Wednesday, August 8, 2001

Lower Video Conferencing Costs = Wider Adoption

Most buyers of video-conferencing equipment have been from Fortune 1000 companies. Health care, education, legal, financial, and government entities have been the niche markets for video conferencing. Executives, salespeople, lawyers, doctors, and other professionals have been the users of the product. High costs, difficulty of use, and reliability have kept this market limited to $780 million for worldwide revenues.

According to Joe Gagan, senior analyst for the Yankee Group's E-Networks & Broadband Access research and consulting practice, and author of the Report, "Because of the success and value proposition of IP PBXs, many companies are now taking the proper steps to ensure that their networks have the proper quality of service (QoS) and sufficient bandwidth to allow for multiple applications on their LAN. Because of the costs and time involved in upgrading networks, it will be a gradual process that will take a few years to make a major impact on the video-conferencing industry." Gagan adds, "We also believe that the wider popularity of networked systems with video conferencing coming to the desktop will lead to wider adoption over the next few years."

Component costs are expected to come down, and efficiencies associated with video delivery over IP instead of ISDNs will bring price points down. This must happen for adoption to spread beyond large enterprises. Though video conferencing will probably never make sense for small businesses because of its economies of scale, we believe adoption will spread to mid-sized businesses.