AV Conferencing: Point of Inflection

Accelerated migration to IP networks and high definition (HD)
took the Indian videoconferencing market to the next phase of evolutionfrom
plain vanilla to technologically advanced. But, even more importantly, the
videoconferencing market in India became largely demand driven, a significant
change from when growth depended on suppliers pushing technology to end-users.
FY 07 marked an inflection point for this market in more ways than one.

Strong demand from corporate and government sectors and
declining bandwidth and communication costs saw the Indian video conferencing
equipment market garner Rs 110 crore against Rs 82 crore in FY 06, a 34%
growth. Considering the growth trends, the Indian market, along with Chinas,
is touted to be the most exciting growth engine in the Apac videoconferencing
market over the next five to six years. A major chunk of the revenues came from
endpoints market that brought home Rs 90 crore, accounting for 82% of the total
videoconferencing equipment market size. The infrastructure systems market
comprising primarily bridges/gateways made up for the remaining Rs 20 crore.
Individually, the endpoints market grew 36%, up from Rs 66 crore in FY 06
while the infrastructure systems market grew 25%, moving up from Rs 16 crore in
FY 06.

During this fiscal, the market continued to be dominated by
Polycom, Aethra, Tandberg and Sony in the endpoints market, and by Polycom,
Tandberg and Radvision in the infrastructure systems market. However, the entry
of two new playersCisco and Life Size set the pace for changes in the
competitive landscape for FY 08.

Market Uptake

A key highlight for FY 07 was the transition from a supply-driven market
to a demand-led market. Corporates and the government were frontrunners in
adoption.

There is an urgent need to improve the decision making processes
in the government, bringing the state headquarters a click away from the
district headquarters, and this drove adoption here. Chief ministers are now
reviewing their pet projects with district administrations directly using the
audio-video conferencing technologybringing in transparency and better
accountability from the administration. National Informatics Centre (NIC) has
been among the earliest adopters of the technology in the government sector. It
provides videoconferencing services from 490 locations in India including all
north-eastern state capitals, over its high-speed satellite-based network, NICNET.
It has established videoconferencing facilities between various government
departments in India. The main areas where the government uses videoconferencing
are in judicial cases and district administration in the states of Andhra
Pradesh, Kerela, Madhya Pradesh, Chhattisgarh, Uttaranchal, Uttar Pradesh, and
Himachal Pradesh.

Among key government projects undertaken in FY 07 was the one
by the Ministry of Finance for connecting all the chief commissioners of income
tax at 56 locations, and a videoconferencing project as part of the Himachal
Pradesh SWAN. Polycom bagged both these projects.

The momentum is likely to pick up over the next few years with
some more projects in the pipeline. This includes computerization of courts, to
be implemented in three phases over five years, with an aim to set up
videoconferencing facilities at the Supreme Court, High Courts and all the
district courts, and establishing digital interconnectivity between all the
courts from the taluka level to the Apex Court. According to Frost &
Sullivan, the government usually goes for bulk purchases of videoconferencing
equipment, making it the main reason for the governments major market share.

On the corporate front, BFSI along with IT/BPO led the adoption
wave. One of the foremost drivers for this adoption has been increasing
globalization, reduced travel time and costs which also led up to enhanced
employee productivity, improved remote office productivity, better collaboration
between geographically dispersed workforce and customers, and an expedited
decision making process.

The next round of verticals where rampant activity is likely to
happen in the coming years are education and healthcare. Educational
institutions have implemented the use of videoconferencing and this vertical
shall increase its share in the coming three to four years.

Enterprise Uses

Traditionally, the key areas where videoconferencing has been used are
project reviews, client reviews, analyst meetings, new-hire interviews, and
appraisals. General meetings within organizations and client meetings are the
most common applications.

Training is an area where these conferencing services will gain
importance as most large enterprises are going in for mass recruitments, and
training them at a single platform shall become a necessity. The upcoming
applications include telemedicine, remote consulting and assistance in
diagnostics, remote faculty training and distance learning.

Service Provider Spurt

A huge spurt in demand has come from service providers. Led by Reliance, in
the last three years the market has seen a surge in popularity for public rooms
providing hosted videoconferencing to individuals as well as corporate clients.
Reliance provides retail videoconferencing services from 241 Reliance World
outlets across more than 105 cities in India. By end 2006, the company boasted a
customer base of 750 in the managed videoconferencing space with plans to
increase it to 1,000 by 2007.

While the trend had been sparked off by Reliance, over the last
one year service providers have started offering videoconferencing services as
one of the mainline value added services from their kitty. It is estimated that
in the coming three to four years, service providers owning these public rooms
will upgrade their infrastructure, pushing demand for videoconferencing
endpoints as well as infrastructure equipment.

