Video Conferencing Reaches an Inflection Point, and the Disruptor is Vidyo

Vidyo’s vision is to make natural communication universally available. Leading technologists doubted it could be accomplished. Competing vendors believed they could continue selling less for more.

Making natural communication universally available is about delivering standard definition per face, pictures that don’t break and latency below 250 ms for natural interaction. It also means affordable universal access to HD quality for anyone, over any network on any device. We undertook this goal 6 years ago through development of a very unique architecture which leverages the H.264 SVC compression standard. Vidyo has now been granted 10 patents (with 42 pending) for this architecture.

Today at Vidyo, we hear plenty of glowing reports from enterprises, government agencies, medical facilities and SMBs worldwide about the transformational power of Vidyo: how our affordable personal telepresence solutions help them communicate and collaborate better internally and with customers and constituents over desktops, mobile devices or telepresence room systems; how they are finding new ways to work smarter, capitalize on new business opportunities, become more competitive and to help communities recover from environmental disasters or improve the health and morale of those in need; how they are saving money by leveraging a software architecture on their existing smart phones, tablets, laptops, and desktops over the Internet, WiFi, 3G and 4G Networks.

It is gratifying when a leading Wall Street analyst firm – in this case Baird Equity Research – issues a report identifying Vidyo as the “disruptor” in a major inflection point in the global video conferencing market. Here’s the summary from the Baird report and its lead author, senior research analyst Jayson Noland (who you might have watched on CNBC’s Squawk Box program):

“We believe the video conferencing market is approaching an inflection point of more widespread commercial adoption driven by much lower-cost, high-quality enterprise solutions based in software. We believe this architectural shift will prove disruptive for hardware-based providers Cisco and Polycom, who currently enjoy dominant market share.”

Noland and other Baird analysts surveyed the video conferencing market, talking to vendors, resellers, and customers of video conferencing products around the world. They uncovered and present a number of interesting points about the market and its leading players, and they aren’t afraid to name names.

They make a strong case for the move toward the video compression technology standard that Vidyo’s products are based on. You can read the technical details for yourself, but here’s the main point from the report:

“…we believe H.264 SVC-based solutions (software-centric advanced compression technology) and the ‘consumerization’ of IT will allow for increased adoption rates and an expanded addressable market. While several years away, we expect software-intensive solutions to make video conferencing as pervasive as audio conferencing… Currently, Vidyo is the only vendor of size with H.264 SVC product that is generally available.”

Traditionally, video conferencing has been viewed as a big undertaking requiring dedicated rooms, equipment, and network resources. There are enormous costs involved in this traditional approach, as summed up in the Baird report:

“Industry sources estimate that [a] typical, traditional telepresence solution costs $1 million when considering the network and ongoing maintenance costs… Therefore, given the large up-front capex investment in video conferencing equipment and network upgrades, and the relatively intangible ROI, we [...] view traditional video conferencing solutions as hard to justify for many companies.”

In contrast:

“Vidyo has developed an architecture that allows the company to provide enterprise-grade mobility-focused video conferencing solutions at price points significantly below traditional vendors’ prices… With Vidyo’s recently launched VidyoPanorama, the company touts that it can provide a better telepresence experience for 10% of the cost of a traditional telepresence solution, which Vidyo estimates to be approximately $1 million (when considering the hardware, required networking, and ongoing maintenance costs)…”

“Vidyo prices its solutions significantly below Cisco and Polycom while providing the same or better quality video experience.” – Baird Equity Research Report

“While Vidyo seems to thrive in mobile environments, it also can excel in hybrid desktop/room projects, or even simply room environments. In fact, we understand that in a recent large competitive deal, Cisco and Polycom were forced to drop their prices by as much as 3x-4x to compete with Vidyo’s quote, but Vidyo still won based on a more optimal and scalable architecture… Vidyo prices its solutions significantly below Cisco and Polycom while providing the same or better quality video experience.“

Video conferencing makes intuitive sense to businesses, government agencies, and other organizations, but until recently the whole concept has been dragged down by the expense, inflexibility, and difficulty of setting up and conducting hardware-based video conferencing sessions. Vidyo is a “disruptor,” to use Baird’s term, because our software-based approach and underlying technology liberate people from the constraints of the old, outmoded approaches. A disruptive technology or disruptive innovation is “an innovation that helps create a new market and value network, and eventually goes on to disrupt an existing market and value network.” Initially Vidyo’s technology was considered to impact only the ‘new market’ – the desktop – but it is now clear that is impacts every aspect and form factor of video communication. The biggest impact which ties it all together is connecting mobile-desktop-room-telepresence across the same infrastructure without transcoding – which gives Vidyo the differentiated advantage of delivering natural video communications, universally and affordably.

The Baird report puts its finger on why Vidyo, and no current vendors dominating the market, represents the future of video conferencing:

“The consumerization of IT, combined with the rise of mobile and remote workers, has created an inflection point for the enterprise video conferencing market, as there seems to be more need and desire for videoconferencing in the dynamic workplace… We view Vidyo’s ability to virtualize and scale as a significant competitive advantage, one in which we do not believe the traditional, MCU-based [i.e., hardware-based] vendors (Cisco, Polycom, LifeSize, RADVISION, Huawei) will be able to replicate given their hardware-centric architectures.”

According to the Baird Equity Group report the future of video conferencing – over the Internet, from any device, in real time and with real clarity – is available now, with Vidyo.

The Wikipedia entry on disruptive innovation also tells us how this all ends:

“…. Meanwhile, upstart firms inhabit different value networks, at least until the day that their disruptive innovation is able to invade the older value network. At that time, the established firm in that network can at best only fend off the market share attack with a me-too entry, for which survival (not thriving) is the only reward.”

If you followed the latest announcements from the incumbents on what their ‘upcoming’ products will do, you may notice it is the same as what Vidyo has been doing for a while. You can see where we are in the cycle. The market is in transition and Vidyo is leading it.

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Vidyo co-founder and CEO Ofer Shapiro

Ofer co-founded Vidyo in 2005 and pioneered Personal Telepresence, enabling a new generation of software-based natural, multi-point HD video conferences on desktop computers, room systems, and mobile devices. Prior to Vidyo, Ofer spent eight years at RADVISION where he was responsible for the development of the first IP video conferencing bridge and gatekeeper technology and the first commercially successful video conferencing architecture. He also served as senior vice president of business development responsible for strategic sales and relationships. Ofer was a contributor and one of the editors of the H.323 standard. Ofer has over fifteen years of experience in bringing disruptive technologies to market. He holds a Master’s Degree in Applied Physics.

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