Where's The Puck Going In Enterprise Videoconferencing?

It used to be that video-focused solution providers could depend on A/V integration, video endpoint resale and infrastructure to keep their growth steady. Video, as a market, has always been long on promise but relatively short on enterprise business adoption, and the A/V integration specialists and endpoint resellers basically had the opportunity to themselves.

Those days are over. Swelling is the number of VARs, particularly those focused on unified communications, that can access and provide video solutions effectively, and that's not even counting the major telecoms and service providers that are using their breadth and influence to sell video and unified communications to their customers.

With a market that has continued to consolidate -- Cisco's 2009 acquisition of Tandberg being the standout example -- solution providers left and right are simply having to rethink how they're going to make money off of video solutions down the road.

"Selling hardware is no longer as profitable as it was, and yes, we expect it to get harder," said Ira Weinstein, senior analyst and partner at Wainhouse Research, which closely follows the video, A/V and unified communications segments. "Cisco came in and those guys live on high volume sales with low margins. This is having an impact in the industry. Margins on hardware are down, down, down, and some resellers are walking away from deals if it's only hardware. Hardware is a small profit."

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The growing consensus for how solution providers will preserve their lucrative video returns rests on managed services and advanced video integration. In other words, VARs that can manage infrastructure, drive videoconferencing usage and align video resources so that disparate video systems can "talk" to one another -- and realize that long-held ideal of making a video call as easy as voice call -- are in increasingly high demand.

"The thing that keeps coming up is interoperability," said Marielle Crisanti, product marketing manager for communications solutions at Matrix Video Communications, a Calgary-based solution provider. "The actual physical products we're selling are aren't as important as the services we can offer."

Video-focused vendors both startup and veteran are now attempting to home in on the interoperability and ease-of-use pain points for customers. One fast-rising upstart is Blue Jeans Network, a two-year-old company that emerged from stealth mode this past summer with commercial availability of its Any(Ware) videoconferencing service.

The hook for Blue Jeans Network is a platform that provides a cloud-based video "meeting room" from which users can host, schedule and manage their own videoconferences via a Web interface. What's crucial, however, is that the Blue Jeans service can bridge any number of different video and audio protocols for as many as 10 participants, meaning users of Cisco's high-end Telepresence can easily connect into meetings with users of LifeSize, Polycom or Vidyo endpoints. Or Skype or other low-end clients. Or the PSTN.

Stu Aaron, Blue Jeans Networks' chief commercial officer, says the value of Blue Jeans is in that interoperability. Video calls, Bluthe company maintains, will see adoption based on how easy they are for a business user to launch.

"Imagine if you had to do a traditional audioconference and you had to know what type of phone the other person had," Aaron told CRN earlier this year. "It's preposterous, but it's the way that video has always been."

NEXT: Blue Jeans' Appeal To Solution Providers

Blue Jeans has wasted no time making its pitch to video VARs, and its initial recruits include Hauppage, N.Y.-based IVCI, which that uses Blue Jeans' platform as part of its managed services offering, as well as Matrix, and most recently, Eatontown, N.J.-based Yorktel.

IVCI, well-known in the video conferencing channel and a top VAR for both Cisco and Polycom in the space, began working with Blue Jeans before its commercial launch. IVCI uses Blue Jeans' cloud to power its IVCI Desktop Experience, a managed services offering that connects various desktop video clients and is both application- and appliance-independent. It works hand in hand with IVCI's Managed Video Experience, the managed video services offering IVCI uses for everything from multipoint bridging and ISDN service to endpoint and network management for customers.

Blue Jeans is a game-changer, said Chris Bottger, IVCI's senior vice president, managed conferencing services.

"They're isn't anything I've seen that works, that ties the business in with what I would call the prosumer and the consumer sides, and if there is, it's not as robust as the cloud offering that Blue Jeans has here," Bottger said. "Just the fact that you can do a video call with Skype clients and really make this easy. A lot of the customers who have done the demo are blown away by it."

A service like Blue Jeans' makes irrelevant the challenge of connecting various video endpoints and pieces of video infrastructure, and also makes more convenient the idea of on-the-go video, particularly from smartphones and tablets.

"If you think about it, probably 80 percent of the video calls we run on a daily basis have an audioconferencing bridge attached to them. You usually have more people than you have video systems available," Bottger said. "But now we can offer those people the ability to do video, as well, at their convenience. People need to be able to use the tools they're comfortable with."

Bottger disagreed with the idea that the shift toward selling the video experience would mean less emphasis on hardware-based endpoint and infrastructure sales. There'll be less opportunity to sell those things individually he said, but packaging them with managed video services will make the whole video solution a moneymaker for a company like IVCI.

"One feeds the other," Bottger said. "It feeds the services on the back side and we're also not shortchanging the hardware business -- it's continuing to grow. We're fairly evenly balanced: one-third services, one-third integration and one-third technology, meaning them buying it or us building it for them."

Matrix's Currie said she first tried out Blue Jeans as a customer, by signing up for a free trial following a pick-up in discussion around the service on various LinkedIn groups and message boards. The service gives a VAR like Matrix a different type of video pitch for smaller customers, she said, or those in cash-strapped vertical markets like education that would prefer desktop collaboration or low-end, consumer-centric services like Skype.

