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Audio, Video, andWeb ConferencingInfrastructure Products

RichMedia2004

Conferencing

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Rich Media Conferencing – 2004

Volume 1, Audio, Video, and Web

Conferencing Infrastructure Products

April 2004

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About the Authors Andrew W. Davis is Managing Partner at the Wainhouse Research, LLC, a Brookline, MA-based firm providing market research, business planning, and marketing services. He has more than ten years experience as a successful technology consultant and industry analyst. Prior to independent consulting, Andrew held senior marketing positions with several large and small high technology companies. He has published over 200 articles and columns on multimedia communications, image and signal processing, videoconferencing, and corporate strategies in multiple trade journals. He has created and taught monthly two-day seminars on multimedia communications, videoconferencing, and streaming media technologies. Mr. Davis holds B.S. and M.S. degrees in engineering from Cornell University and a Masters of Business Administration from Harvard University. He can be reached at [email protected]. Marc F. Beattie is a Senior Analyst and Partner at Wainhouse Research, LLC where he heads the CSP practice. He has authored public and private reports on product strategies, distribution structures, emerging technologies and industry applications. Marc is the principle author of CSP SpotCheck, and co-authors Wainhouse Research’s three volume Rich Media Conferencing series annually. He is a featured speaker and moderator at industry conferences and private company events - specializing on the future impact of current technology developments. Marc regularly consults with end users, established vendors, emerging companies, and the financial community. He is a member of Gerson Lehrman Group's The Councils of Advisors and Vista Research's Society of Industry Leaders through which he advises worldwide financial clients on technology companies and trends. Prior to joining Wainhouse Research Marc was an early member of PictureTel and Polycom - holding positions in product management, business development and sales management - and spent 13 years working within the industry. He has been an independent analyst and consultant since 1998. He can be reached at [email protected]. Andrew H. Nilssen is a Senior Analyst and Partner at Wainhouse Research, LLC. Andy has over 20 years of experience in bringing high-technology products to market. At Wainhouse Research, he co-authors many of the firm’s market research reports and has lead seminars on streaming media technologies & applications and real-time conferencing over IP networks. He is also a consultant to rich media conferencing vendors, network infrastructure vendors, end users, government agencies, and venture capitalists. Prior to Wainhouse Research, Andy was Director of Marketing at PictureTel where he identified strategies and partners to expand business, and was responsible for all market research including end-user, competitive, and market sizing. Earlier, Andy managed the planning and launching of PictureTel's Venue and Concorde group systems and authored the original business plan for SwiftSite. Andy was also Vice President of Marketing at Visual Technology, a maker of IP-based network terminals, and a Product Line Manager at Sun Microsystems. Andy earned his MBA and BSEE degrees from the University of New Hampshire and holds two ease-of-use related patents. He can be reached at [email protected]

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Rich Media Conferencing 2004

A comprehensive series of market research reports designed to help you keep abreast of

the rapidly changing technologies, offerings, and vendors in the audio, web, and video conferencing and collaboration markets.

The rich media conferencing and collaboration market is undergoing important changes. Audio and video conferences are being deployed over IP networks, though network QoS, bandwidth, and infrastructure bottlenecks remain a concern. Web conferencing and Instant Messaging, combined with the enormous power of Presence and Availability Management, have come out of nowhere to gain massive popularity and support from important enterprise software vendors who are looking to morph many collaboration functions into features of higher level applications rather than see them exist as stand-alone desktop applications. Videoconferencing systems are evolving with new standards promising higher quality video, security, and data conferencing capabilities. Demand for video- and collaboration-centric hosting services is building as enterprises of all types look for ways to improve communications and reduce travel expenses. Wainhouse Research’s Rich Media Conferencing series will help you track the market, understand your competition, re-vamp your marketing messages and distribution strategies, and maximize your return on investment. Our goal is to broaden your understanding of the technology and market trends and to provide an independent insight into the future.

The Rich Media Conferencing series consists of three separate reports of interest to vendors and end users alike:

Volume 1: Multimedia Networking Infra-structure Products - Market and technology overview of audio, video, and web conferencing servers, MCUs, gateways, and gatekeepers complete with summaries of major vendors and their product lines, and a detailed 5-year forecast.

