This article is intended neither to hype nor impugn any particular technology. Rather, it is a statement of what I see as an analyst occurring in the communications market and where I believe we will see winners and losers.
This analysis is based on close proximity to both the unified communications (UC) market in all of its forms (on-premises, cloud, hybrid) as well as through firsthand observation of the emerging trends in the WebRTC space from my participation in WebRTC events and in judging numerous WebRTC products, and in compiling significant data on numerous companies with WebRTC products and services. The title for this article has been percolating in my mind for some time and actually comes from a long conversation I had several years ago with Ian Small, former CEO of TokBox, along with numerous interactions with UC companies and WebRTC companies since then.
The Rise of the WebRTC Ecosystem
As communications gets "webified," via WebRTC and other enabling components, the traditional barriers to entry will come down. In turn, the webification of communications will unleash the collective powers of the Internet and the creativity of millions of app developers. Anyone with some JavaScript background can now create complex and useful communications, collaboration and data-rich applications in a matter of hours or days.
Enabling this webification of communications is an emerging dynamic ecosystem of companies -- both established and very new -- that offer WebRTC-enabled products and services. These products and services range from open source code that developers can freely reuse, to libraries and APIs, and all the way up to complete, ready-to-deploy standalone systems for voice, video and Web collaboration based on WebRTC.
To understand this ecosystem better, KelCor and PKE Consulting have recently engaged in research with and about these WebRTC companies. As part of this effort, we have developed a framework for the fragmented WebRTC marketplace that provides structure and order. What is more important, we have used this ecosystem framework to analyze more than 200 companies that offer WebRTC-enabled products and services. The WebRTC Ecosystem framework has become a useful tool for examining the WebRTC marketplace and identifying trends, products and services that are influencing how the webification of communications is developing.
A Look at the WebRTC Ecosystem
For our analysis, we have divided the WebRTC ecosystem into 30 discrete categories. As with the UC market, many providers span multiple categories. See Figure 1 below for an example of what the ecosystem looks like.
Thus far, we have provided detailed analysis of 210 companies participating in the ecosystem. The figure below shows the level of detail we have collected for each company (in this case, Twilio).
Predicting Winners and Losers
Drawing on data from the WebRTC ecosystem and my understanding of the UC market, I am prepared to make predictions about which segments may see revenue destruction and which segments may see revenue creation.
Read more inside:
A Look at the Conferencing Players
From Figure 1, we can see that there are 77 providers of complete WebRTC-enabled video conferencing solutions and 73 WebRTC-enabled audio conferencing providers (many overlap, but not all). Some of these names -- Blue Jeans Network, Lifesize and Vidyo, for example -- will be readily recognizable to most readers of this article. Others are lesser-known startups such as SightCall, UberConference, Facemeeting, Bistri and Veeting. What I find very interesting is that some of the largest audio conferencing and video providers have no announced WebRTC-enabled offering while some of these newer vendors already offer rather robust WebRTC-based conferencing applications.
When considering just video conferencing, one thing is clear: With so much competition, we can bet on continued price cuts, especially as WebRTC-based endpoints eclipse the market for group and personal video endpoints. Even now some companies are making WebRTC-enabled phones and video units, while many users will simply use a PC with a browser or a mobile device application. (This is not to say the market for telepresence and traditional group systems will disappear. It is interesting to see continued development of stylish and expensive video endpoints from providers like Cisco, which I think is offering its new telepresence units at a list price of $299,000 each.)
I have long said desktop video is free given the large number of applications people can use to engage in a desktop or mobile video conference. WebRTC further reinforces this position given that anyone with a computer already has or will have WebRTC built into the browser (yes, only Chrome, Firefox and Opera support WebRTC for the moment, but Internet Explorer will ultimately get there and Safari will have to adapt as well in order to compete with Android-based devices). So the money for video in the midterm to long term won't be at the desktop but rather in infrastructure and services.
Infrastructure investments will be forthcoming for a couple of reasons. For one, WebRTC can do multipoint video, but it is not particularly adept at doing so beyond a few users; as the processor and network gets taxed, enterprises will need more infrastructure to support WebRTC-based multipoint video. In addition, the impending arrival of VP9 and H.265 video compression technologies, both of which will require even more compute horsepower, will result in the need for new infrastructure -- once again making infrastructure a reasonable bet for revenue generation.
That said, WebRTC-based infrastructure will not support traditional video infrastructure pricing, which often approaches $1,000 to $2,000 per port installed. Twenty-four companies provide WebRTC-enabled media servers, and we estimate pricing will decline by an order of magnitude over the next few years. Acano and Pexip already are pushing the pricing envelope downward, and the other companies in this segment will do so as well.
Furthermore, as open source media servers become available they will likely cannibalize revenues even further. One such media server was on display at the WebRTC Expo in November 2014 from a non-profit entity called Kurento. This organization is not included in the WebRTC Ecosystem report simply because we didn't know about it when we went to press. This market is still very dynamic.
