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Zen and the Future of Videoconferencing Hardware
May 14, 2012 | David S. Maldow, Esq.
I am not ready to put myself out there and say that the emperor has no clothes and the market leaders are selling billions of dollars of overpriced, brand-name telepresence shims. The analogy is overstated; there are still a number of significant differentiators between the expensive brand name video systems and build-it-yourself budget solutions. However, the shim effect is certainly a part of what is currently happening in the field. My clients are still requesting the familiar brand name room systems in the environments I design. When I recommend considering PC based, build-it-yourself, room systems, my clients look as uncomfortable as a BMW owner looking at a beer can shim.
However, we can't deny that something big is happening in the industry. This article was inspired by a discussion currently taking place in a private forum of industry experts on LinkedIn. The fact that many of the top analysts in the industry have chosen to participate extensively on that particular thread, in itself, is pretty strong evidence of something. When over a century of combined videoconferencing experience comes together to passionately debate a topic, I start paying attention. LinkedIn aside, the discussion of the death of hardware just keeps coming up. In the few weeks we have seen major articles on both sides of the issue (Forbes , NoJitter). I have been unable to completely avoid it in my recent articles, because it is there, it is part of the story now.
Look at the recent numbers. Hardware sales are below expectations. Some are even reporting revenue declines for certain VC product segments. Polycom took a stock hit because of that. Polycom is also selling a $100 million division to fund its share buyback program. That could be interpreted in a number of ways, but it's hard not to see it as a piece of this puzzle. Cisco's recent move to make Jabber free to Cisco customers is another piece of the puzzle. However, yet another piece of the puzzle is the hundreds of millions of dollars of revenue currently being generated by the sale of VC hardware.
So who is right? Was Fuzebox's eulogy for Polycom and Cisco timely and accurate? Was it just self promotional marketing, not worthy of Forbes? Is hardware here to stay? If not, how long will it continue to be a revenue fire hose? If it does die, will it be a slow death, or will they just be completely gone in a couple of years, like the old Walkman a few years after the iPod dropped?
The Immediate Future of VC Hardware (According to CEOs of Software VC Vendors)
It is impossible to answer those questions definitively at this time. This is due to more than the usual uncertainty of predicting any future event; the video field is particularly susceptible to technology disruption. There are development teams throughout the world working on videoconferencing technology. Any one of them could be coming up with the telepresence equivalent of Facebook. Anything can happen in the next few years in video.
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That being said, we can look at what is happening right now and list some obvious possibilities, if not predictions, for the next few years. One thing to keep in mind, this is a growing industry. That increases the possibilities. We shouldn't be treating this as though we have a static industry, and the growth of software can only be at the expense of hardware. I have read so many articles forecasting 100-fold growth in VC usage in the next few years that they are a blur. Even if the software upstarts capture a staggering 90% of that growth, that still leaves room for massive growth in sales of traditional room system. In other words, rather than asking is hardware dead or alive, we should be asking where we will fall on the following spectrum.
- Hardware continues to dominate enterprise video and takes the lion's share of VC growth.
- Hardware and software share in the expected VC growth.
- Software dominates, but hardware is still able to keep growing and remain a presence in the boardroom.
- Hardware has 2-4 years left but the old school vendors will buy or out-market the upstarts and dominate the new software VC world. Jabber, M100, Scopia, ClearSea, etc. will own the desktop.
- Hardware has 2-4 years left, after which upstarts and old school both do very well sharing in massive VC software market.
- Hardware has 2-4 years left and then the old school vendors are in trouble. It is too late to catch up with all the distruptive technology out there.
- Hardware is dead today. Don't bother restocking the shelves after these last few units sell.
Option 1 is complete success for hardware, while Option 7 is complete doom. I have only listed a sampling of the possibilities between those two extremes, but you get the idea. In today's business atmosphere we assume someone will crush all competition and dominate. Either the hardware guys or the software guys will win and sit on a throne of skulls. Perhaps this is true, but it is really a lot better for the consumer if multiple vendors are thriving and innovating, so my hope is for one of the win-win scenarios (like Option 5 above).
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In the short term, enterprises will continue to purchase hardware for the assurance of using a tested solution, the support that comes with a name brand, and as a result of channel pressure. As software solutions continue to develop and improve, the shim factor may help to delay the inevitable.
Moore's law and the appeal of multi-purpose devices are a major assault against dedicated appliances in general. If my laptop or iPad can do it (regardless of what "it" is) why should I buy another box? The iPad or laptop of 2015 should be powerful enough, and the software by that time should be advanced enough, to turn a monitor/camera combo into a room system every bit as capable as a dedicated appliance for a fraction of the price. Some would argue we are already there, but regardless, when the market is convinced that cheap software is up to par, expensive hardware will take a big hit. The real question is whether that laptop or iPad will be running Jabber (M100, Scopia, ClearSea, etc) and supported by one of the big boys or their partners (Cisco, Polycom, Avaya, LifeSize, Huawei, AVI-SPL, Glowpoint, AT&T, Masergy, etc.), or will one or more of the smaller players (Vidyo, DVE, EMC, Teliris, Sciencelogic, etc.) find the magic bullet to turn this industry on its head.
The times, they are a-changing, but that doesn't mean any particular company is necessarily going to go out of business. The hardware folks better be smart and quick as they adapt to the changing climate if they want to stay on top, but it isn't too late for them to win this fight. From a consumer advocate point of view, I hope this battle stays hot.
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