Analyst: Video conferencing market to triple in six years

The Australian video conferencing industry is on track to triple in size in the next six years, with the channel tipped to grab a growing majority of sales across key market segments, according to Frost and Sullivan's Australian Videoconferencing Report 2011, released today.

Frost ICT research director Audrey William said that the figures for 2010 were a welcome relief for the sector after the shocker inflicted by the GFC in 2009.

“2010 was a return to form for Australia's video conferencing market," William said. "Growing business confidence saw the resurrection of a number of previously postponed projects along with an increase in demand for new deployments."

Various sources estimate that around 90 percent of sales in the Australian videoconferencing market go through the channel, with that figure expected to grow even further in the coming years.

Frost noted that the biggest players in the channel are still Telstra, Dimension Data and Optus-Alphawest, adding that Telstra’s acquisition of Tandberg’s iVision integration arm last year was a major event in the ongoing consolidation of the industry.

William said that the Australian video conferencing market presented a number of uniquely Australian opportunities for resellers. One was the growing desire to reduce the amount of long distance travel typically required by various professions. Another was the prospect of super high bandwidth being promised by the NBN.

The NBN, William said would likely help drive demand for videoconferencing, especially amongst smaller companies. Adding cloud services into the mix, more companies would view opportunities to exploit the power of videoconferencing infrastructure without having to pay for the requisite nuts and bolts, she said.

Furthermore, the convergence of traditional telco offerings along with things like unified communications (UC) was expected to give rise to more integrated and sophisticated video conferencing solutions, with the opportunity for resellers to develop specialised, high-margin offerings.

Frost said that the market, which includes sales of equipment for immersive telepresence, video conferencing endpoints and video conferencing infrastructure ( excluding maintenance and communications revenues ) is expected to more than triple by 2017, based on a compound annual growth rate of 19.1 percent.

The research paper stated that one of the fastest growing sectors in Australia for video conferencing is government, with sales into healthcare and education especially strong. The allocation of more government money for ICT projects during the period of the research made it easier for government agencies to invest in things like video conferencing.

In the private sector, banking, financial and professional services as well as mining were all showing plenty of enthusiasm for video conferencing.

The best performing technology segment was so-called room-based systems, or video conferencing end-points, which represented 66.7 percent of all revenues last year.  These mid-range systems have seen a sharp fall in price while quality has improved over the last few years.

But while there is a lot of excitement about the potential for the SME market, Frost noted the existence of a number barriers to entry, including sensitivities around price, especially given the free availability of services such as Skype.

Nevertheless, a number of vendors are making inroads despite the difficult conditions, led by market leader LifeSize while emerging vendors such as Huawei and Vidyo are beginning to make an impact.

The high-end of the video conferencing market is also proving difficult for many companies to penetrate, according to Frost, with sales of immersive solutions, such as telepresence, growing at just three percent.  This compared however with sharp falls inflicted by the GFC throughout 2009.

Frost and Sullivan expects the high end of the market to continue serving a specialised niche in the market.

But in a sure sign of the health of the videoconferencing market, overall leaders Cisco and Polycom both recorded strong growth in Australia.

However, Polycom owed some of its success to the uncertainty surrounding Cisco’s acquisition of Tandberg, which Frost and Sullivan noted had led to customers from both companies switching to Polycom.