What's The Next Big Channel Opportunity In Video?

Enterprise video as a front-and-center channel opportunity? That's nothing new.

But with more solution providers getting into the video game than ever before -- and the role of video in unified communications expanding -- the definition of "video solution provider" is no longer just about endpoints and connectivity. It's systems, software, UC and content management, too, and all of those things will come to define the video channel of tomorrow. Recent research and moves by some of video's top vendors, including Cisco and Polycom, all support the claim.

In its most recent quarterly report on Enterprise Telepresence and Video Conferencing, Infonetics Research said annual revenue for enterprise video conferencing and telepresence systems grew 18 percent in 2010, and exited the year a $2.2 billion worldwide market.

That market is expected to more than double by 2015, according to Infonetics, and should top $5 billion by then, too. Thanks to its acquisition of Tandberg, Cisco enjoys the No. 1 spot in overall enterprise video conferencing revenue, laying claim to 50 percent in 2010. Polycom is the No. 2 vendor for revenue, but leads Cisco in units shipped, according to the researcher.

Either way, the growth is unmistakable.

"Communicating via video continues to be one of the top trends in telecom, as evidence by strong growth in the enterprise video market," noted Matthias Machowinski, Infonetics' directing analyst for enterprise networks and video, in the report. "Businesses worldwide are looking for richer means of communications with their employees, partners, and customers, and enterprise videoconferencing and telepresence solutions are a natural fit."

Multi-purpose room systems account for the majority of enterprise video conferencing equipment, Infonetics noted. But immersive telepresence systems are expected to have the highest growth rates.

"The biggest winners in the enterprise communication market will be those who offer solutions that are multi-modal, visual (e.g. video-based), and support the collaboration requirements of globally distributed organizations," Machowinski said.

Indeed, video solutions have never been more ubiquitous. And now that video is so accessible, customers are demanding that it also be flexible, said Manak Ahluwalia, chief technology officer at Alliant Technologies, a Morristown, N.J.-based solution provider and Cisco Gold partner.

"One thing we're seeing is that, traditionally, video started more as an executive or conference room experience," he said. "Telepresence provided an additional user experience at that level, where face-to-face [meeting] isn't necessary, and it's easy enough to use. Now the experience is built into laptops and iPads and they are using technologies like Skype and WebEx connect. We're seeing the marriage between the corporate and personal sides of the house with federation-type technologies."

What that means, Ahluwalia said, is that the lines between what constitutes "enterprise" business video and consumer video will continue to blur.

Cisco, for example, recently announced full interoperability between Umi, its consumer-centric telepresence system, and its broader TelePresence portfolio. That's a shrewd move, Ahluwalia notes, because it separates Cisco from the pack in terms of its ability to tie consumer and business video together versus its competitors'.

"I think the next evolution we've seen starting to pop-up is tying businesses to consumers. Cisco's recent announcement with Umi is part of that," he said. "They [consumers] can't bear the price points like businesses do but that's the next big wave of the user experience and customer service. Consumers now have low-cost, high-experience platforms that businesses will be able to tap into."

Next: The Video Market Leans Toward Software

No question the growth of video has meant bigger business opportunities for solution providers. It's also meant ongoing market consolidation, with a short wave of large, dynamic M&A events -- Cisco's $3.3 billion Tandberg acquisition, for example, or Logitech buying LifeSize Communications -- preceding a trend of smaller, niche-based acquisitions that market observers expect will continue.

The most recent of those was by Polycom, which snapped up video content management specialist Accordent Technologies for $50 million earlier this month. According to Polycom, Accordent's content management software will open up its addressable market opportunity -- and that of its channel partners -- by $500 million, and be especially compelling given both companies' tight integration with the Microsoft stack.

The move also means Polycom will alienate Qumu, the San Bruno, Calif-based from whom Polycom has OEM'ed video content management technology for some time. Polycom has pledged to support Qumu-OEM'ed products for five years.

It's a bold move by Polycom, for one, but the Accordent acquisition also underscores a shift by the key players in the video channel toward solutions that are software-centric and address video content management.

