video conferencing telepresence market forecast

8/6/2019 Video Conferencing Telepresence Market Forecast

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Filing Information: March 2010, IDC #221356, Volume: 1

Enterprise Communications Infrastructure: Market Analysis

M A R K E T A N A L Y S I S

W o r l d w i d e E n t e r p r i s e V i d e o c o n f e r e n c i n g a n d T e l e p r e s e n c e2 0 1 0 2 0 1 4 F o r e c a s t

Jonathan Edwards

I D C O P I N I O N

Enterprise videoconferencing has been through a number of hype cycles over the

past few decades and has failed to become culturally integrated into the fabric of

business processes and communications. However, IDC believes that only recently

have the technologies delivered to end users' experiences worthy of initiating a

videoconference over a phone call or conducting business across locations that in the

past required travel. IDC believes the following three factors will shape the enterprise

videoconferencing market over the next five years:

Technology capability and market awareness. The ways in which we interact

with video (be it YouTube content accessed on our iPhones or a Skype video call

with a grandparent) are more abundant and advanced than ever. This trend is

only accelerating as partnerships like Skype and HDTV manufacturer Panasonic

form. From an enterprise standpoint, quality, productivity, and level of

engagement per interaction over video are primary keys to usage and adoption,

and only within the past three years has the technology become capable

(epitomized by high-end telepresence systems) to deliver here. Furthermore,

market awareness has never been greater as vendors like TANDBERG,

Polycom, LifeSize, and Cisco have successfully catalyzed awareness and

demonstrated the value of videoconferencing to their growing customer bases

and to their strategic and channel partners.

Bandwidth availability. The most significant impediment to videoconferencing

adoption is bandwidth. Interviews with a major IT systems integrator/consultancy

indicated that on average every $1 spent on videoconferencing requires roughly

$3 on network upgrades. In comparison with IP telephony, which requires on

average $0.80 for network upgrade on every $1 spent, the overall costs of

investing in videoconferencing are high. Cisco alone has upgraded its network

four times in roughly three years since rolling out companywide access to

telepresence and other video endpoints.

Interoperability. While vendors like Polycom and TANDBERG have

demonstrated videoconferencing and telepresence interoperability from an

equipment standpoint for some time, interoperability between all forms of

conferencing systems (Web conferencing, audioconferencing, etc.) will greatly

impact the way enterprises evaluate the ROI of the application. There aremultiple levels of interoperability that will take time to address, but all will

significantly impact adoption and help accelerate the tenets of Metcalfe's law.

These levels include system type to system type (e.g., Web based to

telepresence), legacy to next generation, vendor to vendor, carrier network to

carrier network, and business to business (B2B).

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#221356 2010 IDC

T A B L E O F C O N T E N T S

P

In This Study 1

Methodology............................................................................................................................................. 1

Situation Overview 1

Industry Consolidation .............................................................................................................................. 2

Adoption Trends .......................................................................................................................................2

Future Outlook 3

Forecast and Assumptions .......................................................................................................................4

Market Context .........................................................................................................................................25

Essential Guidance 25

Learn More 25

Related Research.....................................................................................................................................25


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2010 IDC #221356

L I S T O F T A B L E S

P

1 Key Forecast Assumptions for the Worldwide Enterprise Videoconferencing andTelepresence Market, 20102014................................................................................................ 5

2 Worldwide Enterprise Videoconferencing Revenue and Endpoints, 20092014.......................... 23

3 Worldwide Enterprise Telepresence-Only Revenue, Number of TelepresenceRooms/Systems, Room/System Install Base, and Number of Screens, 20092014................... . 24


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#221356 2010 IDC

L I S T O F F I G U R E S

P

1 Worldwide Enterprise Videoconferencing Revenue, 20092014 .................................................232 Worldwide Enterprise Telepresence-Only Revenue, 20092014................................................. 24


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2010 IDC #221356 1

I N T H I S S T U D Y

M e t h o d o l o g y

The quantitative and qualitative information contained in this study results from IDC'songoing videoconferencing research. Both primary and secondary sources of

information were used in the development of this study. Primary sources include

interviews with videoconferencing vendors and IDC survey data. Secondary sources

include vendors' publicly registered financial statements, news releases, vendor-

provided marketing material, and consultation with other IDC offices.

All revenue figures are IDC estimates that refer only to videoconferencing equipment

and exclude services (installation, professional, and managed). Considered

videoconferencing equipment includes multipoint control units (MCUs), video codecs,

gateways, cameras, screens, and associated audio components. These figures do

not include PC/Web-based systems, Webcams, or videophones. The telepresence

revenue, room/systems, and screens figures refer only to the highly immersivevideoconferencing systems that deliver near-in-person experiences via HD video,

wideband audio, echo cancellation, zero latency, and spatial relativity. These systems

do not need to be installed as preconfigured room-based units but instead are tracked

and forecast based on the experience the infrastructure delivers not the setting or the

application. IDC expects the number of applications telepresence technology is

brought to in the later years of this forecast will be the primary revenue drivers.

These estimates were modeled based on primary and secondary research. Sources

include but are not limited to vendor statements, vendor financials, briefings, press

releases, interviews, conferences, and internal forecast models. Shipment information

may have been provided by the vendor, when available.

Note: All numbers in this document may not be exact due to rounding.

S I T U A T I O N O V E R V I E W

IDC predicted that 2009 would be the year of the great enterprise video experiment,

and given the macroeconomic challenges that enterprises faced this year, the market

was able to maintain 16.7% year-over-year growth. IDC considers this prediction to

be validated by the success of Cisco (which claims 100% year-over-year growth in

telepresence revenue), Polycom, and TANDBERG among others in 2009 as well as

the increasing levels of interest in videoconferencing among enterprises validated by

end-user interviews, surveys, and conversations with IT communications

implementation consultants. In 2009, videoconferencing received a great amount of

traction in the media and in marketing materials as a means to cut travel costs and

scale human capital. Cisco has also pushed its telepresence line into the mainstream

media, with equipment appearances on NBC's 30 Rock as well as in television

commercials starring actress Ellen Page.


