DRAFT. AT&T Unified Communications News. Video Collaboration

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Video Collaboration

Challenge:

Overcoming roadblocks

in adopting pervasive video for an

increasingly mobile business

Solution:

Video as a service for anytime,

anywhere, any device videoconferencing

via the cloud

AT&T difference:

Expertise to

incorporate enterprise video into an

overall UC adoption strategy via the cloud

Research from Gartner:

Market Trends:

Video as a Service reforming the video

establishment

About AT&T

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Putting a user adoption strategy on the UC menu

Today, video collaboration has become more than just a way to bring people together without incurring the cost of travel. High-resolution, bi-directional cameras and sophisticated acoustics have created more interactive, personalized and “real life” video experiences than any audio or web conference ever could.

As a result, video collaboration has become a way to build and solidify relationships between teams inside and outside the enterprise. Now, cloud-based Video as a Service (VaaS) makes it possible to deliver video virtually anytime, anywhere and to nearly any device – enabling the shift to pervasive video, where it can be embedded into the everyday workflows and interactions that drive business operations. This edition of AT&T Unified Communications News, featuring a Gartner Report on VaaS trends, explores the potential challenges of video adoption and how VaaS can help you realize the benefits of more mobile, productive and pervasive video collaboration.

Enabling

pervasive video

“Video as a service is both a consequence of and a prerequisite for the move to pervasive video. It also impacts traditional modes

of owning and managing videoconferencing.1_”

Challenges: Roadblocks to enterprise video adoption

Cost. Traditional video systems can require capital investments in on-premises hardware, dedicated networks and designated

telepresence rooms that may include multiple screens, special lighting and custom furniture. Some hosted video solutions many still require on-site equipment. The purchasing and installation cycle for such an infrastructure can also be lengthy.

By offering a truly immersive experience that engages attendees, this more traditional model continues to play an important role in the mix of videoconferencing services you can make available to your organization. However, as business becomes increasingly mobile, you may want to consider other options, as well.

Complexity. Today, videoconferencing solutions have expanded beyond in-room systems to deliver video to desktops, smartphones and tablets. This helps meet the need to mobilize videoconferencing, giving employees more freedom to work how and where they want.

However, compatibility problems between vendor endpoints, device types, platforms and applications can limit that freedom, complicating access and management and negatively impacting user adoption, which can lessen investment return. Enterprise buyers also often want videoconferencing solutions that integrate well with existing communication and collaboration tools to simplify the user experience and build upon previous UC investments.

Introduction

1_{(Source: Gartner, “Market Trends: Video as a Service}

Reforming the Video Establishment,” Tom Eagle, Sorell Slaymaker, August 2014.)

A changing model

“Gartner has seen longer sales cycles for

traditional videoconferencing solutions

(even, for broad comparison, room-based

videoconferencing systems), as enterprise

buyers are pausing to give serious consideration

to the growing alternative approaches and

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Compelling economics

“The economics for making the transition

to VaaS have become increasingly

compelling because the

software/cloud-based multipoint control unites (MCUs) that

are replacing traditional forms of hosted

bridging are at least 40% cheaper per port on

a like-by-like basis, viewed from a

total-cost-of-ownership perspective.”

This complexity between solutions can also make it difficult to expand video collaboration systems to include external partners, suppliers and customers, which means missing the opportunity to build stronger ties with those outside the organization.

Solution: VaaS for anytime, anywhere, any device

videoconferencing

By delivering videoconferencing through the cloud – with no

requirement for an on-premises video infrastructure – VaaS can help break through potential cost and complexity barriers.

Help reduce expenses with a consumption-based model. Software-based VaaS solutions can be provisioned in as little as three days and consumed from the cloud and over the Internet for a monthly expense. According to Gartner: As the VaaS technology and deployment models evolve and gain efficiencies, costs will be driven down even further.”1

Endpoint independence, multi-platform interoperability. While multi-endpoint delivery was possible before, VaaS expands your ability to integrate video sessions across a broader range of vendor endpoints, device types and platforms.

