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Frost & Sullivan's North American Video Conferencing Study

Video conferencing is high on the list of communications tools likely to succeed during this recession. As organizations look to control costs and go green, corporate travel budgets are being slashed. Conferencing technologies can offset costs while allowing employees to continue business as usual, virtually.Frost & Sullivan recently released a new study on the worldwide video conferencing endpoints market, and since the topic is top of mind, I wanted to summarize some key findings here. Clients can access the full report at

* The worldwide video conferencing endpoints market reached $983.2 million in revenues for Jan -Sept 2008, growing by 19.1 percent over the same period previous year. Following an anticipated slowdown in Q4, we expect total revenues for full year 2008 to reach $1.31 billion, growing by 14.6 percent over the previous year.

* While 2007 was the year of revival when the market saw accelerated momentum (31 percent revenue growth), in 2008 the market experienced lower growth as a result of a slowdown in demand and mounting pricing pressures. Unit shipments grew at 13.5 percent in Jan -Sept 2008 over the same period previous year.

* The video conferencing market is in the midst of a massive transition as new products and delivery modes continue to emerge and as vendors realign their strategies to tap into emerging opportunities. The viral growth of video in the consumer market will impact the psyche of "Gen Y-ers" when they get into the workforce. Along with web 2.0 technologies like wikis, blogs, and social networking, video is becoming a key part of this new communication paradigm.

* In North America, intensifying competition will continue exerting pressure on vendors to push prices down. There is an increasing level of interest among global/ North American conferencing participants to establish a strong footprint in overseas markets. However, regional vendors particularly in APAC continue to grow at a higher pace.

* Cisco and HP are positioning telepresence as the wave of the future, pouring millions of dollars into development and marketing. The media coverage and marketing efforts for telepresence have helped the sales of high-end video conferencing systems. Organizations that could not invest in telepresence, due to its high price tag, adopted high-end HD room systems that met their needs. Sales of high-end systems, and particularly HD systems with higher average selling prices, resulted in revenue growth exceeding growth in units. HD accounted for 55 percent of revenues in 2008 compared to 42 percent in 2007.

* We believe that the effect of the economic slowdown will be a double-edged sword. On one hand, video conferencing will help companies cut travel and facilities costs to support a more virtual workplace. On the other hand, it is reasonable to expect that majority of companies will hunker down and slash IT budgets to avoid new investments. We believe that the combination of the two will lead to a moderate growth in 2009. After a short-term period of stalled growth, we expect accelerated adoption leading to a six-year CAGR in revenues of 16.3 percent.