterprise Videoconferencing and Telepresence Market, 2010–2014 Accelerator/ Inhibitor/ Certainty of Market Force IDC Assumption Impact Neutral Assumption Server The worldwide virtual machine High. Server virtualization is virtualization software (VMS) market grew to reshaping the IT and network over $1.78 billion in 2007, up landscape. The use of server from $1.05 billion the year virtualization to virtualize before. This was a robust 69% desktops is creating demand growth from 2006 to 2007, for WAN application delivery which equaled the 69% growth products at the remote branch recorded from 2005 to 2006. and datacenter. Additionally, IDC believes the growth in this form factors for WAN dynamic market will continue as application delivery and organizations increasingly datacenter Layer 4–7 are deploy VMS as a means of changing to leverage the decoupling the application benefits of server virtualization. stack from the underlying Branch platforms are emerging   hardware and driving increased that will enable multiple virtual "mobility" of virtual machines. network and IT services to IDC views VMS as a coexist on a single consolidated foundational technology to the server. creation of dynamic, agile IT environments and expects robust growth in this market. Networking service delivery will begin to incorporate this new form factor and create multiple deployment options for customers and suppliers.©2010 IDC #221356 15
    • TABLE 1 Key Forecast Assumptions for the Worldwide Enterprise Videoconferencing and Telepresence Market, 2010–2014 Accelerator/ Inhibitor/ Certainty of Market Force IDC Assumption Impact Neutral Assumption Convergence of With Layer 3 Ethernet switches Low. Products exhibiting router routing and capable of performing routing and LAN convergence fill needs switching functions and an increasing from Cisco Catalyst 6500 with number of WAN interfaces WAN services serving as high- available for what have capacity headend routers to traditionally been switches Force 10s datacenter-focused designed to create local area SONET interface on its E- networks, IDC believes the Series to Adtrans NetVanta lines between what is a LAN 1000 Series for small locations. switch and what is a router will The end result is a blur over time. Today, a router consolidation of footprint and remains a device whose generally decreased spending   primary responsibility is on routers, while the switch focused on the WAN interface, becomes the focal point for the but a growing number of network spend as Ethernet products are clearly capable of becomes a fixture in both the and sometimes sold to LAN and the WAN accomplish both tasks. IDC environment. believes this long-standing assumption will continue to hold true throughout the forecast period. Management Management capabilities will Moderate. Voice, security, continue to lag behind wireless, telepresence, and all customer needs. During this the rest of the networking economic downturn, network buzzwords are for naught if managers will increasingly look networking vendors cannot   to network management tools significantly drive down the cost to optimize capacity planning of running the network and and minimize capital providing IP services. expenditures. Application Application networking is High. The network is on a networking evolving the key technology course to deliver a broad base that enables the network to of services to the datacenter. provide business value to the Application networking will drive organization. In 2009, the the datacenter to be more   market for application responsive in real time to the networking was $1.8 billion business. worldwide.16 #221356 ©2010 IDC
    • TABLE 1 Key Forecast Assumptions for the Worldwide Enterprise Videoconferencing and Telepresence Market, 2010–2014 Accelerator/ Inhibitor/ Certainty of Market Force IDC Assumption Impact Neutral Assumption Datacenter The datacenter network Moderate. Ethernet will begin networking traditionally consisted of three to capture new greenfield networks: Ethernet, Fibre datacenters and new Channel, and InfiniBand. IDC application growth. But the believes that over time Ethernet specialized high-performance will begin to capture a greater requirements of HPC share of the network traffic in applications will continue to rely the datacenter as IT on InfiniBand for the forecast   increasingly looks to deploy a period. Ethernet will capture the holistic datacenter architecture growth in storage traffic both built on one unified network. with FCoE and unstructured content types, but Fibre Channel will remain in the datacenter throughout the forecast period. Fibre Channel over FCoE aims to bring together Moderate. Mainstream Ethernet the predictability of the FC adoption of FCoE for server transport and the ubiquity of connects will start to climb in Ethernet infrastructure, making 2010 but will not be significant possible for datacenters to till 2011. Most of these servers consolidate FC and Ethernet will access FC SAN–based cabling for increasingly storage via gateway facilities. virtualized server pools. The Broad availability on storage   FCoE standard bypasses the systems will not happen until TCP/IP stack, directly maps the the 2011–2012 time