Blog archive - October 2011

We recently published our 2011 web conferencing research which points at the strong demand and growth potential for web conferencing solutions. Global revenues in the web conferencing market reached $1.5 billion last year, growing at 10.8%. User demand is growing rapidly though revenue growth is starting to slow down due to increasing market maturity and the impact of declining prices. Revenues are expected to reach $3.1 billion in 2015, supporting a widening user base and a healthy 5-year CAGR of 15.3%. Fast decline in prices and significant technology evolution are permitting customers to roll out web conferencing at a wider scale, going beyond traditional departmental-level deployments. The market is seeing early mainstreaming with penetration rates pushing up. Here are the key trends and findings: SaaS Remains Dominant – Hosted services or SaaS contributed 81% of total web conferencing revenues. Based on an OPEX model, cloud technologies are creating time to market advantage for organizations of all size. The on-premise market showed strong momentum registering higher revenue growth than SaaS. The push toward UC is expected to lead to stronger growth for on-premise web conferencing. Cloud based UC services are evolving and do not yet offer the robust capabilities that their server-based counterparts provide. The need for customization and deeper integration are other reasons for adoption of on-premise UC. Mobility and Video Redefine Collaboration – Enterprise communications is getting redefined as it centers around three new trends: mobile, social, and visual. End users will continue to win the "battle of choice" (BYOD, BYOA, consumerization of IT…). The mobility explosion, combined with growing demand for video and social media, has led to richer forms of web collaboration enhancing the end-user experience. Personal videoconferencing fueled by Skype, Apple FaceTime, Google Talk, is making enterprises more video-ready which has pushed video into all collaboration forms including web conferencing. Software plus Service – Private clouds, hybrid solutions, and managed services are emerging to shake up traditional business models. As users move from an "either/or" approach to a hybrid ‘software plus service’ model, vendors are offering flexible deployment modes to meet changing end-user needs. Private clouds are the right answer for large enterprises that are risk averse and want to take small steps to cloud computing. Growing Focus on Interoperability – Interoperability across multiple devices, networks, and applications will be critical to long-term viability of any offering. Vendors are offering SDKs, and open APIs for seamless integration with line of business applications, development of customized mobile apps, integration with telepresence systems, and so on. Global Footprint – Growth in APAC far exceeds the annual growth in other regions. APAC is growing from a smaller base and remains under penetrated, posing strong opportunities over the next several years. Ensuring global availability and support of products and services will define the winning vendors and solutions. BRIC nations as well as countries classified as MAVINS (Mexico, Argentina, Vietnam, Indonesia, Nigeria, and South Africa) are the next hotspots for growth. Pricing Pressures – While web conferencing continues to be a good growth market, revenue growth is not fully indicative of demand. Rapidly declining prices are bringing in early stage commoditization. We expect price declines to be in the 15 to 20% range over the next few years resulting from heightened competitive pressures and an increased focus on selling larger communications solutions. Strong SMB growth – Cloud-based solutions are winning big among SMBs. SMB contribution in hosted web conferencing market continues to climb at a rapid pace. Vendors across the board are revving up ecommerce capabilities for better SMB penetration. While e-commerce is well established in North America, efforts are underway for ecommerce enablement and local language and currency support in several international markets. Ongoing Market Consolidation - The web conferencing market has seen several smaller players and free conferencing providers gain significant traction. However, with the overall move toward UC, the market is getting more concentrated in the hands of larger vendors. Recent acquisitions include Dimdim by Salesforce, Elluminate and Wimba by Blackboard, Netviewer by Citrix Online, and more recently that of iLinc by Broadsoft. In the UC space, Microsoft’s acquisition of Skype further consolidated its position in the communications market. The well-established position and marketing muscle of communications giants pose threats for smaller players. However, larger vendors that are integrating web conferencing into their UC portfolio have to evolve their business models to continually innovate, offer attractive pricing, and stay agile to outsmart smaller more nimble competitors. Keep it Simple – The dominant theme is simplification and creating easy-to-use stickier solutions at attractive price points. Feature explosion, or overloading a product with features, leads to explosion in complexity. What remain top of mind among customers are simpler intuitive yet rich user interfaces that deliver real business functionality. Open solutions are enabling an entire ecosystem of third party applications that run on top, so users can customize their user experiences and functionality. For further information and in-depth market metrics, forecasts, market shares and valuable insights see the full study titled "Analysis of the Global Web Conferencing Market" (code N9D0-64) on www.frost.com.