"There's a huge opportunity here in the small to medium business market," Currie said. "There are hundreds of endpoints deployed there, but it's also people who don't necessarily have the need or just find it cost prohibitive to put in infrastructure products. A hardware solution for an MCU just isn't going to make sense for them."

NEXT: Video's Inflection Point

The video industry as a whole is at a crossroads -- one where there are many new ways to answer traditional questions around the cost and deployment of videoconferencing.

Researcher Baird & Co., in a recent study titled "Video Conferencing: Software-Based Solutions Driving an Inflection Point," cited scalable video solutions based on the H.264 protocol as making major gains against major video incumbents like Polycom and Cisco.

"While several years away, we expect software-intensive solutions to make video conferencing as pervasive as audio conferencing," wrote Baird senior analyst Jayson Noland, indicating that the traditional corporate video conferencing market is expected to hit $3.6 billion in 2011, up 22 percent year over year.

If the software-focused, SVC-based solutions are on the rise, that's good news particularly for companies like Vidyo, which in a few short years has entrenched itself in the channel and won raves for its Adaptive Video Layering (ADL) technology to optimize video quality in each participant's environment, using only data networks and the Internet for connectivity.

Vidyo, which copped a $22.5 million round of Series D funding this fall, recently added a new version of its Vidyo offering in which the media plane is virtualized in much the same way that VMware offers compute-plane virtualization for the data center.

That allows videoconferencing users to flexibly scale-up depending on real-time, not estimated, video conference usage, Vidyo argues, which further means a globally deployed video infrastructure that's as low as 3 percent of what comparable infrastructure and services from incumbent video vendors would cost.

The virtualization aspect, Vidyo notes, is also making Vidyo's channel story more appealing beyond the confines of the A/V and UC communities.

"It allows for not just the traditional A/V or videoconferencing resellers, but now it attracts the data resellers and service providers," said Jim Fairweather, vice president of worldwide channels at Vidyo, in a recent interview with CRN. "Everybody wants to do something with cloud, and it fits perfectly into that strategy with minimal investment."

It's a shift that all video vendors have to be mindful of, argued Baird's Noland.

"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," he wrote in the Baird report, citing Vidyo as a disruptor winning large competitive deals.

NEXT: Services Will Preserve Video VARs

If software is the technology concept that's redefining enterprise video, services are the moneymaker driving new conversations for VARs. According to Wainhouse's Weinstein, many VARs offer maintenance and installation services for videoconferencing infrastructure, but standing up a managed services practices -- meaning everything from endpoint management to network monitoring and video integration -- is a far more advanced and lucrative approach to the market.

"Managed services aren't well-defined, so that's a very gelatinous offering, which makes it not a bad thing, but a challenging thing," he said. "But those who can do it can make a lot of money and get a lot of business. What channel partners have to do is recognize that support services beyond maintenance and warranty require work. But investing in a help desk and gaining the networking expertise to help clients solve these deeper problems is the thing. It's investing in people, procedures, processes and systems."

Among the major video solution providers that are investing heavily in managed video services is Dimension Data, which recently added help desk assistance, point-to-point videoconferencing and video conference bridging to its deep portfolio of Visual Communications managed services.

Like other VARs, Dimension Data is focusing less on the individual technologies and more on customer experience, said Scott Cruikshank, director of converged communications at the South Africa-based integrator giant. According to Dimension Data's customer research, about two-third of U.S. companies choose to manage their video systems on premise, but nearly half of those companies don't have firm plans in place to drive adoption by employees.

"The ROI is predicated upon usage and adoption," Cruikshank told CRN. "The technology has caught up with what users are looking for, which is making sure the end user can easily get it up and running."

"We have finally started to figure out that the experience and usability matters as much as the technology," said Wainhouse's Weinstein. "A lot of resellers aren't figuring that out yet -- because a lot of them are installers. They're just not looking at it from a business angle. The wise ones are."

Weinstein, like other researchers and long-time observers of the video channel, see VARs that can't go beyond basic resell and maintenance as being boxed out by the service providers -- who see video as a way to supplement what they can offer customers.

"We expect the service providers to have a much more significant role here in the future," Weinstein said. "That's both an opportunity and a threat for channel partners. It's a threat because they have significant sales capabilities and they can drive integration with services they're selling. But it's an opportunity for [VARs] to differentiate, too, because those network service providers don't have feet on the street with video savvy. The channel partners do."

"It's a survival thing for a lot of them," added Jon Arnold, principal of analyst firm J. Arnold & Associates, regarding the service providers. "They have to protect their customer base in whatever way they can, and video can generate some revenues to offset all the traditional landline money they're using. Some will partner with the resellers but they have their own house to take care of."

All in all, the potential for video solutions isn't anywhere near tapped out, VARs say. Rather, it's just getting exciting.

"It's still in its infancy -- there's still so little penetration relatively speaking," said IVCI's Bottger. "I mean, look, Skype got 600 million people signed up because it's a cloud-based service and you sign up and away you go. We have to take advantage of that ease."