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I n d u s t r y C o n s o l i d a t i o n

2009 brought about vendor consolidation, most notably Cisco's October acquisition of

TANDBERG (finalized in December). This acquisition not only solidified Cisco's

commitment to enterprise video beyond telepresence (particularly but not limited to

conferencing) but also is indicative of where the market needs to go, namely theblurring of lines between low- and high-end videoconferencing system silos and the

interoperability and interconnectivity between them. Couple TANDBERG with Cisco's

WebEx assets, and the networking giant is now capable of offering end-to-end

video/Web conferencing solutions.

Another example is PC peripheral provider Logitech (a company with a market cap of

nearly $3 billion) acquiring videoconferencing provider LifeSize on December 11,

2009, for $405 million. LifeSize was founded in 2003, currently serves over 9,000

customers in 80 countries, and is known for its affordable telepresence offerings.

Logitech on the other hand has been a market leader in Webcams for years and in

June 2009 announced its Web-based video call service Vid. While Vid is primarily

targeted at consumers and as a complement to Logitech's Webcam business, Skype,Google, and ooVoo's Web-based videoconferencing services are used frequently for

business use. Note: While Web-based videoconferencing services are not included in

this IDC forecast, these services are aiding the adoption and visibi l i ty of

videoconferencing overall and are therefore noteworthy. In contrast with Cisco, which

acquired TANDBERG to move downstream from telepresence, Logitech will

conversely attempt to move upward from PC-based video calling/conferencing.

Polycom now remains the last major independent market player with a significant

videoconferencing install base and an extensive product portfolio. IDC does not

expect Polycom to be acquired in the near future as it can play the Cisco-alternative

card now that TANDBERG is a Cisco asset and has formed a number of strategic

partnerships to support its efforts against Cisco (partnerships include those with IBM,Siemens, Juniper, and BroadSoft). Moreover, some of Cisco's primary competitors in

IT/networking (HP) and IP communications (Avaya) have been busy themselves (in

2009, HP acquired 3Com and Avaya acquired Nortel). HP appears to be the most

likely suitor though, given the level of disruption in enterprise networking, the

convergence of enterprise communications and collaboration applications, and the

lucrative opportunities in enterprise video at stake; companies such as Dell and IBM

have likely entertained the thought.

A d o p t i o n T r e n d s

Given the trending of an increasingly distributed workforce within a globally

interdependent economy, the business case for videoconferencing has never been

clearer. The need to reduce travel costs has been a primary driver of adoption in

2009, validating November 2008 (posteconomic crash) survey data from IDC's

eVideo QuickPoll, which indicated that the number 1 reason for adopting

videoconferencing was cost savings/avoidance followed by improving team

collaboration, improving customer service, and improving employee work/life balance

(sequentially). Because of the bandwidth requirements for videoconferencing, larger

companies with higher network capacities have been the heaviest adopters of the


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2010 IDC #221356 3

application, especially the high-end telepresence systems. Larger companies tend to

have a greater number of global locations as well, which makes videoconferencing a

valuable way to connect distributed employees. Financial services, government, and

healthcare have been the most prominent adopting verticals, though the education

sector is showing dramatic increases in interest early in 2010.

Beyond cutting travel costs, the soft ROI of scaling human capital across multiple

locations in a highly engaging manner is cited as a primary benefit of

videoconferencing. 23% of respondents to a recent IDC survey indicated that the top

reason they find videoconferencing valuable is it increases the effectiveness of

meetings.

Though IDC has seen double-digit growth in videoconferencing revenue over the past

three years, significant adoption barriers remain. Bandwidth remains a primary barrier

to mass-market adoption, though Polycom for example recently announced its

support for H.264 "High Profile" to deliver HD video starting at just 512Kbps. IDC

expects coding and compression technology efficiencies to improve significantly

within the forecast period.

Beyond bandwidth, cultural adoption has proven to be one of the most difficult

obstacles. Unlike Web and audioconferencing, videoconferencing has traditionally

been supported by A/V staffs within enterprises and has not integrated with

calendaring and scheduling systems for example, making it difficult for end users to

reserve or even consider these resources in many cases. Multiple systems

integrators and videoconferencing vendors have indicated to IDC that the ability to

schedule a videoconference within Microsoft Outlook/Lotus Notes and/or reserve

equipment within these applications is one of the initial applications if not the initial

application integration customers are requesting.

Another cultural barrier is getting employees to consider leveraging

videoconferencing resources instead of traveling if and when possible. This aspect of

cultural adoption takes time but will accelerate as the number of videoconferencing

systems grows (including public sites). This issue should be handled at the C-level,

and providing incentives is highly recommended. Other barriers include the inability to

videoconference B2B currently in the ways businesses can via audio bridges and

dedicated conference lines.

F U T U R E O U T L O O K

The future is bright for videoconferencing vendors, but a number of recently

established business models and go-to-market strategies that have yet to be proven

may or may not accelerate the pace of adoption.

For example, Tata Communications launched its telepresence managed service and

public room offering in 2008. Tata Communications' goal is to remove the high capex

of telepresence by offering onsite but Tata Communicationsmanaged equipment

and telepresence services as well as public/shared telepresence facilities at hotels

and other locations. Tata will also host a telepresence directory listing businesses

capable of meeting over telepresence (on- or offsite). While Tata Communications'

telepresence business is in its infancy with just 10 public rooms to date and only a


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handful of managed service clients, the prospect of lowering cost barriers to adoption,

establishing a global network of connected telepresence systems, and of fering

telepresence as a managed service with no equipment purchases required is

promising. Even more encouraging is Tata Communications' telepresence advisory

services it couples with its managed services. Tata Communications, with its partners

CWT and AmEx, has demonstrated the ability to help customers drive user adoption

and create bottom-line cost savings by layering travel schedules, most commonly

collaborating/conferencing city pairings and other data to come up with the most

strategic ways in which telepresence can be leveraged within a business.