The first three quarters of 2011 were strong for Verizon from a capital spend perspective, so it came as no surprise the fact that 4Q CAPEX will probably increase less sequentially than in past years, following a similar dynamic to AT&T. Typically, in years past, the Verizon 4Q CAPEX would rise in the 11-13% range, however we believe CAPEX will only rise by ~6% this time around. This has already been factored in by guidance offered by Verizon suppliers such as Adtran and Juniper, which reported 3Q results with lower/revised guidance for 4Q. Verizon's 4G LTE network now reaches over 186 million Americans, surpassing the 185 million goal (by YE 2011) set by the company in 2010. In mid-November, Verizon will light up 13 more markets, for a total of 178 markets. 52% of its new postpaid subscribers (882,000 altogether) are coming from 4G subs (smartphones and Internet and data devices). Verizon sold 1.4 million 4G LTE devices last quarters, half of which were smartphones.

This blogpost was first published in Social Media Today, October 18, 2011, http://bit.ly/qHIEmO. Two months ago, a friend of mine up in Austin had a bet: who could make it to Elite status on Yelp faster. He won, besting me with 50 reviews to my paltry 21. Yelp, the site for user reviews, mostly of restaurants, has grown exponentially. There are 63 million people who have visited the site in the last 30 days, and Yelpers have contributed over 21 million local reviews. Indeed, nowadays, a restaurant is more concerned with its reviews on Yelp than those of the local newspaper reporter. In the battle for our attention, there is also Foursquare, the leader in geotargeting or check-ins, which was founded in 2008 and counts over 10 million members and over 1 billion check-ins. Most discussions of Foursquare usually center around the site's position with respect to other check-in services, such as Gowalla and Loopt, but as all social networks vie for user's time, and location-based services are all the rage, why not compare the leader in user-generated reviews to the leader of checking in? Hands down, Yelp wins out over Foursquare. Here's why. Checking in is a one-trick pony. Moving from a nifty engagement tool to an annoyance perhaps bordering on self-promotion or cyberstalking, checking in is losing its mojo. Foursquare, while having added deals to its service, will need to provide a much more robust offering if it is to continue appealing to users -- and survive. As a testament to the low returns of checking in, Facebook abandoned its Places check-in service in August. A mobile-only experience cannot survive. The Foursquare website is just not engaging enough and offers little incentive to visit the site or the opportunity to interact with others. Foursquare's game mechanics, including its badges and mayorships, have survived and continue to enthrall, but there is simply no reason for users to spend any significant amount of time on the website. And without another endpoint, advertisers and marketing partners will have fewer eyeballs and eventually leave. Content provides engagement and long-term value. What makes Yelp so intriguing is the millions of reviews that are self-published by its members. Others can rate these reviews (Cool, Funny or Useful) or share and comment. Because the site is continually updated with fresh content, Yelp pages continually display higher in search results. This is not the case with Foursquare. The only content one can contribute to Foursquare is a few words at check-in, a tip, or a photo. Complete reviews of establishments, message boards, and offline events, as with Yelp, are nowhere to be found in the service. With Yelp, there exists proof that consumers own the brand experience, while with Foursquare, it's not as obvious. In past articles on how to improve the Foursquare experience, experts have suggested that Foursquare roll out a promotions program such that when a patron checks in to an establishment, the manager or business owner recognizes this individual with some type of acknowledgment, discount, or prize. Too little too late: While Foursquare has made three upgrades in 2011 alone, it has added too little too late. It overlaid discounts or deals with its basic check-in service, but it isn’t robust enough. There is a pages feature, in which users can follow companies, brands, and media organizations, but it seems like simply a marketing relationship without any real value delivered to the user. Over time, Yelp has added features to its site and mobile application, including the ability to check-in -- taking aim at Foursquare. The site, in efforts to join the daily deal craze, also includes coupons and specials from local merchants. As such, there is substantial overlap between the services. And the value of sites with user-generated content continues to rise. Last month Google acquired Zagat, a clear indication in the value of user-generated reviews. When using the Google Places mobile app, for example, reviews from Urban Spoon and other sources frequently display, indicating the importance of integrating user-generated reviews with location-based data. And with Google+ picking up steam, expect even more integration between Places and Zagat. However, this isn't to say that Yelp has its issues, too. Both Yelp and Foursquare still have much to prove with large national brands; deals and coupons are largely relegated to local businesses only. Both sites will need to demonstrate much more value to garner buy-in from major advertisers, as well as the media buying agencies that represent them. With its millions of content pages, mobile app, and cheeky branding, social media professionals, marketers, and investors are wondering what will be next for Yelp, but perhaps less so for Foursquare.

