This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them. Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.
WebRTC and Cloud: The Race to the Bottom
For the pure-play WebRTC companies, competitive differences will eventually disappear. This is what happened in the Competitive Local Exchange Carrier (CLEC) business in the ‘90s. When all that they had left to sell was a lower price, many CLECs soon disappeared.
Close to 400 companies are using Web Real-Time Communications (WebRTC) in their products. Some are offering pure-play WebRTC solutions, and others are offering WebRTC solutions as an additional connection point for traditional enterprise communications. There is no question that there will be substantial revenue erosion in the communications industry as a result of WebRTC's royalty-free economics. For the pure-play WebRTC companies, competitive differences will eventually disappear. This is what happened in the Competitive Local Exchange Carrier (CLEC) business in the '90s. When all that they had left to sell was a lower price, many CLECs soon disappeared. The question for enterprises that seek to use WebRTC is: Who will survive?
While many traditional telecom CPE players struggle, cloud-based telecom providers are experiencing revenue growth in the 30 to 50% range. Some of these companies have revenues in the hundreds of millions of dollars. These companies are growing in spite of their use of legacy technology and legacy pricing models. Consider WebRTC's royalty-free economics and its architecture that lends itself to cloud deployment, and you can easily anticipate the 5x or 10x reduction in pricing that typically accompanies a true cloud disruption.
Traditional enterprise manufacturers could easily deliver WebRTC interfaces that would be tightly integrated into their media services; however, the moment that they do this, none of their customers will ever have to buy another telephone. This is a profound problem for most traditional manufacturers.
This situation is exacerbated by the availability of WebRTC-to-SIP gateways from several manufacturers of session border controllers (SBCs). Regardless of manufacturer, once a WebRTC-to-SIP gateway is implemented, telecom spend goes down for that enterprise. Further, if this is done from the cloud and delivered to the enterprise via a SIP trunk, then it happens fast and does not break anything.
Capital investment, specifically the depreciation of these investments, prevents enterprises from purchasing direct replacement solutions too quickly. Enterprise telecom investments are typically depreciated over 5 to 7 year periods. This economic distortion buys some time for the traditional enterprise telecom manufacturers. However, it opens the door for hybrid, cloud-based solutions that fit an operating expense model.
The alternative to the pure-play, premise-based WebRTC solution in enterprises is to extend existing systems through hybrid cloud integration. There are over 1 billion WebRTC-enabled endpoints today, and this number will quadruple in 2 years. Integration has the added benefit of not affecting the depreciation of existing assets. Further, it extends legacy systems outside of their physical borders to support ubiquitous, secure, context-rich, multi-device, multi-modal, mobile communications - all at a fraction of the current price.
So if you read closely, there are few places that a pure-play WebRTC software manufacturer can achieve the financial footing necessary to constitute a sustainable business. This is an opportunity for SBC manufacturers and any of the traditional telecom manufacturers that embrace the risks. The key here is that the traditional telecom model is being disrupted by technology in the form of WebRTC and economics in the form of royalty-free software and cloud distribution techniques.
True cloud disruption is driven by 5x to 10x reductions in price. If you are an enterprise looking to exploit WebRTC to the fullest, then be careful to buy from a company that has the financial stability to be around after a year or two of price reductions.