The ‘Death’ of TelePresence

It’s interesting times in the Videoconferencing / TelePresence industry.  With market data from Polycom and Cisco showing downturns in recent times, and with notable sources such as also seeming eager to put the boot in, publishing a controversial article here, the industry is rife with speculation about the ‘death’ of TelePresence. Much of the speculation points to low cost start-up businesses such as Vidyo, who themselves reported some stunning growth numbers last quarter.

So what do this all mean?

Well first, lets put something into context.  Vidyo’s growth numbers may be impressive at 82%, but lets not forget that its far easier as a small business to achieve such levels of growth, simply because doubling a small revenue number is way easier than doubling a large one.  As Vidyo does not disclose its numbers, then a simple percentage growth figure is largely meaningless.  We certainly cannot assume that Vidyo’s growth is responsible for Cisco’s and Polycom’s decline in numbers.

This brings me to my second point, start-up video calling businesses that do not provide proper interoperability are doomed from the start, and it’s just a matter of time.

Already we are seeing free to market, standards based alternatives with HD video that are interoperable with the huge installed base of Polycom, Cisco and others.  These services are easy to use, and whilst feature limited, offer video calling instantly with the assurance of being able to connect to any other standards based system.

There’s one very notable exception to this of course, Skype.  Skype is different simply because it defined the market for domestic video calling, and owns that market.  It may be a walled garden but with such critical mass, they are able to call the shots.  Whenever I’m asked if our standards based service is able to call someone at home, the question is invariable can we connect with Skype.  It’s incredible to think that the EU would actually miss this when it approved the Microsoft acquisition, given its previous form with Cisco and the Tandberg acquisition, especially when ownership of Skype gives Microsoft far more power over a market than the Tandberg acquisition gave Cisco.  I watch with interest on that front, because should Skype remain a walled garden, I predict that the business community will ultimately reject it as a solution because of its closed nature.

Customers are becoming more educated as to how they want to connect, and they want to be able to connect to anyone, anywhere without fuss or conversations about why their investment doesn’t allow them to talk to X, Y or Z systems.

Which brings me back to Polycom and Cisco:  OK these companies have duked it out previously, and on a number of occasions about supporting standards, but actually their track record is pretty good at interoperability, and trying to ensure that customers are able to communicate with each other, even if sometimes certain ‘premium features’ aren’t available when its a multi-vendor call.  I strongly believe that its the interoperability approach here that will win out in the long term, versus the alternative, where a dominant business such as Microsoft attempts to leverage market forces to drive its agenda.

Another aspect being discussed here, as it has for many years is that of Software vs. Hardware.  Many believe now that software only solutions are primed to take over the market delivering the same quality and experience of hardware solutions, (which drive both Cisco and Polycom’s revenues in the video space).  Whilst it’s true that general purpose computing hardware is now more than capable of processing H.264 with High Definition, that’s only part of the picture.  Firstly, hardware systems provide an appropriate, resilient form factor for use in rooms where multiple input devices are required, with purpose built GUI’s designed to optimise the experience for the user.  That’s one part.

The other more telling part though, and what industry analysts seem to have overlooked, (despite having seen two cycles of what we are about to go through), is the continuing innovation that occurs within the standards.  I’m referring here to the ratification of H.265, expected early 2013.

As has been seen before with both H.263 and H.261 before it, PC based solutions became available toward the later stages of these standards because general purpose computing caught up over time.  H.265 promises to change the game in as significant a way as H.264 did 6 years ago, and general purpose computing will not cut it for at least a couple of years.

So what does H.265 promise?

Two main things; Firstly, as with H.264 and H.263 before it, the first aspect to be exploited will be the reduction in bandwidth required to transmit video of a certain resolution and bandwidth.  So for example, if a 1080p30 call today requires say 1.5Mbps with H.264, then H.265 could well provide this at 768kbps (if the bandwidth savings made by H.264 over H.263 are anything to go by).  OK so bandwidth is getting less expensive, but this is a big deal if the number of video calls is going to increase at the rate people expect it to.