Steve Jobs was clearly a brilliant innovator, but what set him apart from other great technology pioneers was his ability to distribute, market, and monetize that innovation on an unprecedented scale. Though Jobs always evangelized great products as the foundation of Apple’s success, it was his inordinate ability to simplify complex ecosystems that has been paramount to the commercial success of Apple products. Simple Can be Harder than Complex “That’s been one of my mantras — focus and simplicity. Simple can be harder than complex: You have to work hard to get your thinking clean to make it simple. But it’s worth it in the end because once you get there, you can move mountains.” – Steve Jobs 1998 There is no better example of this then the App Store. In a customer's buying decision for an iPhone or an iPad, the App Store is at the front and center of the value proposition. The backend complexity of delivering an integrated storefront experience on a mobile device (from application discovery, to purchase, to delivery, to billing) is no easy task. Jobs was at the forefront of driving the vision for a simplified, seamless experience for mobile users to access premium digital content, while simultaneously creating an ecosystem where application developers could easily monetize these transactions. The success of the App Store has been astounding with over 350,000 apps available today, over 10 billion downloads, and a cumulative $2 billion sent to developers for apps sold in the App Store. Interestingly, before the introduction of the App Store, the complexity of completing a mobile transaction was often considered a greater inhibitor to the propensity to purchase then the cost of the transaction, which further strengthens the argument that much of the commercial success of the App Store can be tightly tied to the very concept of simplicity. Former Apple CEO, John Scully, once said of Jobs, “He’s a minimalist and constantly reducing things to their simplest level… He simplifies complexity.” Control the Vision, Own the Ecosystem In order for Jobs to maintain control of his vision he believed strongly in end-to-end ecosystems and, in particular, that the integrated hardware + software approach is superior to the approach of a common software platform crossing disparate hardware providers. In contrast to many of Apple’s competitors, which have focused on select pieces of the value chain (and outsourcing everything else), Jobs advocated comprehensive ownership, not simply to maximize margins but, more importantly, to maintain Apple’s high standards of quality across the full supply chain. Recent industry developments, such as Google’s acquisition of Motorola Mobility and Microsoft’s partnership with Nokia, are increasingly validating the integrated approach as the more attractive long-term model. Products Speak for Themselves, but Perception Drives Reality Jobs has often downplayed the importance of advertising and public relations in interviews but it is no secret that Jobs was the mastermind behind Apple’s marketing brilliance. John Scully has said the concept of making Apple a ‘product marketing’ company was discussed quite frequently in Apple’s early years: “We talked often about how perception leads reality and if you are going to create a reality you have to be able to create the perception… a high level of perception of expectation will sort of tease people to want to find out what the product is capable of”. Clearly, Jobs had a perspective that always started with the product, but it was his unique view of defining the ‘user experience’ that separated him from the pack. Jobs viewed the user experience as the full end-to end journey, from marketing, advertising and discovery, to user interaction with the physical product. The profound impact that Jobs has had on technology, business, and marketing has been unprecedented and unlikely to be replicated anytime soon. Jobs has been called everything from a visionary to a creative genius. He often downplayed his iconic status: “Creativity is just connecting dots. When you ask creative people how they did something, they feel a little guilty because they didn’t really do it, they just saw something. It seemed obvious to them after a while. That’s because they were able to connect experiences they’ve had and synthesize new ideas… Unfortunately, that’s a rare commodity. A lot of people haven’t had very diverse experiences. So they don’t have enough dots to connect, and they end up with very linear solutions...” –Steve Jobs So for future visionaries, some dots worth pondering: 1) Focus on Simplicity 2) Control the Vision, Own the Ecosystem; 3) Products Speak for Themselves, but Perception Drives Reality…

Today the legendary Steve Jobs is no more. A legion of fans, nations and the future of technology mourn. In the past decade, no one came close to Steve Jobs in re-invigorating technology and helping in changing the global markets forever. Jobs instilled a sense of competitiveness and challenge to so many of Apple competitors that drove them to innovate more to compete with Apple’s path breaking products. In the last few years when the global markets were down on optimism, companies were going bankrupt and unemployment was on rise, one company withered that entire storm by continuing to introduce products that were beautifully crafted and which appealed to young and old alike. Jobs through his innovations instilled a sense of optimism and a beacon of hope to many who thought technology will indeed come to save the day. It certainly did for Apple, which quarter after quarter reported record breaking profits. Steve Jobs has cemented his place in the hall of fame of inventors who provided this world with innovations that in a way brought a sense of order to the chaos of information. He will truly be missed. I hope and pray Apple will carry his vision forward and continue to shower this world with innovative products and technology. We need a few more disruptive technologies to bring back the glory of economy which seem to have got lost in the last few years. R.I.P. Steve Jobs