Cisco has also established a hosted telepresence directory that according to Tata

Communications will be cross-listed with the telepresence directory Tata

Communications itself hosts. Cisco also has established a SIP-like standard it is

calling TIP for enabling telepresence-to-telepresence interoperability at the necessary

QoS levels. Cisco demonst rated WebEx/telepresence interoperability at its

Collaboration Summit as well, and the extent to which these two solutions can

accelerate the adoption of one another remains unknown. Integration between audio,

Web, and videoconferencing as well as with application sharing and whiteboarding

functionality is already happening, but it will take three to five years before these are

fully integrated turnkey solutions.

Another area of this market that has yet to be proven is the extent to which

videoconferencing equipment will be leveraged for applications like digital signage,

rich media content streaming, and application sharing. Yet another is how integral

video will become from a content and knowledge sharing perspective in the way

YouTube has on the public Web. Depending on the size and speed of demand for

video applications beyond conferencing, the ways in which videoconferencing

equipment is deployed and leveraged change the way enterprises will evaluate the

ROI of these offerings. IDC does expect the number of applications

video/telepresence is brought to over the next five years to dramatically increase

beyond the conference room setting. In the outer years of this forecast, IDC

anticipates HD video and telepresence technology to be present in, for example, retail

banks, fast-food drive-thrus, and concierge services of all kinds.

At CES 2010, both Polycom (with partner IBM) and Cisco demonstrated home

telepresence solutions. Cisco will enter U.S. home telepresence field trials this spring,

with Verizon as an early partner, and field trials in France will start later in 2010, with

France Telecom as Cisco's early partner. If home-videoconferencing/telepresence

systems become prevalently accessible (e.g., Skype on Panasonic televisions or

Cisco/Polycomtype offerings) , the ways in which consumers can interact with

businesses, family, and friends from the home changes as well.

F o r e c a s t a n d A s s u m p t i o n s

Table 1 provides the key forecast assumptions for the worldwide enterprise

videoconferencing and telepresence market.


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2010 IDC #221356 5

T A B L E 1

K e y F o r e c a s t A s s u m p t i o n s f o r t h e W o r l d w i d e E n t e r p r i s e V i d e o c o n f e r e n c i n g a n d

T e l e p r e s e n c e M a r k e t , 2 0 1 0 2 0 1 4

Market Force IDC Assumption Impact

Accelerator/

Inhibitor/

Neutral

Certainty of

Assumption

Macroeconomics

Economy Worldwide economic growth

will be negative by 23% in

2009, although forecasting

groups expect 2010 to be

markedly better. Through the

year, forecasts for 2010 have

held up, partly because 2009

has drifted down. IDC will

continue to take a milddownside view of GDP

forecasts from Consensus

Economics. Assumptions for

2010: United States 2.0%,

Western Europe 0.2%, and

Japan 1%. This means that

worldwide, the global economy

will drop 2.5% in 2009 and

grow 2.0% in 2010.

High. A down economy affects

business and consumer

confidence, availability of credit

and private investment, and

internal funding. A rising

economy does the opposite.

Fiscal stimulus

packages

The economic stimulus plans

enacted globally seem to have

stemmed the panic and

economic freefall of 4Q08 and1Q09, but they will have little

impact on market demand or

employment until well into

2010. More of the effects will be

seen in 2010. Our assumption

at this point is that these plans

will bulwark the economy

against getting worse than we

expect, so we are not changing

our basic assumption about

GDP growth.

High. The stimulus packages

follow in the footsteps of the

banking system bailouts by

stemming economic panic.They will not immediately jump-

start the global economy after

such a shock.

Policy IDC expects to see new

regulation for financial marketsput in place in 2010.

High. New regulations could

drive new demand for ITspending; a downside

possibility is that this spending

crowds out other IT spending,

but that wasn't the case in the

post-Sarbanes-Oxley years.


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T A B L E 1




Accelerator/

Inhibitor/

Neutral

Certainty of

Assumption

Profits Consensus Economics'

estimates of U.S. profit growth

have trended up for 2010

(11.9%) since September 2009.

High. Compliance spending

seems to be funding itself

through better-run business

operations and, in fact, is

spurring other IT initiatives.

U.S. fiscal policy,

deficits, and trade

imbalance

These areas affect the long-

term economic outlook for the

world; however, their short-term

impact is muted. IDC assumes

these areas will not affect short-term ICT forecasts.

High. A crash of the dollar or

the use of economic power to

drive U.S. political decisions

could affect the world economy.

Inflation Inflation driven by higher oil and

commodity prices has been

taken off the table. At the same

time, worries about deflation

have abated.

High. Low inflation keeps

interest rates low and leads to

more capital spending,

including spending on ICT.

Exchange rates The financial crisis has caused

gyrations in dollar exchange

rates, which went up in the first

half of 2009 and are now

coming back down. For the

purposes of IT forecasts, IDCassumes no major impact on

overall demand. There will be a

difference in demand growth,

however, and "as reported"

vendor revenue.

High. A stable, or even steadily

falling, dollar makes it easier for

vendors to manage supply lines

and stabilizes the prices of

imports and exports.

Wild cards We are assuming that there will

be wild-card events, but we are

predicting no single one. As

one scientist has put it, there is

a high probability of a low-

probability event taking place.

Moderate. Uncertainty and

political malaise could lead to a

fall in business and consumer

confidence, which could affect

ICT spending.


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2010 IDC #221356 7

T A B L E 1




Accelerator/

Inhibitor/

Neutral

Certainty of

Assumption

Global

megatrends

Cloud services Cloud services is IDC's name

for what we believe will become

a new paradigm of computing

over the next several decades

the logical evolution of what

we have called "dynamic IT" for

years. It entails shared access

to virtualized resources overthe Internet. A detailed

definition of and research about

cloud services can be found at

idc.com. IDC predicts that cloud

services (public cloud) will

increase 35% in 2010 to nearly

$25 billion, or about 1.6% of IT

spending. That percentage

should increase to 2.6% by

2013.

High. The key advantage to

cloud services should be the

ability of IT organizations to

shift IT resources from

maintenance to new initiatives.

