May 30, 2014, 1:03 PM — 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.