During FY 07, an interesting trend in the service provider
space has been the emergence of videoconferencing endpoints bundling strategy as
part of enhancing their value added offerings. Customers are willing to purchase
a bundled offer rather than going in for individual conferencing services.

Toward High Definition

The guiding theme of technology trends in FY 07 was moving towards high
quality. There has been a shift toward high definition videoconferencing driven
by telepresence, multi-party conferencing using hardware MCUs, and recording and
streaming solutions.

HD is a new technology and the trend has started taking shape in
India. Till early 2006, there was only one company, LifeSize, with a working
solution. LifeSize launched the first HD offering in late 2005. Today, the rest
of the players in the videoconferencing space have recognized the customer
demand for high definition and are now in various stages of bringing their
products to the market. While manufacturers like Polycom, Tandberg, Aethra and
Sony have been operating in the Indian market for sometime, LifeSize
Communications, providing high definition videoconferencing solutions, made its
entry into India almost at the same time as it launched its products worldwide.
This immediately differentiated manufacturers as those with high definition (HD)
solutions and those with only standard definition (SD).

The Telepresence Effect

Telepresence emerged as a major driver for HD conferencing and attracted
attention in the Indian market in FY 07. The telepresence phenomenon emerged
as a very high quality audio/video/sensory communication alternative to
traditional videoconferencing. More emphasis will be laid on conferencing with
life-size displays employing high definition video and audio. Some of the high
definition telepresence applications include business meetings, telemedicine,
distance learning, and corporate training.

A highlight was Ciscos launch of its telepresence meeting
solution. This includes ultra high definition 1080p video, imperceptible
end-to-end latency, and wideband spatial audio. As the telepresence category
grows, Cisco will develop additional applications tailored for specific
industries like healthcare, retail, banking, entertainment, and government. This
could include a doctors appointment, a virtual specialist for providing
in-store expertise, remote interviews or depositions, or getting in touch with
grandparents without the need for travel. The system requires major bandwidthof
about 12 Mbps for a three-screen setup.

As Indian companies increasingly go global and global MNCs
continue to grow in India, one will see significant investments in converged
communications technologies like telepresence.

• More reliable, since it
  can be monitored at all times

• Easy to install

• Lower costs

• Offers easy connectivity
  to the corporate network for management/desktop videoconferencing

• More secure than ISDN

• Offers flexibility of
  high bandwidth calls

• Offers advantage of
  converged platform

IP Calling

On the technology front, FY 07 saw the transition from ISDN to IP
networks. Though there still continued to be a sizeable market for equipment
running on dual mode, the pure IP platform was successful in increasing its base
considering the benefits it brings along. The banking sector, in particular, has
seen deployments in pure IP. The benefits include lower running costs, easier
management and control, remote monitoring, higher quality audio and video, and
integration into the corporate IT infrastructure. Videoconferencing on converged
IP network also allows the network to be used for other applications.
Videoconferencing can also be converged with IP-based applications like instant
messaging, streaming and Web collaboration. Customers will be able to adopt
single conferencing platforms to use audio, video or Web-based solutions to
communicate.

According to Frost & Sullivan, with cost effective and
dynamic bandwidth usage, demand for videoconferencing infrastructure products
are anticipated to rise along with the popularity of IP videoconferencing.

The technological shift from ISDN to IP also leads to easier
deployment of videoconferencing solutions, thereby pushing demand in the SMB
segment. IP networks, if efficiently used for videoconferencing, could catalyze
adoption of videoconferencing as a viable option for effective communication.

With the growing adoption of IP in the Indian market, more
companies are expected to upgrade their equipment to IP-enabled systems, as well
as invest in gatekeepers and advanced management tools starting 2007. It is
expected that non-bridging products will grow at a faster rate than standalone
bridges during the maturity phase of the market. As the industry starts using IP
networks, demand for software-based bridges and better videoconferencing
infrastructure will also increase in tandem. Bandwidth availability and drop in
bandwidth prices in the coming years will, however, hold the key to growth,
according to Frost & Sullivan.

The growing adoption of IP has turned critical, beyond just the
cost advantage. It has sparked off the adoption trends towards desktop
conferencing as well. During FY 07, the adoption of desktop videoconferencing
systems was low and still in its infancy as compared to group systems. However,
as IP networks become ubiquitous and also highly efficient, at least within
organizations, the need for desktop videoconferencing will also grow. The need
to seamlessly communicate (video and voice) with clients, peers, suppliers and
others will drive growth in the desktop conferencing space.

Other Trends

Additional trends were unified conferencing (converging audio, video and Web
conferencing into a single unit) and mobile videoconferencing. The anticipation
of 3G takeing off in the next couple of years, will bring opportunities to
videoconferencing infrastructure vendors in providing real-time interactive
video communications between 3G H.324M mobile phones and multiple IP
videoconferencing endpoints.

Shipra Malhotra

shipram@cybermedia.co.in