This, in turn, could lead to new

business revenue and

competitiveness.

Convergence Convergence is a complex

phenomenon working at many

levels convergence of thetelephone network and the

Internet; communications and

IT technologies; consumer and

enterprise technologies; and

even storage, routing, and

processing in the datacenter.

Of these, perhaps the most

overarching is the convergence

of voice, video, and data

communications. IDC assumes

that this convergence is a

permanent phenomenon and

that it will pick up pace as the

decade wears on. Onemeasure is that IDC expects

1.9 billion users on the Internet

and 3 billion users of the phone

network by 2012. The overlap

will be significant.

High. Convergence will drive

new competitive dynamics,

offer new applications andfunctions to customers, and

strain the legal and regulatory

systems. It will also drive

increased ICT spending.


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T A B L E 1




Accelerator/

Inhibitor/

Neutral

Certainty of

Assumption

Software industry

transformation

The software industry is going

through a major transformation,

from basic architecture

(service-oriented architecture

[SOA]) and the way software is

written (composite applications)

to the way software is delivered

(software as a service) and

even funded (advertising

based). IDC assumes that this

transformation will take adecade but that it will, when

done, allow for much faster and

more dynamic delivery of

software functionality.

High. The new software

creation and delivery models

should allow for a quantum

increase in the ability to deliver

and integrate new software

functionality to ICT systems.

This should increase overall

spending even as it lowers

costs.

Service industry

transformation

This is a long, slow process

involving the rise of offshore IT

services, the increased

integration of IT services inside

business services, and the

advent of new service delivery

models. Most firms have

developed a multishoring

capability and blended pricingmodel and are now working on

ways to standardize on

technologies and

methodologies, deliver services

online or in new form factors,

invest in datacenters, and

expand into business services.

Despite the race to automate

service creation and delivery,

there is a looming talent

shortage. The economic crisis

will be good for outsourcing

markets but bad for project-

based services.

High. These trends portend

new competitive dynamics in

the industry software and

online services competing with

traditional IT services as well

as new thresholds for delivery.

Online delivery models and

operational standardization,

from new technologies toremote infrastructure services,

will allow faster and more

efficient translation of service

labor to client deliverable.


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2010 IDC #221356 9

T A B L E 1




Accelerator/

Inhibitor/

Neutral

Certainty of

Assumption

The changing IT

domain

The IT domain that was once

the care and feeding of

mainframes has evolved over

the years to include the

management of enterprise

applications, deployment of

software and applications to the

workforce, and desktop

automation. Now it is evolving

again to take on responsibility

for the phones, buildingautomation, sensors, and RFID,

and sometimes even physical

security as proprietary systems

migrate to TCP/IP networks.

Other new applications, such

as Web 2.0 and real-time

business analytics, are driving

IT-based applications to the

point of customer or employee

contact and becoming mission

critical along the way. This

could increase the need for IT

to be so close to the business

units that it becomes part ofthem rather than merely a

service organization.

High. This migration will

generate new staffing and skill

set demands on IT

organizations, which will create

challenges but create more

ultimate demand for ICT.

Green IT This term refers to a basket of

technologies and practices

designed to minimize power

costs, carbon output, or

hazardous waste. IDC's

coverage of green IT can be

found in numerous documents.

The major impact of green IT

will be on technology choices

based on low power, more

attention to asset disposal, andsome change in vendor

selection. Depending on the

country, voluntary adherence to

green IT principles could

become law. The search for

sustainability in areas outside

IT will lead to opportunity for IT

vendors.

High. The adoption of green IT

products and practices should

increase demand for new IT

products and services.


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T A B L E 1




Accelerator/

Inhibitor/

Neutral

Certainty of

Assumption

Technology/

service

developments

10GbE adoption 10GbE is becoming a staple in

the high-end datacenters

even into the aggregation layer

in networks with server clusters

and very high-end users.

Products will continue to

mature with declining ASPsowing to new product

introductions by existing

vendors with greater port

densities as well as new

vendors entering the market.

10GbE will also benefit as a

low-cost alternative to SONET

transport in the WAN.

High. 10GbE enables the

aggregation of numerous

gigabit ports in high-end

environments. In the near term,

the most significant revenue

impact of 10GbE will be to drive

sales of gigabit ports in serverclusters as well as those being

used by carriers for the Internet

core backbone. 10GbE will

continue to play a significant

role in the datacenter

movement toward consolidated

and dense datacenters, while

storage, grid, and WAN

applications will begin to add

significant growth in the later

years of the forecast period.

Gigabit Ethernet

(1,000Mb)

Gigabit Ethernet is primarily a

server connectivity technologytoday. The bulk of development

efforts in the switch, OEM, and

semiconductor vendor

communities are focused on

10GbE and Gigabit Ethernet.

Most importantly for Gigabit

Ethernet, new traffic types such

as video and software as a

service are beginning to drive

utilization rates up and, as a

result, enabling Gigabit to truly

challenge Fast Ethernet in the

wiring closet.

Moderate. Gigabit ports will

represent 60% of spending onEthernet switches. While most

customers are not significantly

bandwidth constrained in the

wiring closet, the security,

wireless, and traffic control

features found in newer (most

often Gigabit) switches are very

attractive. Video is the most

likely candidate to pressure

network capacity to the

desktop. Additionally, server

virtualization and dense

computing is clearly driving

Fast Ethernet out of thedatacenter in favor of Gigabit

connections.


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2010 IDC #221356 11

T A B L E 1




Accelerator/

Inhibitor/

Neutral

Certainty of

Assumption

Impact of WLAN on

edge

WLAN access devices are

deployed at a ratio of 1:10 or

more users. In facilities where

WLAN becomes the primary

method of network access,

demand for edge switch ports

will wane late in the forecast

period. This downward

pressure on ports is somewhat

offset by a rise in the

importance and demand foradvanced capabilities in the

remaining ports.

