The demand for video conferencing is strong among enterprises, but IT departments are pulling away from expensive dedicated systems in favor of low-cost endpoints. This has turned companies toward PBX-based video systems, which are now driving market growth, according to Infonetics Research's Enterprise Telepresence and Video Conferencing Equipment report for the first quarter of 2014.
PBX-based system sales are up 32% from the first quarter of 2013 and video phones are the fastest growing segment of the video conferencing hardware market, with shipments increasing 48% from Q1 2013, according to the report.
In this Q&A, Matthias Machowinski, directing analyst for enterprise networks and video at Infonetics Research, discussed with SearchUnifiedCommunications the uptake of video on PBX systems and the trend towards low-cost video conferencing endpoints.
Can you explain what a PBX-based video system is?
Matthias Machowinski: A lot of these PBX systems have evolved toward capabilities beyond just telephony -- like unified communications, presence and all these other things. Video is one of the key ones that vendors have added. [This report] looks at the uptake of video on telephony platforms. We look at the uptake of UC and, here specifically, the uptake of video and video components.
The other way would be via software, so UC clients like a Skype client for the enterprise. [UC clients] do have video capabilities -- not all of them, but many do now. The PBX handles all the call control and connections and you're able to use video.
What are the use cases where a video phone is preferable to other video conferencing systems?
Machowinski: I don't think video phones are necessarily the greatest solution because the screen's really small and the angles can be kind of awkward. You will get better results from a dedicated [video conferencing] system. [But businesses are] trying to figure out "How much am I willing to pay and what am I getting out of it?" With video phones, what they're doing is striking the right balance.
If you look at the dedicated [video] system market, personal endpoints cost thousands of dollars. I think the average is around $4.5 to $5,000. That's a lot of money for one person. Video phones are a couple hundred dollars per phone. This is manufacture revenue, so the [buyer] is going to pay more than that. If you were to ask somebody what they prefer, video phone or a dedicated endpoint, they're probably going to say they want to have a dedicated system. But [are you] willing to pay for that is the big question -- or can you pay for it? And I think that's part of the reason behind the popularity of the video phones.
Is the growth of the video phone market new? How does this compare to previous years?
Machowinski: It's not entirely a new trend. In 2011 they started to take off. In 2011 we're looking at about $82 million in video phone sales. That doubled in 2012 to $190 million and then 2013 not quite doubling again to $275 million. We do actually think it's going to slow down in 2014 because the tax rate of video phones is getting quite high. In the end, a video phone is still a fairly high-end endpoint for a phone system.
You see a hierarchy where the top folks in a company get the best stuff and your basic phone is going to be reserved for the majority of employees. Video phones are still a high-end endpoint and I'm just not sure how sustainable the growth is going to be over the coming years. But I do have to say that they have certainly exceeded my expectations.
Does the future of video conferencing lie in cheaper endpoints?
Machowinski : That [video conferencing] trend will definitely persist for lower-cost endpoints. We'll see it in a variety of ways. With PBX-based systems, they are a cost effective way of rolling out video. We could also see on the dedicated system side cheaper endpoints arriving. Look at Cisco for example, Cisco just came out with some new endpoints for their dedicated systems and I think the pricing is quite a bit lower -- they're $2 to $3,000. Even though you're still in the same category, you now have a much lower-cost offering. You'll see lower-cost room systems coming out. The rise of software has been growing pretty well. I do think that we'll see [the trend] in a number of ways in this market here.
People are after the capabilities, they're not always necessarily willing to pay for them in full. Part of that is expectations. People use Skype in their personal life and you usually don't pay for Skype. There are some questions going around like, "Why should I be paying for this?" There are a lot of free offerings out there [like Skype and Face Time] and that's definitely competitive. A lot of smaller companies, for example, will use free [video conferencing] services.
So free consumer options will also drive down conferencing costs?
Machowinski: People are used to it and they get used to it. Just go back 15 years -- it was very unusual to make a video call. Today that's perfectly acceptable and some people have known nothing else. It's definitely a big shift. How long has the video phone been around? It was the 50s or 60s when it was introduced and [has] taken quite a while to catch on. But now we're finally at that point where basically everybody carries a video phone around with them in their pocket.
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