For example, AT&T Video Meetings with Blue Jeansinteroperates with a range of desktop PCs, room and immersive video systems, along with iOS and Android devices. To simplify usage and help increase adoption, it provides a single user interface, designed to work with familiar web browers, scheduling applications and video clients, including Cisco Jabber® _{and Google Video ChatTM. Interoperability with Microsoft}®

Lync® _{also makes it easier for external parties to participate in a}

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experience in an immersive telepresence room to help maximize legacy investments, but you can also provide mobile workers with a virtually anytime, anywhere, any device experience to help build and fortify relationships with internal and external teams.

AT&T difference: Making videoconferencing part of the

overall UC strategy

By expanding how, where and with whom you collaborate, VaaS can help you realize the potential of pervasive video, where videoconferencing is integrated into everyday business processes to increase worker productivity and business efficiency.

With AT&T as your service provider, you can choose from a range of videoconferencing services from a single vendor, including AT&T Video Meetings with Blue Jeans and AT&T Telepresence Solution®_{, which can}

make it easier to find the right mix of solutions for your enterprise. We can also help you promote videoconferencing capabilities to employees to get more from both your existing investments and new VaaS deployments. For example, our RAMP program for AT&T Telepresence Solution® _{helps our customers develop an internal} communications program to generate awareness and accelerate adoption.

VaaS in the UC mix

“The videoconferencing function offered

through VaaS is typically part of a larger

unified communications and collaboration

consideration by enterprise organizations.

These organizations evaluate video alongside

other communications and collaboration

functionality, including telephony, instant

messaging and presence.

”

Further, our experience in delivering and supporting audio, web and video conferencing services, together with our UC expertise, can help you integrate video collaboration with other UC tools to make your interactions more seamless from more places and with more people. Talk to your AT&T representative about AT&T Video Meetings with Blue Jeans and AT&T Videoconferencing solutions.

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videoconferencing pricing models and rates, and challenging

established channel dynamics. Gartner analyzes these major trends to help strategy planners respond to the opportunities and threats.

Key Findings

• Video as a service (VaaS) is both a consequence of and a prerequisite for the move to pervasive video. It also impacts traditional modes of owning and managing videoconferencing. • VaaS commoditizes both infrastructure and the management

of infrastructure, creating much lower cost-per-port options. The result is a shift from high-touch managed services to more industrialized services and price erosion on all service elements. • VaaS enables users to put many more low-cost endpoints (including

“free” soft clients) into the business. This has tended to change the mix of endpoints and placed increasing pressure on endpoint manufacturers to justify their room system prices. Again, the net result is price and total market value erosion.

• Traditional technology providers and pure-play VaaS providers are competing fiercely with traditional communications and IT services providers for this business opportunity. This is further accelerating price declines.

Recommendations

• Established VaaS providers: Emphasize managed service expertise and capabilities for video collaboration, network and support, which are not easily duplicated by market entrants.

• Legacy video manufacturers: Encourage channel partners to employ more flexible sales terms to soften the financial impact of large video system purchases.

• New VaaS vendors: Focus on building a sales pipeline exploiting cloud advantages for VaaS offerings, and take advantage of current expense-based pricing practices.

• Entrants to VaaS services: Quickly develop differentiated service and feature capabilities (such as vertical industry-specific solution sets), as the proliferation of vendors in this space threatens to homogenize offerings.

Introduction

The videoconferencing function offered through VaaS is typically part of a larger unified communications and collaboration (UCC) consideration by enterprise organizations. These organizations evaluate video alongside other communications and collaboration functionality, including telephony, instant messaging and presence. The unified communications (UC) market is in a state of rapid evolution, with opportunities for new providers using new technology and service models such as VaaS to disrupt established providers. Figure 1 offers a high-level view of the UC ecosystem.

Market Trends: Video as a Service Reforming

the Video Establishment

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to use video across a range of vendor endpoints (for example, Polycom, Cisco, Lifesize and Avaya), device types (desktops, tablets, smartphones and telepresence) and standards. Blue Jeans Network, Vidyo and, more recently, Acano, Pexip and Polycom are some of the vendors offering a cloud-based video solution — that is, VaaS. Primarily led by software technology, these VaaS offerings can integrate video sessions across a range of vendor endpoint devices and experience levels. They also offer more efficient and cost-effective means of scaling for growing ad hoc videoconferencing usage.