Volume 2: Conferencing Clients -

Video and Web conferencing clients market and technology overview, complete with summaries of major vendors and their product lines, and a detailed 5-year forecast.

Volume 3: The Services Industry -

Audio, Video, Web & Streaming conference services market and technology overview, complete with summaries of major conferencing service providers (CSPs) and their service offerings, and a detailed 5-year forecast.

The RMC report series is available by full series subscription or individual reports; in either hardcopy or electronically via Adobe Acrobat pdf.

Segment Focus Reports Wainhouse Research Segment Focus reports are published on an ad-hoc basis. They are intended to provide in-depth coverage of markets, technologies, or product categories of special interest to the rich media conferencing community. Some reports include five-year forecasts. See www.wainhouse.com for a listing of available reports.

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Rich Media Conferencing 2004 Volume 1: Audio, Video, and Web Conferencing Infrastructure Products

© 2004 Wainhouse Research, LLC Page 5

Table of Contents CHAPTER 1 - EXECUTIVE SUMMARY............................................................................... 9

OVERVIEW........................................................................................................................... 9 METHODOLOGY.................................................................................................................. 10 MAJOR TRENDS ................................................................................................................. 11 FORECAST SUMMARY......................................................................................................... 12 SUPPLIERS COVERED IN THIS REPORT................................................................................ 14

CHAPTER 2 - THE YEAR (2003) IN REVIEW ................................................................... 15 THE TOP FIVE .................................................................................................................... 15 THE CONFERENCING INDUSTRY IN GENERAL ....................................................................... 16 MERGERS, ACQUISITIONS, EXITS, AND OTHER BUSINESS DEALS.......................................... 17 PURE TECHNOLOGY DEVELOPMENTS.................................................................................. 17 AUDIO, VIDEO, AND WEB CONFERENCING INFRASTRUCTURE PRODUCTS .............................. 18 ENDPOINTS FOR GROUP AND PERSONAL VIDEOCONFERENCING........................................... 19 AUDIO, VIDEO, AND WEB CONFERENCING SERVICES ........................................................... 19

CHAPTER 3 - TECHNOLOGY & STANDARDS OVERVIEW ........................................... 21 NETWORKS........................................................................................................................ 22 AUDIO CONFERENCING BRIDGES ........................................................................................ 22 WEB CONFERENCING......................................................................................................... 24 VIDEOCONFERENCING MCUS ............................................................................................. 26 GATEWAYS ........................................................................................................................ 27 GATEKEEPERS................................................................................................................... 28 IM AND PRESENCE SERVERS.............................................................................................. 29 MEDIA SERVERS ................................................................................................................ 30 STANDARDS....................................................................................................................... 34

CHAPTER 4 - REVIEW OF SUPPLIERS ........................................................................... 37 AREL COMMUNICATIONS AND SOFTWARE ............................................................................ 37 AVAYA............................................................................................................................... 40 BANTU, INC........................................................................................................................ 43 CENTRA SOFTWARE........................................................................................................... 45 CISCO SYSTEMS ................................................................................................................ 48 COMPUNETIX INC. .............................................................................................................. 53 CONVEDIA ......................................................................................................................... 56 DATA CONNECTION LTD. .................................................................................................... 58 DST SOFTWARE TECHNOLOGY........................................................................................... 60 EDIAL ................................................................................................................................ 62 FORUM .............................................................................................................................. 64 FIRST VIRTUAL COMMUNICATIONS ...................................................................................... 66 HUAWEI TECHNOLOGIES COMPANY, LTD ............................................................................ 68 IBM LOTUS SOFTWARE ...................................................................................................... 71 INDIGO SOFTWARE............................................................................................................. 74 IP UNITY............................................................................................................................ 76 JABBER, INC. ..................................................................................................................... 78 MACROMEDIA, INC. ............................................................................................................ 80 MICROSOFT ....................................................................................................................... 83 ORACLE CORPORATION...................................................................................................... 87 PACTOLUS ......................................................................................................................... 89 POLYCOM .......................................................................................................................... 91