frame. FC protocol over Ethernet, and FCoE will not generate allows SAN traffic to run substantial new demand and natively on low-latency 10GbE. will ultimately replace FC SAN, but not until well after 2013. IT and application Geographically dispersed High. The movement to consolidation business locations and/or consolidate and centralize is mobile/remote workforces are increasing the dependence on driving both enterprises and the network. IT organizations small businesses to Web are willing to pay for network enable and centralize their equipment and services that business application offer a higher level of resiliency infrastructures and provide end- and performance. This is one of user access via the Internet the key drivers of network   and/or corporate WANs. This equipment market growth. IT/application infrastructure model enables enterprises to reduce operational costs, improve regulatory compliance, and enhance efficiency and performance.©2010 IDC #221356 17
    • TABLE 1 Key Forecast Assumptions for the Worldwide Enterprise Videoconferencing and Telepresence Market, 2010–2014 Accelerator/ Inhibitor/ Certainty of Market Force IDC Assumption Impact Neutral Assumption Storage Storage centralization provides High. These storage centralization for both site-specific business applications are driving demand continuity and disaster recovery for storage network over and operational recovery. IDC Ethernet and application   sees increasing levels of intelligence such as WAN adoption of centralized backups application delivery. of remote office data. Labor supply IT talent From 2010 to 2013, IT High. The availability and the employment, now at 35 million, skill level of talent have a direct will grow by a factor of 1.2 impact on markets as diverse worldwide. This is a constraint as network security and in an industry that will grow by outsourcing. The availability a factor of 1.1 in spending, but may affect some markets or by more than 2 in devices adoption rates, such as the managed, 5 in information development of SOA, but in   created, and 8 in networked general, there will be other, interactions between more immediate gating factors. customers. IDC views this as a In the long run, the optimization long-term structural constraint. of the slow-growth labor pool The current recession has argues for cloud computing. tightened that constraint. Small office/home SOHO environments will not Moderate. Deploying and office (SOHO) invest in learning about managing a network can be a networking networking, preferring instead daunting task. A number of to depend on product vendors vendors will work to simplify the to supply more turnkey, easy- process of deploying networks to-use, and easy-to-manage for the SOHO environment. devices that provide Many SOHO environments are   connectivity and performance turning to WLAN as the primary without incurring significant mode of connectivity. In these maintenance and management cases, the few ports of costs. switching functionality are integrated into the router.18 #221356 ©2010 IDC
    • TABLE 1 Key Forecast Assumptions for the Worldwide Enterprise Videoconferencing and Telepresence Market, 2010–2014 Accelerator/ Inhibitor/ Certainty of Market Force IDC Assumption Impact Neutral Assumption Enterprise Enterprise customers will Moderate. The widespread networking continue to invest in educating availability of general staff on new networking networking expertise as well as technologies and protocols. automation and remote diagnostics lends confidence to businesses investing in network   infrastructures and reduces the cost of training specialists in niche or emerging technologies. Distribution of The swing to emerging High. The migration will talent geographies is evident. The increase the overhead costs of number of scientists and finding, recruiting, and engineers in the United States managing talent from global and Western Europe is falling pools. It should, however, also compared with the number of lower costs and may even lead scientists and engineers in to more innovation.   China and India, while the growth in the number of IT- related employees in those countries is three times the world average. Telecom and IT The days of telecom as a Moderate. IT departments that separate operating entity within decide to hold off on IP the enterprise or even as one telephony and video may operating within facilities is embrace used equipment as a coming to an end as companies short-term fix to holding on to fold those responsibilities into legacy systems. IT. Even if an IT shop decides   not to migrate to IP telephony, that staff transition could impact the purchasing power and direction of the classic customer for telephony gear.©2010 IDC #221356 19