Moderate. Enterprise adoption

of WLAN is growing. Most

importantly, WLAN as the

primary network access

technology is taking hold in

education and healthcare. As

the number of enterprise and

small business clients

provisioned only on a WLAN

begins to accelerate, demand

for switch ports at the edge ofthe network will decrease

slightly despite some

buttressing from wired devices

that require more bandwidth or

more reliable connections than

a wireless network can provide

(IP phones, IP video

surveillance, graphics and

engineering workstations, and

RFID readers).

Impact of WLAN on

LAN switching

Enterprise adoption of WLAN

will grow over the next five

years. Increasing coverage andadditional applications on the

WLAN will increase enterprise

reliance on the network as a

whole and drive new

investments in network

intelligence in both the core and

edge of the network.

Low. Enterprise WLAN

deployments are still largely

overlay networks that are notheavily integrated with the

wired network. Despite the

current state, WLAN is now a

mature enough technology to

influence the deployment

strategies of wiring closet

switches. WLAN-induced traffic

changes in the form of mobility,

identity management, and RF

management demands will

continue to drive network

intelligence investments at the

edge and traffic into the core.


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T A B L E 1




Accelerator/

Inhibitor/

Neutral

Certainty of

Assumption

IP voice Deployment of IP voice on

enterprise networks will drive

significant sales of new and

upgraded network equipment.

High. Most customers still plan

on upgrading the network

before a full IP voice rollout.

However, we believe network

spending directly tied to voice

deployments will decrease as

tools to assess voice readiness

proliferate and voice

preparation becomes part of

normal network planning.

IP video Video is finally here.

Nonbusiness consumption of

Internet video from sites such

as YouTube.com and IP video

surveillance are clearly leading

the charge in the near term.

IDC believes that in the

20092014 time frame, video

on the enterprise network will

become a significant form of

enterprise communications

including training, telepresence,

and conferencing, as well as

internal and external corporatecommunications. All of these

video types are growing quickly

and placing a more significant

burden on the network.

Moderate. These applications

are all in early stage formal use

in many companies, but the

move to IP voice could hasten

the ability to deploy increasing

levels of video on the network.

However, continued network

upgrade and management

costs as well as WAN

bandwidth and storage costs

remain a concern for this

market. If travel delays from

security threats spike beyond

the current trends of continuedintensity, the demand for video

will rise faster than that

presented in IDC's current

forecast.

Unified

communications

UC is a common infrastructure

to deliver, manage, and support

a wide range of

communications applications,

including IP telephony calling

and management; Web,

audio-, and videoconferencing;

voice, email, and text

messaging; presence/IM; click-to-dial and event-driven

communications.

Moderate. VoIP applications

are increasingly becoming the

predominant driver for IP

telephony adoption. Businesses

are looking to increase

productivity and collaboration

and believe that such

applications are the solution.

Companies will not only adoptmore communication-rich

applications but also seek to

integrate other primary

business-critical operation

solutions with this new

communication infrastructure.


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Accelerator/

Inhibitor/

Neutral

Certainty of

Assumption

Voice, video, and

data application

integration

VoIP applications are

increasingly becoming the

predominant driver for IP

telephony adoption. Businesses

are looking to increase

productivity and collaboration

and believe that such

applications are the solution.

Companies will not only adopt

more communication-rich

applications but also seek tointegrate other primary

business-critical operation

solutions with this new

communication infrastructure.

Vendors will begin to acquire

voice-centric solution vendors.

High. If applications vendors

and systems integrators can

build the necessary APIs for

integration efforts, they will

grant themselves access to a

large installed base of users

and businesses that have

already deployed common

business applications.

Mobile PBX

extensions

Many enterprises also lack

corporate control over mobile

devices that are being used in

the corporate environment.

First, there is rarely a standard

corporate account and/or

centralized billing for corporatemobile phone usage. Second,

the independence of

employees and their mobile

phones does not allow for true

separation of personal and

professional phone usage. This

makes enterprises particularly

vulnerable in the case of the

loss of an employee through

termination or move to another

job. The mobile device is rarely

recaptured, and the phone

number assets are often lost to

the enterprise.

Moderate. IDC suggests that if

enterprises are looking to

provide greater mobility to their

employees while leveraging the

robust functionality of their IP

PBXs, they should look toward

those off-the-shelf mobile PBXsolutions that allow for single-

number dialing that can help

them begin to regain control of

their enterprise mobility costs.


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Accelerator/

Inhibitor/

Neutral

Certainty of

Assumption

VoIP application

development

platforms

As the number of voice

applications on the network

grows, the focus on voice in the

IT realm will be to segregate

into two areas of responsibility.

The first area is to maintain a

high level of reliability for dial

tone and quality of service. The

second area will be to develop,

grow, and manage the IP voice

system as a platform forapplication development. Major

network vendors will either

partner or acquire VoIP

development platform solutions

that allow customers to quickly

build and deploy applications

over their converged networks.

(Examples are Avaya's

Communications Enabled

Business Processes [CEBP]

platform and Cisco's Unified

Application Environment

[UAE].)

High. Start-ups like LiteScape,

IPcelerate, and Cistera

Networks are helping VoIP

customers build applications

over their converged networks

to maximize their customers'

return on IP telephony

investment. These

communications mashups and

integration with existing

business applications effortsare fairly small applications that

drive significant hard-dollar

ROI. Given the skill sets

needed across industry-specific

business issues,

communications technologies,

and IT expertise, vendors,

consultants, and those with the

ability to bring these capabilities

to market will be highly

disruptive.

Server

architectures

Enterprise customers are

building mission-critical

architectures on commodity

servers, virtual servers, and

blade servers. In addition,

blade servers and server

virtualization will drive the

importance of server

connections up as the growth in

physical servers slows, while

growth in virtual servers

increases.

Moderate. LAN switch

infrastructures that support

server farms and clusters

require higher bandwidth and

individual support for each

virtual machine. New

applications that require greater

levels of computational power

will be supported by Gigabit

connections aggregated with

10GbE uplinks. Increased use

of commodity servers and

virtualized servers places a

focus on the costs ofredundancy and management

operations in the network.