Page 6 © 2004 Wainhouse Research, LLC

PRESCOM.......................................................................................................................... 95 RADVISION ..................................................................................................................... 97 SNOWSHORE................................................................................................................... 101 SONEXIS, INC................................................................................................................... 103 SPECTEL ......................................................................................................................... 105 TANDBERG................................................................................................................... 108 UBIQUITY......................................................................................................................... 113 V2 TECHNOLOGY ............................................................................................................. 115 VCON............................................................................................................................. 117 VIEWTRAN TECHNOLOGY, LTD .......................................................................................... 120 VISIONNEX TECHNOLOGIES, LTD. ..................................................................................... 122 WEBDIALOGS, INC. .......................................................................................................... 124 WIREDRED SOFTWARE CORPORATION ............................................................................. 126 ZTE CORPORATION ......................................................................................................... 128 ZOOM MULTIMEDIA, LTD. ................................................................................................ 130 OTHER VENDORS............................................................................................................. 132

CHAPTER 5 - INDUSTRY FORECAST ........................................................................... 133 MARKET OVERVIEW ......................................................................................................... 133 DEFINITIONS .................................................................................................................... 133 GENERAL FORECAST ASSUMPTIONS ................................................................................. 134 INFRASTRUCTURE-SPECIFIC ASSUMPTIONS....................................................................... 135 METHODOLOGY................................................................................................................ 138 AUDIO BRIDGES (MCU).................................................................................................... 139 VIDEO MCUS – STAND-ALONE SYSTEMS .......................................................................... 143 PSTN TO IP VIDEO GATEWAYS ........................................................................................ 147 IP VIDEO GATEKEEPERS .................................................................................................. 148 WEB CONFERENCING SERVERS........................................................................................ 150 IM & PRESENCE SERVERS ............................................................................................... 153 INFRASTRUCTURE FORECAST SUMMARY ........................................................................... 155

APPENDIX 1 - SURVEY: CONFERENCING INFRASTRUCTURE PLANS AND IP EXPECTATIONS............................................................................................................... 159 APPENDIX B – PRODUCT MATRICES........................................................................... 169

AUDIO BRIDGES ............................................................................................................... 170 STANDALONE VIDEO MCUS.............................................................................................. 176 WEB CONFERENCING SERVERS........................................................................................ 184 IP MEDIA APPLICATION SERVER ....................................................................................... 198 GATEWAYS ...................................................................................................................... 201 GATEKEEPERS................................................................................................................. 204 PRESENCE AND INSTANT MESSAGING SERVERS ................................................................ 207