    • TABLE 1 Key Forecast Assumptions for the Worldwide Enterprise Videoconferencing and Telepresence Market, 2010–2014 Accelerator/ Inhibitor/ Certainty of Market Force IDC Assumption Impact Neutral Assumption Market characteristics Hardware Hardware markets, down more High. Hardware spending, than 8% in 2009, should about 40% of total IT spending, rebound to show spending drives spending in software and growth closer to 4% in 2010 services as well. and 7% in 2011. The rebound   will be dominated by PC spending and, to a lesser extent, telecom equipment. Software Software markets, down to High. Software spending, about about 1% growth in 2009, 20% of total IT spending, can should rebound to show growth drive spending in both closer to 4% in 2010 and 6% in hardware and IT and business 2011. The rebound will be services. strongest in infrastructure   software, in part because of growth in operating systems (Windows 7), but more because of growth in security software. Services Services markets, down to 0% High. IT services spending can growth in 2009, should rebound affect the rate of overall to growth of 3% in 2010 and solution adoption as well as the 4%+ in 2011. The rebound will migration to dynamic IT. It be strongest in operations accounts for about 40% of IT management in 2009 and 2010 spending.   (e.g., outsourcing), but spending on implementation services will kick in the most new money in 2011 as new projects come online. Telecom The telecom industry, in its size High. The IT industry has and utility, is somewhat already factored the telecom insulated from sudden industry spending into its economic swings — or at least internal forecasts; the key is the it has significant inertia. But pace at which convergence IDC expects worldwide telecom takes place. services growth in 2010 to be   lower (2.4%) than in 2009 (3.8%). The fall is related to market saturation and the long- term impact of depressed capital spending.20 #221356 ©2010 IDC
    • TABLE 1 Key Forecast Assumptions for the Worldwide Enterprise Videoconferencing and Telepresence Market, 2010–2014 Accelerator/ Inhibitor/ Certainty of Market Force IDC Assumption Impact Neutral Assumption The Internet Internet adoption is still going High. Analysts and pundits strong, especially in emerging may underestimate the impact economies. In the next four of the Internet because the years, 640 million new users "buzz" is gone, despite the will come online and commerce hype over Web 2.0. It will be an   will double as will mobile users. enabler for both new markets IDC does not expect the current and new business models. crisis to affect Internet adoption. Market ecosystem Telepresence Telepresence technology is High. Bringing telepresence to outside the primarily being used to recreate other applications and settings conference room across-the-table-type meeting like telemedicine and high- experiences. touch customer interaction   endpoints will drive innovation and adoption of the technology far beyond conferencing. Public telepresence Telepresence facilities are Moderate. Driving utilization facilities currently being rolled out to and awareness of these public facilities like hotels and facilities as well as the business   conference centers. models to support them will be the key to success. Managed services Capex constraints will continue High. The MS business for for to be primary barriers to videoconferencing and videoconferencing videoconferencing and telepresence is still in its and telepresence telepresence adoption, but infancy and will take time to managed services that ease develop. However, given the those barriers will allow capex- nature of MS as a means to   constrained businesses to lower-cost barriers to adoption, invest in the technology. IDC expects this model to drive videoconferencing down market.©2010 IDC #221356 21
    • TABLE 1 Key Forecast Assumptions for the Worldwide Enterprise Videoconferencing and Telepresence Market, 2010–2014 Accelerator/ Inhibitor/ Certainty of Market Force IDC Assumption Impact Neutral Assumption Consumption Metcalfes law and Metcalfes law states that the High. Every major vendor is interoperability value of a telecommunications committed to interoperability network is proportional to the but political battles remain, and square of the number of IDC expects each layer of connected users of the system. interoperability to take three to The extent to which each level five years time at minimum. of interoperability can take The speed at which B2B   place and at what pace will videoconferencing happens will greatly impact the value of be a primary inflection point for videoconferencing and will Metcalfes law to take hold. therefore significantly impact adoption. Network upgrades The majority of enterprise Moderate. The importance of networking deals will be the network in an organization upgraded to existing network grows along with the number of   infrastructure. applications on the network. Legend:  very low,  low,  moderate,  high,  very high Source: IDC, 2010Table 2 shows worldwide videoconferencing revenue and endpoints, and Figure 1shows videoconferencing revenue, for 2009–2014. Table 3 shows worldwidetelepresence-only revenue, number of telepresence rooms/systems, room/systeminstall base, and number of screens, and Figure 2 shows telepresence-only revenue,for 2009–2014.22 #221356 ©2010 IDC
    • TABLE 2 Worldwide Enterprise Videoconferencing Revenue and Endpoints, 2009–2014 2009 2010 2011 2012 2013 2014 Videoconferencing revenue ($M) 1,892 2,742 3,877 5,308 6,947 8,755 Growth (%) 16.7 45.0 41.4 36.9 30.9 26.0 Endpoints (000) 218 300 405 533 686 845 Growth (%) 5.4 37.4 35.0 31.5 28.9 23.2 Note: See Table 1 for key forecast assumptions. Source: IDC, 2010FIGURE 1Worldwide Enterprise Videoconferencing Revenue, 2009–2014 10 9 8 7 6 ($B) 5 4 3 2 1 0 2009 2010 2011 2012 2013 2014Source: IDC, 2010©2010 IDC #221356 23