Secondly, and again as we saw with h.264, we will then start to see adoption of new features that the protocol brings.  With H.264 we saw the almost immediate adoption of 720p video, and now we’re seeing 1080p deployed as standard more and more.  H.265, 4k and 8k video resolutions are possible, and in addition, expect to see more than just dual streams, but multi-stream calls with multiple video and content sources simultaneously.  And once again, this is driven by standards.

One might think ‘why do I need 4k or even 8k video when 1080p is perfect even on a 65″ screen’?  I leave you with this thought from none other than Microsoft:


Polycom’s big news

After watching the announcements by Polycom yesterday and having time to reflect, here’s my take on what I think this all really means:

Polycom’s aquisition of HP I suspect is of more benefit to the HP business unit than Polycom in the long term.  On the face of it, HP’s video business overlaps significantly with Polycom’s, with the only significant difference being the development work going on within HP to bring visual communications to a mass market via its WebOS platform.  So why not continue to partner then?

Why do Polycom now want a VNOC service when with their previous aquisition of Telesuite / Destiny, they  hived that element off?  The HP aquisition looks and feels very similar in scope to that of Destiny some years ago, in that Polycom have aquired some large Customers, an immersive Telepresence product, a network that services those systems and a VNOC service.  Will history repeat itself or will Polycom now enter the VNOC business proper?  My suspicion is that this will be ring fenced for existing HP customers, but as for the future of this service, it’s difficult to see Polycom continuing to grow this offering if they want to keep their partners happy.  Then of course comes the question of product overlap, as both HP and Polycom provide what are essentially competing products.  Expect to see a similar strategy to that adopted by Cisco in managing its portfolio of CTS and T-series systems.  What’s really compelling though are the links between Polycom and HP in terms of WebOS development.  Will HP / Polycom really have a play here to compete in the Tablet and Handheld space, and how will it integrate into the overall portfolio?

My suspicion is that this is not a great aquisition.  Polycom have not bought any unique competencies here.  The WebOS competencies still remain with HP, and meanwhile they’ve bought an overlapping product portfolio, a VNOC service that potentially competes with its customers, and they’ve bought HP’s customer base.

The Microsoft connection yielded no major suprises.  Microsoft needs to get into the immersive, big meeting room space if it wants to compete, and Polycom has the competence to make this happen.  The announcements around SVC should also come as no surprise, although again one wonders why the choice of SVC over H.264 baseline is more a case of market positioning than it is from a geniune desire to drive interoperability and ubiquitous video (Cisco don’t have SVC yet, 1-0 to Polycom).

Of most interest was the annoucement of the Telepresence network ecosystem, called the Open Visual Communications Consortium.  Notable by its absence again was Cisco.  No firm details were provided about how this consortium would actually work, or deliver the seamless ‘mobile telephony’ type experience, but the sentiment is one I generally applaud, but the devil is really in the detail.  How will this consortium deal with cross network billing?  How will they ensure that video traffic traversing their networks retain the quality of service required to support immersive telepresence calls?  And importantly, what if a call is placed from inside a consortium member’s network to a busienss that is outside it?

As I have previously suggested, we are beginning to see the hegemonisation of visual communications on the internet.  Polycom places itself here as the central player, which makes sense from a service provider perspective (as this means BT doesn’t have to play 2nd fiddle to AT&T and vice-versa), but it does make it difficult for Cisco to enter this ecosystem, and if Cisco aren’t playing, simply put the OVCC is little more than market positioning.

Despite this, if some good is to come of the OVCC, it has to be able to deliver a service in which customers, regardless of which vendor they use, are able to place calls to each other, across the internet between ISP’s, with guaranteed QoS with a cost structure that promotes inter-company communication rather than choking it.  I still feel that this will only happen when the industry appoints a regulator, in the meantime, let’s see how Polycom fares.