List of Figures Figure 1 Conferencing infrastructure components .............................................................. 10 Figure 2 Overall conferencing industry forecast.................................................................. 12 Figure 3 Changing shape of the conferencing infrastructure market .................................. 13 Figure 4 Conferencing Infrastructure Components ............................................................. 22 Figure 5 - Web conferencing architecture ........................................................................... 25 Figure 6: H.323 MCUs can be configured in LAN or WAN locations................................. 27 Figure 7: Functions of a Gateway ...................................................................................... 28 Figure 8: IP Media Server Configuration with Conferencing............................................... 31 Figure 9: Components of an IP Media Server Platform ..................................................... 32 Figure 10 IP Media / TDM Hybrid Deployment .................................................................. 33 Table 11 ITU-T Multimedia Conferencing Umbrella Standards; * Mandatory.................... 35 Figure 12 Rich Media Conferencing Market Segments .................................................... 133 Figure 13 Forecast transition from ISDN to IP for group video calls................................. 135 Figure 14 Summary table of audio bridge forecast ........................................................... 139 Figure 15 - Audio bridge revenues by customer type ....................................................... 139 Figure 16 - IP and PSTN audio bridge port shipments vs ASPs....................................... 140 Figure 17 - Summary table of ASP and market size by port type ..................................... 141 Figure 18 - Port shipment market segment growth rates.................................................. 142 Figure 19 Audio bridge market size by network type ........................................................ 142 Figure 20 Stand-alone video MCU revenues by market segment .................................... 143 Figure 21 Summary table of stand-alone video MCU forecast ......................................... 144 Figure 22 Stand-alone MCU ports by network .................................................................. 144 Figure 23 Stand-alone MCU ports by network .................................................................. 145 Figure 24 Stand-alone MCU port ASPs by network.......................................................... 146 Figure 25 Stand-alone video MCU revenues by network ................................................. 146 Figure 26 Summary table of gateway forecast.................................................................. 147 Figure 27 PSTN to IP Video Gateway forecast................................................................. 147 Figure 28 Summary table of gatekeeper forecast ............................................................. 148 Figure 29 IP Gatekeeper revenue forecast ....................................................................... 149 Figure 30 Summary table of web conferencing server forecast........................................ 150 Figure 31 Web conferencing server forecast .................................................................... 150 Figure 32 Web conferencing server ASPs ........................................................................ 151 Figure 33 Summary table of IM & presence server forecast............................................. 153 Figure 34 Web conferencing server forecast .................................................................... 153 Figure 35 IM & presence server ASPs.............................................................................. 154 Figure 36 Summary table of infrastructure forecast .......................................................... 155 Figure 37 Overall infrastructure forecast-six segments..................................................... 155 Figure 38 Summary table of audio and video-centric infrastructure forecast ................... 156 Figure 39 Audio, Video, and Web-centric infrastructure forecast ..................................... 156 Figure 40 RMC infrastructure market share estimates for 2003 ....................................... 157 Figure 41 Company size .................................................................................................. 159 Figure 42 Company type ................................................................................................... 160 Figure 43 Respondent location ........................................................................................ 160 Figure 44 Applications in use today ................................................................................. 161 Figure 45 Plans for conferencing infrastructure in 12 months ......................................... 161 Figure 46 Time Series Data: applications in use today................................................... 162 Figure 47 Time Series Data: expected applications in use 12 months from now........... 163 Figure 48 Year 2004 results minus year 2002 results ..................................................... 164 Figure 49 IP-based conferencing application intentions .................................................. 165 Figure 50 Time series data – conferencing intentions ..................................................... 166 Figure 51 Time series data – video over IP ...................................................................... 166



Figure 52 Results from 2004 Survey................................................................................. 166 Figure 53 Results from 2002 Survey – video over IP....................................................... 167 Figure 54 Results from 2001 Survey – video over IP....................................................... 167



Chapter 1 - Executive Summary Overview This report examines the dramatic changes that are affecting the rich media conferencing industry with a specific focus on the conferencing infrastructure market – audio, video, and web conferencing servers and bridges, video gateways and gatekeepers and IM & presence servers – the products that connect, service, and control users with conferencing needs. Included in this report is an analysis of the current state of the market, a review of the underlying technologies, background and analysis of over 35 vendors, current market sizing and a 5-year forecast by product segment, results of an online survey from over 600 respondents, and comprehensive product matrices for each supplier across all product types. The rich media conferencing infrastructure market has experienced a tumultuous year. While the market was still burdened by the telecom meltdown, general economic malaise, and a lingering IT spending hangover, the first signs of market recovery have begun to emerge. Forced with the need to raise productivity, users recognized rich media conferencing as a viable alternative. Audio conferencing minutes and web conferencing seats grew to record levels. Instant messaging became an accepted tool (if not officially sanctioned) within many enterprises. Shipments of videoconferencing endpoints rose. All of which signaled a rise in consumption was finally underway as measured in port or seat shipments – though the upturn in terms of revenue dollars could have been stronger. The rich media conferencing infrastructure market continues to evolve. While the past was concerned with holding audio and video conferences over the PSTN with higher quality and reliability, today’s situation is far more complex as the industry is being swept by three fundamental changes:

1. As indicated by the number of IP ports shipped by the conferencing infrastructure vendors in this report, the movement to a single, converged, IP-based voice-video-data network is well underway. While the market was initially drawn to a converged network on the promise to deliver higher quality and better reliability with attractive economics, the prospect of using one network to seamlessly integrate rich media conferencing into an enterprise’s IT environment may emerge to be the real “killer app” of IP. The ability to initiate an instant rich-media conference from within the very application that raises an issue or signals a need – whether it be while reviewing a document, email, status report, or from within a customer relationship management system, etc – could deliver the next wave of productivity gains for an organization.