VaaS typically comprises a cloud-based, usage-based consumption model for videoconferencing, usually offered under a monthly expense agreement. This approach has grown dramatically in demand for four primary reasons:

• Simplicity of access — primarily through the Internet • Ease of use — simple plug-in and session initiation

• Low-cost monthly usage-based pricing, compared to the capital investments required with legacy videoconferencing systems • Endpoint independent videoconferencing between desktops,

mobile devices and traditional room systems

Although Gartner estimates the VaaS market to currently represent less than 10% of the overall global videoconferencing market (infrastructure and endpoints), it is estimated to grow by over 40% annually to 2018. For broad comparison, the traditional group video system market is in decline.

Figure 1

The UC and Conferencing Market Is Experiencing

Significant Disruption

UC = Unified communications; UCC = Unified communications and collaboration Source: Gartner (August 2014)

Enterprise Comms . e s ir p r e t n E UCC and Conferencing VaaS Vendors Cloud and Svc . Providers Freemium

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transformational effect on several key business characteristics of the videoconferencing industry. Pricing is dropping broadly across traditional premises-based video hardware systems and other types of videoconferencing, and channel dynamics are changing quickly as new service providers emerge and existing technology providers are now able to offer VaaS. These are upsetting the cart of established video service providers.

Market Trend

Videoconferencing Prices Dropping, Sales Terms

Changing

With the introduction several years ago of cloud-based alternatives for videoconferencing, the enterprise market appetite for traditional service provider conferencing began diminishing. Gartner has seen longer sales cycles for traditional videoconferencing solutions (even, for broad comparison, room-based videoconferencing systems), as enterprise buyers are pausing to give serious consideration to the growing alternative approaches and shifting competitive landscape. A compelling aspect of the VaaS offerings — and one that has contributed to the erosion of new video infrastructure deployments — has been the ability of cloud-based video service providers to offer multiplatform (both video and UC) interoperability and

conference capacity without requiring any capital commitment. These interoperability and price features have resonated with enterprise IT managers increasingly seeking design, deployment and management of video solutions that help them transition from closed video

environments (legacy room systems, for example). They are looking for more open, interoperable systems that draw a greater pool of employees (and “outsiders”) into the video experience. The fact that they could do so on a noncapital and relatively inexpensive basis has meant that IT managers can experiment with different VaaS offerings with little risk. Endpoint independence is now a primary requirement. The economics for making the transition to VaaS have become

increasingly compelling because the software/cloud-based multipoint control units (MCUs) that are replacing traditional forms of hosted

bridging are at least 40% cheaper per port on a like-for-like basis, viewed from a total-cost-of-ownership perspective. As the VaaS technology and deployment models evolve and gain efficiencies, costs will be driven down even further.

Freemium Disintermediation: Gartner has estimated that, by 2017, 25% of all audio, Web and videoconferencing will go through freemium conferencing services. This kind of conferencing service offers a free basic feature set or limited user capacity and charges a nominal fee for incremental capabilities. VaaS players such as Fuze and Zoom use these offers to target enterprises that find their “good enough” nature sufficient for a subset of use cases. This foot-in-the-door strategy by VaaS vendors has gained the attention of premium videoconferencing providers (Cisco, Polycom, Lifesize, for example), which, despite their use-case arguments for their dedicated systems, continue dropping their video platform prices to remain competitive in the expanded videoconferencing services market. (Cisco has adopted a freemium WebEx pricing strategy to try to offset the disruption from VaaS, for example.) Having made large investments in UC and video capabilities that go unused, CIOs are focused on a new measure of success: the speed of adoption, not the speed of deployment.

Changing Sales Terms: One of the key value propositions of the VaaS approach is its subscription-based operating expense model. It has pressured the legacy room system manufacturers that require capital investment to allow greater flexibility in sales contracts with customers. Specifically, Gartner has seen a rise in lease/finance options for the purchase of dedicated room systems. Cisco and Polycom (which together represent approximately 75% of the video endpoint and infrastructure market) channel partners are engaging clients with two- to five-year leases. This approach shields the client from using capital funds and the associated capital approval process, and provides an operating expense alternative.