    • TABLE 3 Worldwide Enterprise Telepresence-Only Revenue, Number of Telepresence Rooms/Systems, Room/System Install Base, and Number of Screens, 2009–2014 2009 2010 2011 2012 2013 2014 Telepresence-only revenue ($M) 581 1,019 1,678 2,594 3,670 4,789 Growth (%) 84.0 75.4 64.7 54.6 41.5 30.5 Telepresence rooms/systems (000) 4 7 13 21 33 49 Growth (%) 112.0 92.8 77.2 67.6 56.3 48.4 Room/system install base (000) 5 12 25 46 79 127 Number of screens (000) 8 13 21 32 43 64 Note: See Table 1 for key forecast assumptions. Source: IDC, 2010FIGURE 2Worldwide Enterprise Telepresence-Only Revenue, 2009–2014 6 5 4 ($B) 3 2 1 0 2009 2010 2011 2012 2013 2014Source: IDC, 201024 #221356 ©2010 IDC
    • Market ContextIn videoconferencing and telepresence, the market is in the midst of a transition —from meeting over video as an option of last resort to an alternative thats preferredover traveling. While telepresence systems carry significant price tags for deploymentand operation for example, the cultural shift toward video as a good enough "acrossthe table" replacement for in-person meetings will accelerate swiftly through the nextdecade.The extent to which video calling/conferencing can become an impromptucommunication tool in the way instant messaging (IM) and voice are is unlikely in thenext five years. IDC expects the usage of videoconferencing to be primarily driven byscheduled meetings, corporate communications, and training activities.ESSENTIAL GUIDANCEIDC believes videoconferencing vendors must do more to maximize the number ofcapable endpoints. Integration with legacy systems as well as with commonly usedWeb conferencing systems and collaboration tools like instant messaging clientsdramatically increases the value of these systems and demonstrates to clients acommitment to enterprise unified communications and collaboration (UC&C), not justvideo. Vendors should also help their customers drive usage via usage behavioranalysis and best practices. Polycom for example has taken a leadership role inarticulating the value of integrating video into UC&C environments and is focused ondelivering visual functionality to multivendor UC&C environments.Enterprises should demand high- to low-end integrateable solutions that do not createapplication or technology silos. As communications infrastructure componentsconverge, the last thing any enterprise should consider is placing videoconferencingsystems and equipment on an island. Phased pilot deployments are alsorecommended to ensure that investments in videoconferencing are rolled outappropriately to the right locations and to the right business units. Furthermore, theadoption of videoconferencing is accelerating just as all things enterprisecommunications are quickly becoming IT assets. Therefore, enterprises mustconsider videoconferencing in the same context as larger IT initiatives includingvirtualization, unified communications, and how video will be used beyondconferencing.LEARN MORERelated Research Tandberg Acquisition Puts Ciscos Money Where Its Vision Lies (IDC #lcUS22028909, October 2009) Video in the Enterprise Proliferates: An Updated Snapshot of Current and Planned Adoption (IDC #219871, September 2009)©2010 IDC #221356 25
    •  Will 2009 Become the "Year of the Great Enterprise Video Experiment"? (IDC #lcUS21762909, March 2009)SynopsisThis IDC study discusses the worldwide enterprise videoconferencing andtelepresence market. Enterprise videoconferencing revenue is slated for double-digitgrowth through 2014, with an IDC-estimated CAGR of 36%. Despite previous hypecycles that have produced inflated forecasts of this market, IDC believes that onlyrecently have enterprise networks and videoconferencing technology (epitomized bytelepresence systems) been capable of delivering experiences worthy of initiating avideoconference over a phone call or hopping on a plane. In a suffering economy,videoconferencing gained much traction in 2009, and IDC expects significant growthof this market over the next five years."IDC predicted that 2009 would be the year of the great enterprise video experiment,and despite difficult economic conditions, the worldwide market for videoconferencingand telepresence grew 17% year over year and will eclipse the $1 billion mark in2010." — Jonathan Edwards, research analyst, IDCs Unified Communications andEnterprise Communications Infrastructure programsCopyright NoticeThis IDC research document was published as part of an IDC continuous intelligenceservice, providing written research, analyst interactions, telebriefings, andconferences. Visit www.idc.com to learn more about IDC subscription and consultingservices. To view a list of IDC offices worldwide, visit www.idc.com/offices. Pleasecontact the IDC Hotline at 800.343.4952, ext. 7988 (or +1.508.988.7988) orsales@idc.com for information on applying the price of this document toward thepurchase of an IDC service or for information on additional copies or Web rights.Copyright 2010 IDC. Reproduction is forbidden unless authorized. All rights reserved.26 #221356 ©2010 IDC