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Accelerator/

Inhibitor/

Neutral

Certainty of

Assumption

Server

virtualization

The worldwide virtual machine

software (VMS) market grew to

over $1.78 billion in 2007, up

from $1.05 billion the year

before. This was a robust 69%

growth from 2006 to 2007,

which equaled the 69% growth

recorded from 2005 to 2006.

IDC believes the growth in this

dynamic market will continue as

organizations increasinglydeploy VMS as a means of

decoupling the application

stack from the underlying

hardware and driving increased

"mobility" of virtual machines.

IDC views VMS as a

foundational technology to the

creation of dynamic, agile IT

environments and expects

robust growth in this market.

Networking service delivery will

begin to incorporate this new

form factor and create multiple

deployment options forcustomers and suppliers.

High. Server virtualization is

reshaping the IT and network

landscape. The use of server

virtualization to virtualize

desktops is creating demand

for WAN application delivery

products at the remote branch

and datacenter. Additionally,

form factors for WAN

application delivery and

datacenter Layer 47 arechanging to leverage the

benefits of server virtualization.

Branch platforms are emerging

that will enable multiple virtual

network and IT services to

coexist on a single consolidated

server.


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Accelerator/

Inhibitor/

Neutral

Certainty of

Assumption

Convergence of

routing and

switching

With Layer 3 Ethernet switches

capable of performing routing

functions and an increasing

number of WAN interfaces

available for what have

traditionally been switches

designed to create local area

networks, IDC believes the

lines between what is a LAN

switch and what is a router will

blur over time. Today, a routerremains a device whose

primary responsibility is

focused on the WAN interface,

but a growing number of

products are clearly capable of

and sometimes sold to

accomplish both tasks. IDC

believes this long-standing

assumption will continue to hold

true throughout the forecast

period.

Low. Products exhibiting router

and LAN convergence fill needs

from Cisco Catalyst 6500 with

WAN services serving as high-

capacity headend routers to

Force 10's datacenter-focused

SONET interface on its E-

Series to Adtran's NetVanta

1000 Series for small locations.

The end result is a

consolidation of footprint andgenerally decreased spending

on routers, while the switch

becomes the focal point for the

network spend as Ethernet

becomes a fixture in both the

LAN and the WAN

environment.

Management Management capabilities will

continue to lag behindcustomer needs. During this

economic downturn, network

managers will increasingly look

to network management tools

to optimize capacity planning

and minimize capital

expenditures.

Moderate. Voice, security,

wireless, telepresence, and allthe rest of the networking

buzzwords are for naught if

networking vendors cannot

significantly drive down the cost

of running the network and

providing IP services.

Application

networking

Application networking is

evolving the key technology

that enables the network to

provide business value to the

organization. In 2009, the

market for applicationnetworking was $1.8 billion

worldwide.

High. The network is on a

course to deliver a broad base

of services to the datacenter.

Application networking will drive

the datacenter to be more

responsive in real time to thebusiness.


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T A B L E 1




Accelerator/

Inhibitor/

Neutral

Certainty of

Assumption

Datacenter

networking

The datacenter network

traditionally consisted of three

networks: Ethernet, Fibre

Channel, and InfiniBand. IDC

believes that over time Ethernet

will begin to capture a greater

share of the network traffic in

the datacenter as IT

increasingly looks to deploy a

holistic datacenter architecture

built on one unified network.

Moderate. Ethernet will begin

to capture new greenfield

datacenters and new

application growth. But the

specialized high-performance

requirements of HPC

applications will continue to rely

on InfiniBand for the forecast

period. Ethernet will capture the

growth in storage traffic both

with FCoE and unstructuredcontent types, but Fibre

Channel will remain in the

datacenter throughout the

forecast period.

Fibre Channel over

Ethernet

FCoE aims to bring together

the predictability of the FC

transport and the ubiquity of

Ethernet infrastructure, making

possible for datacenters to

consolidate FC and Ethernet

cabling for increasingly

virtualized server pools. The

FCoE standard bypasses theTCP/IP stack, directly maps the

FC protocol over Ethernet, and

allows SAN traffic to run

natively on low-latency 10GbE.

Moderate. Mainstream

adoption of FCoE for server

connects will start to climb in

2010 but will not be significant

till 2011. Most of these servers

will access FC SANbased

storage via gateway facilities.

Broad availability on storage

systems will not happen untilthe 20112012 time frame.

FCoE will not generate

substantial new demand and

will ultimately replace FC SAN,

but not until well after 2013.

IT and application

consolidation

Geographically dispersed

business locations and/or

mobile/remote workforces are

driving both enterprises and

small businesses to Web

enable and centralize their

business application

infrastructures and provide end-user access via the Internet

and/or corporate WANs. This

IT/application infrastructure

model enables enterprises to

reduce operational costs,

improve regulatory compliance,

and enhance efficiency and

performance.

High. The movement to

consolidate and centralize is

increasing the dependence on

the network. IT organizations

are willing to pay for network

equipment and services that

offer a higher level of resiliency

and performance. This is one ofthe key drivers of network

equipment market growth.


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Accelerator/

Inhibitor/

Neutral

Certainty of

Assumption

Storage

centralization

Storage centralization provides

for both site-specific business

continuity and disaster recovery

and operational recovery. IDC

sees increasing levels of

adoption of centralized backups

of remote office data.

High. These storage

applications are driving demand

for storage network over

Ethernet and application

intelligence such as WAN

application delivery.

Labor supply

IT talent From 2010 to 2013, ITemployment, now at 35 million,

will grow by a factor of 1.2

worldwide. This is a constraint

in an industry that will grow by

a factor of 1.1 in spending, but

by more than 2 in devices

managed, 5 in information

created, and 8 in networked

interactions between

customers. IDC views this as a

long-term structural constraint.

The current recession has

tightened that constraint.

High. The availability and theskill level of talent have a direct

impact on markets as diverse

as network security and

outsourcing. The availability

may affect some markets or

adoption rates, such as the

development of SOA, but in

general, there will be other,

more immediate gating factors.