I do not predict that this revenue destruction will happen overnight, but we will likely see continued slow erosion of the video endpoint market.
We will also see erosion of the per-minute rates conferencing service providers (CSPs) are able to charge for audio and video conferencing. For example, UberConference offers a freemium audio conferencing service that lets up to 10 people participate via a WebRTC-based client (Chrome for the time being) or PSTN connection. The unlimited service with higher capabilities is $10/month for unlimited conferencing. In a recent one-on-one conversation, Craig Walker, CEO of Switch.com, UberConference's sister company, assured me that this revenue rate is sufficient to operate the business while he noted that the conversion rate to paid service is doubling every month.
TokBox, which offers what we call a complete WebRTC framework, provides 720p-based video bridging as part of the service for which it quoted me, via email, a price of $0.005 per minute per leg (yes, that is one half a penny per minute). Now, this clearly does not include gateway service for H.323- and SIP-based video units, but the important point is the downward trend we expect to see in pricing in the traditional conferencing segment.
Twilio now offers SIP trunking with no long-term contract based exclusively on usage rates, and the per-minute price can go as low as $0.004. For WebRTC-based communications, Twilio also offers a free STUN service that helps media flows traverse firewalls. If this is not sufficient, it also provides a TURN server service, through which media can flow, with pricing beginning at $0.40/gigabyte of media for the first 100 GB and decreasing significantly after that.
For interested readers, I have compiled a list of 13 sites where people can go to use WebRTC-based conferencing absolutely free, and generally the quality of these sessions is very good. I am most familiar with Tawk.com and Appear.in, both of which provide multipoint audio, video and screen sharing. In one recent meeting, one of my vendor customers was having issues with its own downloadable client, so we switched to one of these WebRTC sites. That person was astounded at how well the free service worked. In another situation, audio and video began deteriorating during a conference for which we were both using Microsoft Lync via Office 365 . We switched to a WebRTC-enabled website, both using Chrome, and the audio and video were flawless while nothing in the network changed. We used the same cameras, microphones and PCs. The point is, the peer-to-peer nature of WebRTC likely enabled a better call. (In full disclosure, I pay for a number of Office 365 accounts because I find them so useful for my businesses. The conferencing works well the overwhelming majority of the time, but on occasion, as in this case, the audio and video can flake out.)
In conclusion, when we consider that data from the CSPs themselves indicate that the average conference has 4.1 participants, one can immediately begin to see how some of these free and freemium WebRTC-based conferencing services could easily gain traction, destroying revenues from existing industry leaders. At the same time, we can see new players emerging that stand to create revenue from elastic conferencing solutions, which are low cost for the vendor to operate and which are nearly an order of magnitude less expensive for to people use.
Click to the next page for a look at what's in store for the UC providers, cloud vs. on-premises trends and the rise of the SBC
What's In Store for the UC Providers?
As shown in Figure 1, 29 companies offer WebRTC-enabled UC solutions. This includes Unify with its Circuit solution, which is WebRTC-enabled for audio and video but interestingly does not use the WebRTC data channel for chat or screen sharing. In this area we have profiled efforts by ShoreTel, Cisco, Mitel, Interactive Intelligence (its PureCloud will support WebRTC once this cloud-based offering becomes available in the first half of this year) and Avaya, but most of these traditional UC providers do not yet have fully-baked WebRTC-enabled offerings (what they do have available is outlined in the WebRTC profile we have created for each one). There are some newcomers that do, however. Consider BrowseTel, a company headquartered in the U.K. with developers based in Slovenia. BrowseTel's capabilities are shown in the graphic below.
Although BrowseTel has formally been incorporated for only two years, it supports a tremendous list of capabilities. It is a prime example of how quickly developers can create a UC solution using WebRTC. The company offers on-premises and cloud-based capabilities as well as a development framework with a software development kit (SDK) for inclusion of WebRTC in other applications. BrowseTel also offers PSTN access through WebRTC gateway functionality.
The point is that the UC market, which is already seeing significant pricing pressure, will experience more pressure as these newcomers emerge, particularly those with cloud-based solutions. Other examples include Solaborate out of Macedonia, Switch.co, frisB, Voice4Net, Quobis, and about 15 other companies. Switch offers a UC capability for $15/user/month, which is one-half to one-third the price of most other cloud-based offerings.
A Word About Cloud vs. On-Premises Offerings
In the communications market, capabilities and business models are developing so fast that on-premises offerings will have trouble competing with the cloud for feature/functionality and price parity. Figure 1 shows 41 companies offering enterprise-focused WebRTC-based solutions that run in the cloud. This is opposed to only 27 that offer equivalent solutions for on-premises offerings.
I am quite bullish on cloud-based offerings even though I have written in the past that cloud-based UC solutions are generally more expensive than on-premises offerings over a five-year total cost of ownership window. Over time, however, I suspect that with increased competition these prices must come down, and that these companies will begin amortizing their costs over a large number of customers to provide better pricing. WebRTC will enable cloud-based providers to price their solutions more competitively. Furthermore, built as they often are to take advantage of elastic cloud computing, these solutions can be offered inexpensively by this new generation of WebRTC-enabled providers.
