How Conferencing Vendors are Remaining Relevant amid Market Pressure Need for Complementary Services Drives Mergers and Acquisitions

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1 How Conferencing Vendors are Remaining Relevant amid Market Pressure Need for Complementary Services Drives Mergers and Acquisitions April 2015

2 Contents Executive Summary... 3 Acquisition #1: Cisco acquires Assemblage... 3 Strategic Intent... 3 Outcome... 4 Market Impact... 4 Acquisition #2: ClearOne acquires Spontania... 5 Strategic Intent... 5 Outcome... 5 Market Impact... 6 Acquisition #3: Arkadin acquires implement.com... 7 Strategic Intent... 7 Outcome... 8 Market Impact... 8 Acquisition #4: NTT Communications acquires Arkadin... 9 Strategic Intent... 9 Outcome... 9 Market Impact Acquisition #5: PGi acquires TalkPoint Strategic Intent Outcome Market Impact Acquisition #6: Dimension Data acquires Teliris Strategic Intent Outcome Market Impact Acquisition #7: Yamaha acquires Revolabs Strategic Intent Outcome Market Impact The Last Word Legal Disclaimer The Frost & Sullivan Story

3 Executive Summary While audio conferencing is the most essential service offering in the conferencing bundle, the demand for stand-alone audio conferencing is declining as enterprises prefer integrated solutions from their communication architecture and services. To cater to such unified solution requirements, vendors are increasingly looking to package complementary collaboration services, such as Web and video conferencing, Webcasts, team workspaces, and other unified communication (UC) applications, such as telephony, voice mail, instant messaging, and presence. Solution developers have the option of either developing the technology in-house or taking the acquisition/partnership route to offer such integrated solutions and tap adjacent opportunities. A notable number of vendors have recently opted for the latter as it enhances their ability to go-to-market at a much faster pace when compared to the lead time for platform development from scratch. This study highlights a number of key acquisitions that took place in 2014 in light of providing users with tightly blended solutions. It aims to analyze the objective and the impact of these acquisitions on UC product and service markets with regard to factors such as customer demand, competition, and pricing. Acquisition #1: Cisco acquires Assemblage Strategic Intent In 2013, Cisco intended to promote the development of WebRTC using H.264 standards by making its implementation of the H.264 code publicly available, free of charge. The H.264 video codec is a widely adopted technology for video compression, recording, and the distribution of high-definition (HD) video and traditionally carries a significant royalty fee with it for developers. Cisco s strategy was that this move would help integrate browser-based video technology with video endpoints using existing H.264 media servers. While the market did acknowledge this move, there was an inclination toward VP8 codec as it offers flexibility to the development community. To stay in tune with the market trend toward VP8 and to strengthen its roots in WebRTC, Cisco acquired Assemblage in June Assemblage offers simple click-to-call browser-based video conferencing with the help of application program interface (API) that talks to VP8 video codecs in browsers. Its flagship product, Kollaborate.io, helps users to conduct HD voice and video calls. 3

4 Outcome This acquisition is likely to provide Cisco with the advantage of offering video conferencing not only with H.264 but also with VP8. This is an important move as the WebRTC standards committee has mandated that browsers and browser-based solutions support both VP8 and H.264 to achieve WebRTC-compatibility. Assemblage s technology will be integrated into Cisco s next-generation collaboration platforms. This makeover aims to help users share and collaborate more easily than before. Market Impact In 2014, the sale of hardware-based video endpoints was bleak, with a revenue dip of % in H1 as against H This was attributed to the on-going shift of user demand to software-centric and low-cost solutions. This also created challenges for established endpoint vendors, at the same time pressing them to look for new growth opportunities. WebRTC promises to address these user demands, while its potential to stem declining revenues remains unproven. This acquisition validates Cisco s support for the open-source video codec VP8, in addition to H.264. Through dual codec support, Cisco can safeguard the investments made by users in legacy systems as the browser-based solutions can interoperate with mobile, desktop, and Cisco hardware-based endpoints as well. Cisco can also effectively compete with cloud-centric video providers, such as Acano and Pexip, as Assemblage s technology will be integrated with WebEx and equipped with WebRTC capabilities to launch plugin-free video. Tablet and smartphone users will also experience WebRTC on their devices with the help of VP8 video codec standards. Key Takeaway As a technology leader, Cisco recognized the declining demand for costly video endpoints and is taking the right steps to balance the demand for alternative video solutions by embracing WebRTC technology. 4

5 Acquisition #2: ClearOne acquires Spontania Strategic Intent ClearOne is a specialist in professional audio conferencing equipment, including sound reinforcement systems, professional microphones, and network bridges. With a historical focus on the professional audio conferencing segment in the audio conferencing endpoint market, ClearOne leads with a share of % (2013). It is a logical extension for ClearOne to venture into video conferencing as it can depend on its existing channel base to expand its customer reach and offer a more integrated solution, besides potentially tapping its existing customers for new sales opportunities. ClearOne took the first step into the video market in 2012 when it acquired VCON to include premise-based video communication in its portfolio. Subsequently, to leverage the advantages offered by software-based video conferencing and to position itself as a one-stop-shop provider for all audio and video collaboration needs, ClearOne acquired Spontania. Spontania is a cloud-based software video conferencing service that includes virtual video switching, video conferencing, streaming, recording, and presentation sharing. It is available both on public and private cloud. Outcome This acquisition will allow ClearOne to compete with software-centric alternatives in the cloudbased video conferencing market. ClearOne has signed distribution partners, such as D & H Distributing and Almo Professional A/V, to distribute the software-based Spontania solution to its channels in the United States. 5