2. Web conferencing, instant messaging (IM), and presence have taken

conferencing-savvy organizations by storm. In addition to being IP-driven conferencing tools, these three applications naturally play well together on a converged network - IM is coupled with presence to show the availability status of each potential attendee in real-time before a conference is initiated. While conferencing has quickly transitioned from a scheduled to an ad-hoc paradigm over the past few years, IM & presence holds the potential of taking ad-hoc conferencing to a whole new level by bringing the first change to the call initiation paradigm since the telephone was invented. And while IM text messaging has been the traditional method of communicating using the presence metaphor, advanced conferencing systems (Lotus, Microsoft, FVC, others) already integrate



the full spectrum of rich media conferencing tools so that an IM session can easily escalate to include audio, video, or web conferencing. Because of the potential for IM and presence to impact conferencing, we have added IM and presence servers as a market segment to this report.

3. As if to underscore the potential of the above technologies, Microsoft and Oracle

have joined IBM / Lotus, the current market leader, in delivering rich media conferencing as part of their enterprise software suits. Microsoft’s $200M acquisition of PlaceWare and their establishment of an entire division dedicated to real-time conferencing and collaboration has already resulted in the shipment of the Microsoft Office Live Communication Server – covered in the IM and presence server segment of this report. The entry of Microsoft into the rich media conferencing market promises to take audio-video-web conferencing solutions into the corporate mainstream, to increase general awareness, and to spur the entry of multiple “partner” products; at the same time Microsoft’s entry is guaranteed to change the competitive environment for all. The implications for the entire rich media infrastructure market, including vendors of audio, video, and web conferencing servers, cannot be understated – and are qualtified in the forecasts in this report.

Wainhouse Research believes the conferencing infrastructure industry covers four different elements, as shown in our diagram. Our coverage of the industry is contained in three separate volumes: this volume which covers infrastructure products; a second volume that covers video endpoints, and a third volume that covers conferencing service providers.

Figure 1 Conferencing infrastructure components

Methodology Wainhouse Research monitors the entire rich media conferencing market through its consulting, seminar/Summit, SpotCheck, and user activities, as well as by maintaining continuous contacts with the vendor and end user communities. Part of the research in support of this report included an on-line survey, details of which are included in an appendix to this report. In order to assess the current state of the market and to ground the forecast figures of this report in hard reality, we also interviewed and collected data from over thirty suppliers. Our data collection process maps supplier unit and revenue shipments into six product categories:

1. Audio Bridges: Hardware multipoint control units that enable multipoint audio calls over PSTN and IP networks.

Media SupportNetwork Products

PSTN

ISDN

IP

Audio

Video

Text

Remote Management

Scheduling

Reservations

Audio/Video MCUGateway,

Gatekeeper

Web/IM/PresenceServer

+ + +Graphics

Media/ApplicationServer

Media SupportNetwork Products

PSTN

ISDN

IP

Audio

Video

Text

Remote Management

Scheduling

Reservations

Audio/Video MCUGateway,

Gatekeeper

Web/IM/PresenceServer

+ + +Graphics

Media/ApplicationServer



2. Video MCUs: Stand-alone products that enable multipoint video calls over ISDN and/or IP networks. We track both hardware MCUs and software MCUs for IP conferencing in this category.

3. Video Gateways: Hardware-based products than enable H.320/ISDN callers to connect to H.323/IP callers with a videoconferencing or data conferencing system. This category does NOT include POTS-PSTN/IP gateways for the voice-over-IP industry

4. IP Gatekeepers: Server products that perform the traditional H.323-defined

gatekeeper functions (explained elsewhere in this report) as well as an important, emerging set of functions that bring videoconferencing closer to the world of standard telephony –enhanced directory services, call forwarding functions, call answering, etc.

5. Web Conferencing Servers: Server software and/or hardware that enables web-

based collaboration for data conferencing and remote presentations. This category does not include web conferencing services which are covered in volume 3 of this report series.

6. IM & Presence Servers: Server software that provides an enterprise-class

“presence and availability engine” to support text-based messaging and other forms of real-time conferencing.