The move toward software is, in part, economic; Infonetics noted that software-based endpoints now out-ship hardware based endpoints by a factor of 10 to 1, thanks to their low cost and availability on PBXs. But it's also meant an influx of newer VARs and vendors into the video space, and a move by established video vendors to market themselves more broadly.

LifeSize, for example, is best known for its midmarket-price-friendly endpoints, but continues to expand its line card into infrastructure products, such as bridging and HD video streaming, and touts itself as an infrastructure company.

Skype, pegged as a consumer VoIP service, has looked to push further into the enterprise behind a new channel program and interoperability with business channel-savvy vendors like Avaya and Digium.

And scrappy upstart Vidyo, which has posted significant channel growth as it allies itself with VARs and service providers, lays claim to being several moves ahead of its competitors in the software arena, and has big-ticket relationships with HP and other vendors to show for it.

Even large vendors that aren't considered video and UC players are tapping into the infrastructure opportunities video holds. Juniper, for example, bought the intellectual property assets of Blackwave, focused on video storage and delivery technologies, as part of a recent M&A push.

Channel observers see the video opportunity as transformative for UC, and the content management aspect as one that will create drag for adjacent technology areas, such as storage. Therefore, "video" alone doesn't get the job done anymore, and those who ignore adjacent opportunities with video will miss the forest for the trees, solution providers say.

"Don't forget how much storage this drives," said Alliant's Ahluwalia. "There's a lot of data center strategy and cloud-based, elastic infrastructure-as-a-service."

Next: Content Management The New King?

The recent moves made by Cisco, Polycom, Juniper, LifeSize and a host of others have at least one thing in common: not only are they about video, but also about video content management. And further down the line from the video channel's big players is a generation of emerging vendors that offer a channel-friendly solution behind that video management question.

One is BurstPoint Networks, the Westborough, Mass.-based video streaming vendor that built its technology in part by acquiring the assets of defunct video networking company Starbak Communications. Tom Racca, BurstPoint's CEO, sees Infonetics' new video numbers as encouraging for the industry, but the growth of video endpoints is only the beginning of the conversation, he argued -- streaming and content management represent the next wave.

"Infonetics talks a lot about endpoints and not a lot about the streaming vendors, but what we're going to be talking about is the richness of my communications," Racca said. "You need a content management and distribution system. The channel partners really understand this."

Following its emergence from stealth mode in Sept. 2010, BurstPoint already boasts several of the video channel's top VARs and integrators as partners. Key to BurstPoint's appeal is its IP-based Video Communications Platform (VCP), which, using various products and services, can convert enterprise video content for seamless and flexible management and distribution.

That ability eliminates a problem. Different streaming technologies, endpoints and video codecs aren't always compatible, thus making life difficult for business users to manage and manipulate video content how they want. BurstPoint claims it can provide that flexibility regardless of which vendor's infrastructure a customer uses.

"Partners understand that if they're offering a videoconferencing solution or a telepresence solution, it's not just IP endpoints," Racca said. "These days, they're also including a streaming solution, an on-demand solution, and increasingly more often, a digital signage solution, too. [Video] has to get integrated into your whole communications strategy. There is a big, driving need and importance for this to be part of the solution, and we view it as great for the industry."

Consolidation among various types of video vendors will continue, Racca predicted. But the channel will also see more strategic alliances among vendors than straight-up acquisitions. That BurstPoint's platform isn't tied to one or even a small handful of vendors, for example, is a massive advantage for its solution providers, he said.

"Early on, you'll see tactical decisions being made, and later on, more strategic decisions," Racca said of video channel vendors. "We're trying to leapfrog beyond that. We talk to a number of these key industry players, and we see a much more strategic play where you can have a vendor-neutral or agnostic solution, and also a value-added solution. That's what we do when we walk in. I'm not threatened in a Polycom shop because I can increase the value of that system. Same with a Cisco, or a LifeSize, or an HP Halo. It's not just moving video around."