In the long run, the optimization

of the slow-growth labor pool

argues for cloud computing.

Small office/home

office (SOHO)

networking

SOHO environments will not

invest in learning about

networking, preferring instead

to depend on product vendors

to supply more turnkey, easy-

to-use, and easy-to-manage

devices that provide

connectivity and performance

without incurring significant

maintenance and management

costs.

Moderate. Deploying and

managing a network can be a

daunting task. A number of

vendors will work to simplify the

process of deploying networks

for the SOHO environment.

Many SOHO environments are

turning to WLAN as the primary

mode of connectivity. In these

cases, the few ports of

switching functionality are

integrated into the router.


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Accelerator/

Inhibitor/

Neutral

Certainty of

Assumption

Enterprise

networking

Enterprise customers will

continue to invest in educating

staff on new networking

technologies and protocols.

Moderate. The widespread

availability of general

networking expertise as well as

automation and remote

diagnostics lends confidence to

businesses investing in network

infrastructures and reduces the

cost of training specialists in

niche or emerging

technologies.

Distribution of

talent

The swing to emerging

geographies is evident. The

number of scientists and

engineers in the United States

and Western Europe is falling

compared with the number of

scientists and engineers in

China and India, while the

growth in the number of IT-

related employees in those

countries is three times the

world average.

High. The migration will

increase the overhead costs of

finding, recruiting, and

managing talent from global

pools. It should, however, also

lower costs and may even lead

to more innovation.

Telecom and IT The days of telecom as aseparate operating entity within

the enterprise or even as one

operating within facilities is

coming to an end as companies

fold those responsibilities into

IT. Even if an IT shop decides

not to migrate to IP telephony,

that staff transition could impact

the purchasing power and

direction of the classic

customer for telephony gear.

Moderate. IT departments thatdecide to hold off on IP

telephony and video may

embrace used equipment as a

short-term fix to holding on to

legacy systems.


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Accelerator/

Inhibitor/

Neutral

Certainty of

Assumption

Market

characteristics

Hardware Hardware markets, down more

than 8% in 2009, should

rebound to show spending

growth closer to 4% in 2010

and 7% in 2011. The rebound

will be dominated by PC

spending and, to a lesser

extent, telecom equipment.

High. Hardware spending,

about 40% of total IT spending,

drives spending in software and

services as well.

Software Software markets, down to

about 1% growth in 2009,

should rebound to show growth

closer to 4% in 2010 and 6% in

2011. The rebound will be

strongest in infrastructure

software, in part because of

growth in operating systems

(Windows 7), but more because

of growth in security software.

High. Software spending, about

20% of total IT spending, can

drive spending in both

hardware and IT and business

services.

Services Services markets, down to 0%

growth in 2009, should reboundto growth of 3% in 2010 and

4%+ in 2011. The rebound will

be strongest in operations

management in 2009 and 2010

(e.g., outsourcing), but

spending on implementation

services will kick in the most

new money in 2011 as new

projects come online.

High. IT services spending can

affect the rate of overallsolution adoption as well as the

migration to dynamic IT. It

accounts for about 40% of IT

spending.

Telecom The telecom industry, in its size

and utility, is somewhat

insulated from sudden

economic swings or at leastit has significant inertia. But

IDC expects worldwide telecom

services growth in 2010 to be

lower (2.4%) than in 2009

(3.8%). The fall is related to

market saturation and the long-

term impact of depressed

capital spending.

High. The IT industry has

already factored the telecom

industry spending into its

internal forecasts; the key is thepace at which convergence

takes place.


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2010 IDC #221356 21

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Accelerator/

Inhibitor/

Neutral

Certainty of

Assumption

The Internet Internet adoption is still going

strong, especially in emerging

economies. In the next four

years, 640 million new users

will come online and commerce

will double as will mobile users.

IDC does not expect the current

crisis to affect Internet

adoption.

High. Analysts and pundits

may underestimate the impact

of the Internet because the

"buzz" is gone, despite the

hype over Web 2.0. It will be an

enabler for both new markets

and new business models.

Market ecosystem

Telepresence

outside the

conference room

Telepresence technology is

primarily being used to recreate

across-the-table-type meeting

experiences.

High. Bringing telepresence to

other applications and settings

like telemedicine and high-

touch customer interaction

endpoints will drive innovation

and adoption of the technology

far beyond conferencing.

Public telepresence

facilities

Telepresence facilities are

currently being rolled out to

public facilities like hotels and

conference centers.

Moderate. Driving utilization

and awareness of these

facilities as well as the business

models to support them will be

the key to success.

Managed services

for

videoconferencing

and telepresence

Capex constraints will continue

to be primary barriers to

videoconferencing and

telepresence adoption, but

managed services that ease

those barriers will allow capex-

constrained businesses to

invest in the technology.

High. The MS business for

videoconferencing and

telepresence is still in its

infancy and will take time to

develop. However, given the

nature of MS as a means to

lower-cost barriers to adoption,

IDC expects this model to drive

videoconferencing down

market.


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Accelerator/

Inhibitor/

Neutral

Certainty of

Assumption

Consumption

Metcalfe's law and

interoperability

Metcalfe's law states that the

value of a telecommunications

network is proportional to the

square of the number of

connected users of the system.

The extent to which each level

of interoperability can take

place and at what pace will

greatly impact the value ofvideoconferencing and will

therefore significantly impact

adoption.

High. Every major vendor is

committed to interoperability

but political battles remain, and

IDC expects each layer of

interoperability to take three to

five years time at minimum.

The speed at which B2B

videoconferencing happens will

be a primary inflection point forMetcalfe's law to take hold.

Network upgrades The majority of enterprise

networking deals will be

upgraded to existing network

infrastructure.

Moderate. The importance of

the network in an organization

grows along with the number of

applications on the network.

Legend: very low, low,moderate, high, very high

Source: IDC, 2010

Table 2 shows worldwide videoconferencing revenue and endpoints, and Figure 1

shows videoconferencing revenue, for 20092014. Table 3 sho ws wo rldwide

telepresence-only revenue, number of telepresence rooms/systems, room/system

install base, and number of screens, and Figure 2 shows telepresence-only revenue,

for 20092014.