Recommendations for Providers:

Markets set the ceiling on price. Ensure that your videoconferencing portfolio aligns with the shift toward pervasive and personal video, and focus on building a sales pipeline exploiting the cloud advantages for

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fastest-growing segment of videoconferencing, with high-margin services and shorter sales cycles.

For legacy video manufacturers, encourage your channel partners to employ leasing terms to soften the financial impact of large video system purchases, and price your own cloud offerings with sufficient margin for resell. All providers should pursue all enterprises, since many are adopting a tiered strategy: a high-end solution for executives and critical interactions and a lower-end solution for daily collaboration.

VaaS Enabling New Entrants, Which Often

Conflict With Established Service Providers

The channels to market are also in a state of flux, as VaaS technology enables market players to offer videoconferencing services for the first time and, in the process, encroach on the territories of established service providers.

Channel Partnerships

VaaS represents a tangible opportunity for smaller providers to gain market visibility with minimal investment. Being able to integrate products for price and feature differentiation is critical to larger service providers, and the flexibility that smaller, software-driven vendors can have is an important factor in their choice of VaaS partners. Sometimes this motive results in a channel partnership such as that between Level 3 Communications and Blue Jeans. Level 3 leads with its network service expertise and offers Blue Jeans as a cloud-based videoconferencing solution, thereby addressing both the network and video application layers. With this offering, Level 3 expanded its status as a network service provider to include VaaS services (it already was offering legacy hardware-based videoconferencing options).

Legacy Hardware Vendors Offer White-Label VaaS to

Channels

For legacy providers that continue to focus on hardware-based video solutions, the need to amortize these investments across a wider range of users will lead to the largest (or most aggressive) providers building white-label cloud services and reselling their capacity to smaller providers, in order to maximize utilization of these assets. For example,

Polycom’s RealPresence cloud platform is currently a white-label channel play available to its extensive list of channel partners, which can take it to market as a VaaS offering. Many of these channel partners are smaller, traditional audio/video (A/V) integrators that now have the opportunity to offer a differentiated service in the form of a relatively inexpensive and “hassle free” videoconferencing solution.

Pure-Play VaaS Infrastructure Providers Resell Through

Channel

In another VaaS channel variation, there are pure-play VaaS

infrastructure vendors that resell their cloud platforms and dedicated network capacity to a variety of channel partners. Videxio is an example of this kind of provider, with channel partners such as Whitlock

(global A/V integrator) and Tech Data (large wholesale distributor of technology products), the latter of which in turn provides the Videxio offering to its vast stable of resellers internationally. Typically, the VaaS infrastructure provider represents the “powered by” enabler behind the branded VaaS offer of the reseller, which, as identified above, is usually new to the VaaS market.

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The VaaS Channel Conflict

The three channel scenarios described above represent direct challenges to established cloud- and remote-hosted videoconferencing providers, including:

1 Pure-play VaaS players such as Glowpoint, BCS Global Networks and Yorktel

2 CSPs such as AT&T, BT Conferencing and Verizon

For these experienced pure-play and CSP providers, the explosion in choices for cloud-based videoconferencing represents a potential loss of business, as enterprise buyers have more ready access to VaaS offerings from vendors often better positioned to offer aggressive pricing; as new entrants to the VaaS market, these vendors are often willing to take loss-leader positions to establish themselves.

Recommendations for Providers:

New entrants to VaaS services will need to quickly develop

differentiated service and feature capabilities, as the proliferation of vendors in this space threatens to homogenize offerings. Established VaaS providers should emphasize their managed service expertise and capabilities for video collaboration, network and support — these managed service portfolios result from years of experience and are not easily duplicated by new vendors.

Also, as the video technology and endpoints are commoditized, one of the greatest opportunities for differentiating VaaS is by industry vertical. For instance, higher education accepts a “good enough” video experience that works 99% of the time, but requires strong collaboration tools for whiteboarding and raising a virtual hand. Telemedicine on the other hand requires very high-quality resolution and integration with medical instrumentation. VaaS providers should choose vertical industries that play toward the strengths of their organization. Size also matters, with larger enterprises typically more conservative in their vendor and technology selection.

