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Sizing Up Blue Jeans: Why Video VARs Are Flocking To This Start-Up

By Chad Berndtson
April 25, 2012    11:59 AM ET

Page 2 of 2

After roaring out of the gate with $23.5 million in venture funding, Blue Jeans continued to make moves quickly. In December, Blue Jeans brought on veteran executives from Cisco and SuccessFactors to be its engineering and marketing chiefs. In January, the company added a referral partner program for solution providers that introduce business to Blue Jeans but don't resell the platform.

Asked to cite other key moves Blue Jeans has made in the past few months to keep its momentum steady, Aaron named two. The first was the attention Blue Jeans received for connecting Microsoft Lync UC desktops to Skype calls and to other video systems, shortly after Microsoft completed its $8.5 billion acquisition of Skype in October.

Lync exposure is valuable, Aaron said, because it signifies the trend of video moving from conference rooms to desktop and mobile devices, and unlocks business-to-consumer opportunities -- especially for enterprises that want to connect with customers and home users.

"We're the only people in the world right now that have a solution ready to go that easily connects Lync to Skype," he said. "It's a tremendous value-add for us and for our channels."

The other was the announcement Blue Jeans made in late March around its so-called MCU Killer pricing plans -- basically, allowing customers to license virtual ports from Blue Jeans via the cloud that replace the need for the purchase, maintenance and management of traditional MCU, or multipoint control unit, infrastructure.

It's no small customer base Blue Jeans is challenging; Wainhouse Research estimates that videoconferencing infrastructure is about a $700 million market, overwhelmingly controlled by Cisco and Polycom. A fall 2011 study by researcher Baird & Co. cited scalable, software-based videoconferencing solutions as beginning to disrupt traditional MCU-based market share over the next few years.

"Given its large install base, we expect MCU-based solutions to be around for years, but see Cisco, Polycom and others as being ultimately forced to embrace software-intensive solutions," wrote Jayson Noland, Baird senior analyst, at the time.

Blue Jeans claims its licensable virtual ports are elastic -- customers buy what they need only -- and come in at about one-quarter of the price of typical MCUs. Blue Jeans prices the service at a rate of $299 per port, per month.

"That cost keeps a lot of customers out of the multiparty video game," Aaron said. "It's just so prohibitive. A cloud bridge means you save anywhere from 60 [percent] to 90 percent over the cost of a hardware MCU over a three- to five-year life. You take that money you would have spent and buy more endpoints with it. That's a blessing to us and to channel partners."



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