Vidyo's Free Cloud-Based Connectivity Service - Could it be a Game Changer?
Vidyo is grabbing the headlines this week with the announcement of VideoWay - a free cloud based connectivity service for anyone using H.323 and SIP-based video conferencing endpoints, Lync clients, and mobile devices to connect with each other and/or with Vidyo endpoints. Scheduled to launch this fall, the free service is targeted at users in the enterprise videoconferencing market which is currently dominated by traditional MCU and gateway solutions and services. According to our recent research, the market for video conferencing infrastructure systems continues to grow rapidly with global revenues reaching $746.6 million in 2011, growing at 26.8% over the prior year. The top two vendors – Cisco and Polycom– dominate the market with 75% of the revenue share. Vidyo aims to disrupt this space with its software-based routers that leverage H.264 SVC technology for delivering HD video over general purpose IP networks at lower costs. Growing at 82% in 2011 (albeit from a small revenue base), Vidyo is expanding its footprint for its branded products as well as non-branded offerings through service provider and OEM partners.
I was at the pre-briefing and demo of VidyoWay last week at an analyst event hosted by Vidyo in New York city. The process of joining a VidyoWay call seems extremely simple for even the most novice users. Users can click to connect from the email invite and join the video conference via the web interface with a meeting number and PIN, similar to using an audio conferencing service today. This takes away the complexity typically associated with multi-vendor environments connecting for B2B video collaboration. Users can invite participants from their own address book instead of a centralized directory. VidyoWay also offers a mobile client for smartphones and tablets.
VidyoWay being completely free will appeal to IT managers that are looking to extend the reach of their existing video conferencing systems for B2B connectivity without busting their budgets. This announcement will directly impact not only the traditional MCU market but also services offered by the likes of Blue Jeans (though Skype connectivity is missing), Vidtel, and Glowpoint.
When asked about the cost model and monetization opportunities, Ofer Shapiro Vidyo’s CEO and co-founder explained that VideoWay is strictly meant to connect existing video conferencing endpoints from providers such as Polycom, Cisco, and LifeSize (roughly measuring at a million endpoints today). Vidyo will monitor usage and through its fair use policy will require the use of the service only for the purpose of connecting traditional room and desktop based video conferencing devices. Vidyo is not giving away any free video conferencing clients, such as VidyoDesktop licenses, so it will continue to generate revenues for its product line. As a result, Vidyo will be able to contain the costs while being able to use VidyoWay as a platform to create awareness and get into the enterprise. According to Vidyo, the economics work out way better than the expensive marketing campaigns.
Vidyo has already created a buzz in the market for its solutions and its message against what it calls expensive legacy MCUs. While it does not publicly disclose in-depth revenue details, in Q1 2012 when most vendors reported a Y/Y revenue decline Vidyo grew revenues by 90% for its branded products. With VidyoWay, the adoption will escalate even further making it a key provider in this space.
B2B connectivity has been one of the biggest pain points for videoconferencing users. VidyoWay addresses that challenge directly and since it will be free for any number of enterprise users, it has the potential to immediately swing users from competitive offerings. However, the move is not without risks. It goes without saying that VidyoWay will catch on only if the service delivery is top notch and users don't face any technical or usabilty issues. Moreover, Vidyo’s success will eventually hinge on its ability to have a sustainable monetization model and on conversion of free users to its paid-for solutions and services. While it remains to be seen if Vidyo will be able to significantly impact the well establised video conferencing businesses run by Cisco and Polycom, this announcement is sure to pose some serious headaches for Vidyo’s competition.