IDC: Cloud, software options deflate sales of enterprise video systems

Sales for this market were 'dismal' in the first quarter of 2014

Sales of video conferencing and telepresence hardware systems are declining, hurt by an increase in cloud and software-based options that often are cheaper and simpler to deploy, according to an IDC study.

In 2014's first quarter, video conferencing equipment revenue shrank 16% worldwide year over year to $473.5 million, while units sold fell 6.2%.

Market leader Cisco took a big hit. Its video equipment revenue dropped 22.4%. It sat at the top of this shrinking market in the first quarter with a 40.1% share of the revenue.

Polycom, whose revenue fell 8.4%, was in second place with a 29% share, while Huawei took the third spot with a 7.8% share and a 2% drop in revenue.

So what's behind the market's depression? Customers are delaying purchases as they look for alternatives that are less expensive, software-based and cloud-hosted, signaling a shift away from hardware-based products, according to IDC.

However, video remains a key component of enterprise collaboration stacks in many organizations.

"IDC believes that among the challenges customers are currently trying to work through are a market transition and determining exactly what, when, and how to provision their video deployments as more software-centric and cloud-based service offerings become part of the enterprise video market landscape," said IDC analyst Petr Jirovsky in the statement.

Looking at a couple of specific market segments, multi-codec immersive telepresence equipment revenue fell 33.5% and its units sold dropped 26%, while room-based video system revenue fell 10% and its units sold were down 1%.

Revenue dropped year over year in all major regions, falling 19.8% in Europe, Middle East and Africa, 16.4% in Asia-Pacific, 13.4% in North America and 5.1% in Latin America, IDC said.

A silver lining is that "most or all" of this market's vendors are responding to the shift by also offering cloud-based video alternatives, according to IDC.

For example, Cisco is looking to embed social collaboration functionality in its applications, even though it recently retired its enterprise social networking suite WebEx Social and replaced it by partnering with ESN vendor Jive Software, IDC analyst Rich Costello said via email.

He also noted that while announcing video conferencing hardware recently, Cisco introduced a cloud service for private, room-based video conferencing called Cisco Collaboration Meeting Room (CMR). "I think that Cisco is adding to its broad product portfolio in order to continue meeting evolving customer requirements -- whether premise or cloud," Costello said.

In addition to CMR, Cisco also has other cloud suites for Web meetings and video and audio conferencing like WebEx Meetings and the Cisco Hosted Collaboration Solution (HCS).

"So although hardware remains a big part of what they do, I think they envision more of a hybrid approach -- i.e. a mix of hardware and software -- as the way forward for mid-size and enterprise customers," he said.

"With Polycom, I see a similar situation as far as them being a traditional hardware vendor who has begun to offer more software- and cloud-centric solutions, and services, along with their hardware, in their UC [unified communications] portfolio," Costello added.

The study's results can also be seen as validating the software-focused and cloud-focused approach of Microsoft with its Lync UC server and, to a lesser degree in the enterprise, with Skype.

"There's certainly a lot of interest -- and growth -- in the Microsoft Lync approach to UC, as well as other cloud-based communications and collaboration offerings on the market," he said.

Juan Carlos Perez covers enterprise communication/collaboration suites, operating systems, browsers and general technology breaking news for The IDG News Service. Follow Juan on Twitter at @JuanCPerezIDG.

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