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2010 IDC #221356 23

T A B L E 2

W o r l d w i d e E n t e r p r i s e V i d e o c o n f e r e n c i n g R e v e n u e a n d E n d p o i n t s , 2 0 0 9 2 0 1 4

2009 2010 2011 2012 2013 2014

Videoconferencing revenue ($M) 1,892 2,742 3,877 5,308 6,947 8,755

Growth (%) 16.7 45.0 41.4 36.9 30.9 26.0

Endpoints (000) 218 300 405 533 686 845

Growth (%) 5.4 37.4 35.0 31.5 28.9 23.2

Note: See Table 1 for key forecast assumptions.

Source: IDC, 2010

F I G U R E 1

W o r l d w i d e E n t e r p r i s e V i d e o c o n f e r e n c i n g R e v e n u e , 2 0 0 9 2 0 1 4

0

1

2

34

5

6

7

8

9

10

2009 2010 2011 2012 2013 2014

($B)

Source: IDC, 2010


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24 #221356 2010 IDC

T A B L E 3

W o r l d w i d e E n t e r p r i s e T e l e p r e s e n c e - O n l y R e v e n u e , N u m b e r o f T e l e p r e s e n c e

R o o m s / S y s t e m s , R o o m / S y s t e m I n s t a l l B a s e , a n d N u m b e r o f S c r e e n s , 2 0 0 9 2 0 1 4

2009 2010 2011 2012 2013 2014

Telepresence-only revenue ($M) 581 1,019 1,678 2,594 3,670 4,789

Growth (%) 84.0 75.4 64.7 54.6 41.5 30.5

Telepresence rooms/systems (000) 4 7 13 21 33 49

Growth (%) 112.0 92.8 77.2 67.6 56.3 48.4

Room/system install base (000) 5 12 25 46 79 127

Number of screens (000) 8 13 21 32 43 64

Note: See Table 1 for key forecast assumptions.

Source: IDC, 2010

F I G U R E 2

W o r l d w i d e E n t e r p r i s e T e l e p r e s e n c e - O n l y R e v e n u e , 2 0 0 9 2 0 1 4

0

1

2

3

4

5

6

2009 2010 2011 2012 2013 2014

($B)

Source: IDC, 2010


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2010 IDC #221356 25

M a r k e t C o n t e x t

In videoconferencing and telepresence, the market is in the midst of a transition

from meeting over video as an option of last resort to an alternative that's preferred

over traveling. While telepresence systems carry significant price tags for deployment

and operation for example, the cultural shift toward video as a good enough "acrossthe table" replacement for in-person meetings will accelerate swiftly through the next

decade.

The extent to which video calling/conferencing can become an impromptu

communication tool in the way instant messaging (IM) and voice are is unlikely in the

next five years. IDC expects the usage of videoconferencing to be primarily driven by

scheduled meetings, corporate communications, and training activities.

E S S E N T I A L G U I D A N C E

IDC believes videoconferencing vendors must do more to maximize the number of

capable endpoints. Integration with legacy systems as well as with commonly used

Web conferencing systems and collaboration tools like instant messaging clients

dramatically increases the value of these systems and demonstrates to clients a

commitment to enterprise unified communications and collaboration (UC&C), not just

video. Vendors should also help their customers drive usage via usage behavior

analysis and best practices. Polycom for example has taken a leadership role in

articulating the value of integrating video into UC&C environments and is focused on

delivering visual functionality to multivendor UC&C environments.

Enterprises should demand high- to low-end integrateable solutions that do not create

application or technology silos. As communications infrastructure components

converge, the last thing any enterprise should consider is placing videoconferencing

systems and equipment on an island. Phased pilot deployments are also

recommended to ensure that investments in videoconferencing are rolled out

appropriately to the right locations and to the right business units. Furthermore, the

adoption of videoconferencing is accelerating just as all things enterprise

communications are quickly becoming IT assets. Therefore, enterprises must

consider videoconferencing in the same context as larger IT initiatives including

virtualization, unified communications, and how video will be used beyond

conferencing.

L E A R N M O R E

R e l a t e d R e s e a r c h

Tandberg Acquisition Puts Cisco's Money Where Its Vision Lies (IDC

#lcUS22028909, October 2009)

Video in the Enterprise Proliferates: An Updated Snapshot of Current and

Planned Adoption (IDC #219871, September 2009)


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Will 2009 Become the "Year of the Great Enterprise Video Experiment"? (IDC

#lcUS21762909, March 2009)

S y n o p s i s

This IDC study discusses the worldwide enterprise videoconferencing and

telepresence market. Enterprise videoconferencing revenue is slated for double-digit

growth through 2014, with an IDC-estimated CAGR of 36%. Despite previous hype

cycles that have produced inflated forecasts of this market, IDC believes that only

recently have enterprise networks and videoconferencing technology (epitomized by

telepresence systems) been capable of delivering experiences worthy of initiating a

videoconference over a phone call or hopping on a plane. In a suffering economy,

videoconferencing gained much traction in 2009, and IDC expects significant growth

of this market over the next five years.

"IDC predicted that 2009 would be the year of the great enterprise video experiment,

and despite difficult economic conditions, the worldwide market for videoconferencing

and telepresence grew 17% year over year and will eclipse the $1 billion mark in

2010." Jonathan Edwards, research analyst, IDC's Unified Communications and

Enterprise Communications Infrastructure programs

C o p y r i g h t N o t i c e

This IDC research document was published as part of an IDC continuous intelligence

serv ice, prov idi ng wr it ten research, analyst interactions, telebriefings, and

conferences. Visit www.idc.com to learn more about IDC subscription and consultingservices. To view a list of IDC offices worldwide, visit www.idc.com/offices. Please

contact the IDC Hotline at 800.343.4952, ext . 7988 (or +1.508.988.7988 ) or

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Copyright 2010 IDC. Reproduction is forbidden unless authorized. All rights reserved.

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