The SIP phone market is one of the topics I am most passionate about inside the enterprise communications arena. It is a market that has been transforming considerably over the last years driven by multiple factors such as new technology innovation, competition, the economy and changing customer demands. While many still think that the years of the IP desktop phone market are numbered, we contend that these types of devices will still enjoy double-digit unit growth figures for at least the next four to five years. In fact, we estimate SIP phone shipments to more than double by 2015, reaching around 4.7 million in units sold around the world. Some of the main factors contributing to this growth include the productivity gains enabled by technological advancements that increase the overall value of the devices, declining prices along with the increasing popularity of SIP phones, and the continuous introduction of new SIP phone models with new capabilities from leading manufacturers. Although the line between proprietary versus open standards can often be grey, we define SIP phones as devices adhering to IETF specifications (with little or no proprietary enhancements) that should naturally offer integration with the majority of telephony providers. This article intends to give some broad brush strokes on SIP phone market developments such as current and evolved characteristics of new SIP phones, growth factors by region, price findings, and evolution of the competitive landscape. We talked with some of the major independent SIP phone vendors. What follows is a summary of the conclusions drawn by us and the participants of this market. Current & Evolved Characteristics of SIP Phones: The SIP phone market continues a fast-paced evolution expanding the spectrum of markets and delivering more functionality to businesses. Today, almost all new medium-level SIP phone models incorporate advanced features such as wideband audio, color, touch displays, XML and video applications support – among others. As a result, more business customers are looking for high quality, feature-rich, yet economical devices. For example, many businesses are evaluating SIP phones that support HD voice, even in cases where the majority of calls are internal. Many businesses require their newly-acquired phones to be capable of extending different UC-related features to the desktop, as investments toward soon-to-be deployed UC solutions. Further, more organizations are evaluating high-end models that incorporate video through open standards as a way to secure their investment in terms of interoperability. The business case of video support has been more popular lately with the focus of service providers starting to deploy SIP phones to support video and other advanced services in attempts to reach a greater number of users. On the other hand, simplicity and cost are key, with a variety of sub USD 50 simple and affordable IP phone models in the market. SIP Phone Growth Factors by Region: All regions are doing well in terms of SIP phone adoption. In North America the adoption of SIP phones has been especially strong. North American adoption has not only been related to particularly strong VoIP adoption, but also to the integration of SIP phones as part of broader UC solutions. SIP phone use in this regard is expected to grow as Microsoft Lync matures and deployments of it become more pervasive. In Europe, where the market can be described as more traditional and conservative (except for the more advanced Nordic region), the region has displayed strong signals of SIP phone adoption. While customers tend to prefer whole solutions from larger, better known vendors, price considerations are opening the door for different SIP phone vendors to sell their solutions. The SMB segment specifically is showing notable in adoption in this region. Additionally, more Tier-1 carriers in Europe are beginning to offer SIP-based bundled services. In APAC, on the other hand, most of the well-established independent SIP phone vendors identify strong competition from local vendors as well as special regulatory constraints as obstacles to better penetration in this market. Establishing good relationships with leading service providers has been identified as key to momentum in this region. In the CALA region, although growth continues, there is a push in different countries (including Brazil and Argentina) towards local equipment manufacturing over imported goods, which pushes some of the large SIP phone vendors to manufacture locally in these countries. SIP Phone Price Findings: Like any growing technology, segment prices are showing a tendency to go lower as volume and competition increases. There is a growing sensitivity to price per seat and reduced CAPEX. Almost all vendors are showing great efforts to satisfy the market with lower-end, lower-price products, while at the same time adding rich functionalities that are more cost advantageous that what can deployed in a proprietary landscape. Also, new participants are affecting established vendors, who are now forced to lower their prices.. Today, SIP phone prices could be found from USD 40 to 300. Competitive Landscape Findings: Although competition in the SIP phone market is increasing, the contest has been recognized to come more from existing vendors with new offering than new vendors. In fact, almost all the established SIP phone vendors have made prominent efforts to set the barrier of entry higher by focusing on developing innovative products and trying to meet customers’ evolving needs. Grandstream, for instance, has almost doubled its portfolio of IP telephony terminals in the last 12 months in reaction to demand and competition. In spite of this, almost all vendors recognize new kids on the block that are bringing new excitement into the market, such as Asian manufacturer Yealink. Although established vendors will always try to keep the barrier of entry high in this market, almost all vendors expect more names to enter the SIP phone market within the coming years, particularly from Asian manufacturers and service providers developing their own advanced video models. Some of the competitive strategies of established SIP phone vendors that will be pivotal for success going forward include: UC-enabling thier devices; production of business media phones; partnerships with service providers looking to expand their solutions; the stronger, more pronounced fixed-mobile capabilities; and continued improvements in manageability and provisioning, both in the initial installation and day-to-day maintenance of the SIP phones. Last but not least, established SIP phone manufacturers should play close attention to the evolution of telephony vendors in their continuous crusade to open up their historically proprietary systems and more holistically adopt open standards. We would like to extend special thanks to the following market participants for providing us with their point of view on this subject matter: Aastra, Audiocodes, Grandstream, Polycom and Snom.