Contrarian View

Closed UC Environments Limit VaaS Opportunity

Gartner believes that in the future, most enterprise customers will look for a smaller number of vendors (perhaps just two or three) to provide a complete enterprise communications solution, which will increasingly include video. Many UC vendors, in turn, aspire to deliver that complete UC solution, and some, such as Cisco and Microsoft, have already largely achieved this. In fact, they view it as in their interest to remain closed in order to channel deal flow toward their own systems.

On the service side, there is a market trend toward integrated services rather than single services, such as video. If independent VaaS vendors do not tap into UC vendors’ product plans for pervasive video, they will not be able to play a role in larger enterprise UC deals. Aggressive pricing and creative channel strategies may not be sufficient to overcome this market dynamic. Should this be the case, VaaS vendors would be marginalized at the outskirts of the smaller enterprise market.

Vendors to Watch

The following list is a representative pool of VaaS providers: • Acano — Specializes in providing videoconferencing across

multiple, and individually incompatible, A/V and Web technologies and clients. Its virtual meeting rooms can coexist and integrate with UC platforms from Cisco, Microsoft and Polycom, or users can join via a Web real-time communications-enabled browser.

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of endpoint users, from traditional videoconferencing to Microsoft Lync, Skype or Google. It sells its offering only as a service, either directly or through service provider partners.

• Fuze (formerly FuzeBox) — A pure cloud-based VaaS vendor offering monthly subscription-based licensing for videoconferencing

services. It connects to standards-based room systems (Cisco, Polycom, Lifesize, for example) and allows high-definition content sharing.

• Videxio — This Norway-based company is the cloud “engine” behind a number of branded VaaS vendors in the market. It white labels its global, purpose-built cloud and network platform for videoconferencing for service providers such as BT Al Saudia and international A/V integrators such as Whitlock.

• Vidyo — Plays as an enabler in the services market rather than as a service provider in its own right, and is becoming a more common feature of service provider models. Its pricing, architecture and total cost of ownership continue to be disruptive.

• Zoom — With senior leadership from Cisco WebEx, Zoom has created an A/V and Web conferencing platform that utilizes commodity endpoints, best-effort networks and a simple user interface with a freemium-based subscription model. It is seeing triple-digit growth.

Evidence

Gartner works with videoconferencing technology and services providers, customers of video vendors and other telecom industry participants on an ongoing basis. This research is a result of our regular dialogue with these constituents, supplemented with information from topic-specific interviews, vendor proposals and SLAs, and other relevant existing Gartner research.

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About AT&T

Video Collaboration is published by AT&T. Editorial content supplied by AT&T is independent of Gartner analysis. All Gartner research is used with Gartner’s permission, and was originally published as part of Gartner’s syndicated research service available to all entitled Gartner clients. © 2015 Gartner, Inc. and/or its affiliates. All rights reserved. The use of Gartner research in this publication does not indicate Gartner’s endorsement of AT&T’s products and/or strategies. Reproduction or distribution of this publication in any form without Gartner’s prior written permission is forbidden. The information contained herein has been obtained from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information. The opinions expressed herein are subject to change without notice. Although Gartner research may include a discussion of related legal issues, Gartner does not provide legal advice or services and its research should not be construed or used as such. Gartner is a public company, and its shareholders may include firms and funds that have financial interests in entities covered in Gartner research. Gartner’s Board of Directors may include senior managers of these firms or funds. Gartner research is produced independently by its research organization without input or influence from these firms, funds or their managers. For further information on the independence and integrity of Gartner research, see “Guiding Principles on Independence and Objectivity” on its website, http://www.gartner.com/technology/about/ombudsman/omb_guide2.jsp. © 2015 AT&T Intellectual Property. All rights reserved. AT&T, the AT&T logo and all other AT&T marks contained herein are trademarks of AT&T Intellectual Property and/or AT&T affiliated companies.