Video Conferencing Infrastructure: Time for the Old Business Model to Die
As personal and mobile video endpoints fill the enterprise, companies need to rethink how they buy video conference infrastructure.
Enterprise video conferencing has been around for 30 years, traditionally sold in the business model established long ago as Marco Polo carried oils to China -- purchase the product and pay the seller upfront, then buy a monthly maintenance contract. But change is underway.
The traditional video conferencing sales model was universal, covering both video endpoints and video infrastructure, whether hardware or software. The approach made budgeting easy, since costs were known and generally fixed. But the high cost of video infrastructure combined with an enterprise's uncertain future capacity requirements could lead to difficulties. Exacerbating the capacity-planning challenge for enterprises was the problem that video infrastructure traditionally shipped in quantized formats. If a company found that usage exceeded the capacity of its 16-port MCU by a port or two, it would be forced to buy an additional eight or 16 ports, or even invest in a chassis upgrade, depending on the specific hardware vendor. Alternatively, many enterprises found themselves buying a 24-port MCU from the start even when 16 ports appeared to be sufficient.
In the past two years, however, multiple video conferencing vendors have addressed the cost, flexibility, and business models associated with infrastructure products. They've tackled these in three independent developments.
- Infrastructure as Software - While gateways, gatekeepers, and other video infrastructure devices have moved from dedicated hardware platforms to software running on industry-standard physical and virtual servers, most attention has been focused on the software MCU (video bridge). The exciting news around the software MCU is that 1) software license upgrades are possible in units of one; 2) performance has grown to equal that of the time-honored hardware MCU; and 3) feature enhancements are a simple matter of programming. The forklift update is gone. The less exciting news is that cost savings have had minimal impact for enterprises, at least to date. Wainhouse Research (WR) estimates that the software solutions are less than 15% of the market.
- Infrastructure as a Cloud Service - The typical case here involves enterprises buying their own room video systems, deploying a variety of client- and browser-based desktop and mobile devices, and then using cloud services for point-to-point and multipoint calls. They save lots of money on infrastructure capital and maintenance, but pay subscription fees for the cloud or hosted services. Blue Jeans Network made a big splash when it released its video conferencing as a service (VCaaS) offering several years ago, demonstrating that the subscription fee was often less than what an enterprise paid for traditional bridge maintenance. The company now faces scores of competitors, yet WR survey results suggests that only 20% of video conferencing customers are currently using a cloud service for video, with a similar number looking to expand their use of VCaaS within a year.
- Business Model Adjustments - Several vendors have introduced new cost models for their video infrastructure based on price per user per month. So rather than having a VCaaS solution, the enterprise can have a device on its own network and pay "by the drink." For the enterprise, this approach generally eliminates 1) upfront capital expenses; 2) the risk associated with capacity planning for unknown usage; and 3) bandwidth concerns associated with multiple users needing to access infrastructure located in the cloud. For the vendor, the per-user/per-month model provides a smooth annuity revenue stream rather than lumpy one-time sales. Everyone benefits.
The problem is that despite the hype, nobody is really buying the story. Large enterprises, it turns out, are comfortable with the buying model and fixed budget certainties from the good old days. And small enterprises don't buy video infrastructure, period; they look to cloud offerings, including many that are now free.
But it is time to rethink those strategies and take advantage of the new technologies and market options available for video infrastructure. This rethink is a necessity as enterprises face a future in which hundreds of traditional room systems are being augmented with thousands or tens of thousands of personal and mobile video endpoints. With traditional room systems, the industry ratio for MCU ports to endpoints was typically 1:4; for huddle rooms and personal video, the ratio is likely to vary from 1:20 to 1:400, depending on the company.
Uncertainty reigns. Flexibility is therefore the key. Fortunately, enterprises can now buy both premises-based infrastructure and cloud services via business models that meet this need. It is high time for enterprises to make the switch away from the traditional business model to a new one.