Major Trends Our forecast and supplier reviews note several trends that are shaping the future of the rich media conferencing industry, and their impact on the market for infrastructure products:

Audio bridge manufacturers have completed the move to offering IP-friendly architectures by adding support for IP voice in both all-IP and dual-mode products. While the market for IP-based multipoint voice conferencing is materializing slower than expected, WR believes the demand for IP ports from both enterprises and service providers will fuel the market’s growth going forward.

The web conferencing server market will benefit from a shift to internal hosting from

web conference service providers as enterprise users seek more control, better integration into their IT environments, and a perceived increase in security. This trend is indicated by our user surveys.

Unlike audio, the shift from ISDN to IP ports for videoconferencing MCUs is well

underway with IP video ports outselling ISDN video ports on a ratio of about 6:1. While IP video network services are being marketed by upstarts like GlowPoint, Masergy, Internap, V-SPAN, IVCi, and others, their uptake has been slow. Thus the majority of the demand for IP video ports is coming from enterprise users.

While demand for all forms of rich media conferencing ports and seats is generally

robust throughout the forecast period, the movement from PSTN to IP ports for audio / video bridges and the commoditization of the web conferencing / IM feature set works to lower prices on a per-user basis resulting in limited revenue growth.

Desktop videoconferencing may finally find its home as a feature that is added to IM

and web conferencing rather than being a stand-alone application, which will fuel



healthy growth in IP-based video infrastructure equipment (MCUs, gateways, gatekeepers).

The need for stand-alone video gateways is quickly giving way in favor of mixed-

mode MCUs that can also handle the gateway function.

Rich media conferences will blur from being distinct audio, web, and video conferences into one IP-based rich media conferencing entitly that will accommodate endpoints with different audio, video, and data capabilities – and the infrastructure that will tie it all together. IM and presence will be increasingly used to initiate conferences of all types from within a growing number of applications.

The market sizing for 2003 indicates that demand for rich media conferencing

infrastructure products is growing and the economy is slowly improving. However, the improvement is slower than expected and has caused the adoption of certain segments of the market to be delayed by about a year compared to our previous forecast.

Forecast Summary Our overall results forecast that the conferencing infrastructure industry will grow from about $475 million in 2003 to over $675 million in 2006, producing a compound annual growth rate of 7.3%, despite dramatic declines in average selling prices across the board.

Infrastructure Revenue Forecast ($M)

$0

$100

$200

$300

$400

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$600

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$800

2003 2004 2005 2006 2007 2008

Figure 2 Overall conferencing industry forecast



Infrastructure Revenue Forecast ($M)

0%

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100%

2003 2008

Audio Video Web, IM, Presence

Figure 3 Changing shape of the conferencing infrastructure market However, trends now underway in both the conferencing infrastructure market and the rich media conferencing industry as a whole will continue to change the shape of the industry over the forecast period. The market for web conferencing and IM / presence servers and the market for audio conferencing servers will account for an increasing share of the market – at the expense of the market share for video conferencing MCUs, gateways, and gatekeepers. It is interesting to note that our forecast grows at about 12.6% CAGR from 2003 to 2006, then peaks and stagnates due to a number of factors explained in this report. Forecast details including specific market segment sizes, growth rates, and significant segment metrics where applicable (migration to IP, ports or seats, ASPs, enterprise vs service provider revenues, etc) can be found in chapter 5 of this report.



Suppliers Covered in This Report Wainhouse Research has done extensive research on the conferencing infrastructure suppliers and their equipment. Each supplier is treated separately with a company review, strategy summary, and our analysis & opinion. The following companies are reviewed in detail. Arel Communications and Software Avaya Inc. Bantu, Inc. Centra Software Cisco Systems, Inc. Compunetix Convedia Corporation DST Data Connection Ltd (DCL) eDial First Virtual Communications Forum Communication Systems, Inc Huawei Technologies IBM Indigo Software, Inc. IP Unity Jabber, Inc. Macromedia Microsoft

Oracle Corporation Pactolus Communication Software, Inc. Polycom Prescom S.A. RADVISION SnowShore Networks Sonexis, Inc. Spectel TANDBERG TANDBERG Ubiquity Software V2 VCON Viewtran Incorporated VisionNex Technologies, Inc. WebDialogs WiredRed Software Corp Zoom ZTE Corporation

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