The Rise of the SBC
A few months ago, our industry colleague, Marty Parker, wrote an article on UCStrategies.com entitled, "How to Carve a PBX." One of the takeaways from Marty's article was the emerging importance of the session border controller (SBC) as an alternative to the PBX. Marty had this suggestion for companies: "Remove the mobile, field and remote workers from the PBX."
This suggestion is amplified manyfold for WebRTC and also applies beyond mobile, field or remote workers. Just as a regular phone or video call needs some sort of call routing mechanism, WebRTC needs some type of a "rendezvous server," a term I first heard from a Cisco insider. A rendezvous server provides a mechanism for user authentication and for routing of the call signaling, and the SBC seems to be a perfect place to host this function. Alternative architectures for this capability are being proposed. For example, in the Oracle architecture an Enterprise Communications Broker (ECB) sits in the core of the network and abstracts dial plan management, call control and routing services for internal calls. The ECB, a server, can interact with Oracle's SBC for ingress/egress needs. Companies like AudioCodes, Sonus, Sansay, Ingate and the 13 other organizations that provide WebRTC-enabled SBCs stand to gain from wide deployment of WebRTC-enabled solutions. Expect to see further destruction in revenue for existing PBX vendors and some revenue creation for SBC providers.
Click to the next page for a look at framework and toolkit providers and a revenue prediction wrap-up
Framework and Toolkit Providers
As communications becomes more webified, the role of WebRTC toolkit providers will become more and more important. We have divided up the ecosystem into two main categories of toolkit providers: those like TokBox, Twilio, Genband, Oracle, Frozen Mountain and a host of others that have complete frameworks; and the 95 companies that provide general WebRTC SDKs and tools. The main difference between these two groups is that the complete framework providers have a whole solution, while the SDK and tools providers have the ability to provide only those elements someone wants to use. For example, someone may want only messaging capabilities but not voice and video capabilities. Or, someone may need just a media server but not an SBC.
As communications sees more webification and democratization, toolkit providers will play a significant role in getting solutions to market. For example, the Democratic National Committee used the messaging portion of Twilio's toolkit/platform extensively to promote President Barack Obama's 2012 reelection bid. This solution was elastic in that it could expand as needed, but it could also contract once the election was over. Such is the nature of some of these WebRTC-enabled frameworks and toolkits.
The key for these providers, given that there are a lot of them, is to try to generate some brand awareness and some good use cases. We ran across a number of excellent frameworks and toolkits as we were preparing the WebRTC Ecosystem report, and we profiled them in the document so that investors, enterprises and developers can at least have some hope of finding them.
Conclusion
I am not a doomsdayer when it comes to our current communications market. Rather, I am suggesting that traditional solutions and businesses are going to experience continued long-term, steady revenue decline. We have seen some of this decline in the revenues of several of the market leading companies in our space. Conferencing service providers will also see continued per-minute revenue erosion. Thus, per the title of this article, revenue will in these instances be destroyed.
However, there are some bright spots emerging where revenue will be created, but the money is going to be more broadly dispersed. For example, WebRTC infrastructure will likely be a bright spot. With WebRTC, integration of communications into business applications is much easier, especially with modern Web-based and mobile apps. The existing UC players in the market can still play here, but it is unlikely that, in the long term, they will receive the price premiums many of them require to remain interested in the market. Hence, they may ultimately be disrupted.
I also see some of the complete framework providers and a handful of companies that offer WebRTC SDKs and toolkits as having a bright future. The key for these players is to get noticed and used quickly. I personally like the low-cost-of-entry, usage-based models adopted by some of these companies, including TokBox, Twilio, Temasys and Acision, in this space. Others, like that of Genband's Kandy real-time communications software development platform, will appear more useful to those who want to "own" the solution.
Some SBC manufacturers will see significant migrations of call control and routing come to them from the clientele of the current PBX infrastructure providers. Also, as WebRTC use expands, these manufacturers will be well positioned to take advantage of the fundamental changes in call control, routing, authentication, billing and other functions that a webified communications paradigm will demand. To name a few, Oracle is particularly well positioned, AudioCodes and Sonus should benefit, and Voxbone, as a WebRTC on/off ramp, should see continued good growth, too.
For the short term, expect revenues to continue to be concentrated in the mainstream UC and conferencing players. In the midterm to long term, expect to see the webification of communications take its toll on these mainstream players. Revenue will become much more widely dispersed among a large number of new and existing companies. Dark spots are UC and conferencing; bright spots are in frameworks and SDKs, particularly cloud-based frameworks, and in certain types of infrastructure, including media servers and non-PBX-based call control.
(Author's note: The opinions expressed herein are mine alone and do not necessarily reflect those of the other authors of The WebRTC Ecosystem report.)
