“I can see for miles and miles”*

TeleSpan’s 2009 Predictions

Here’s what I think!

This is so much fun, I have to pinch myself to get serious!

Been writing TeleSpan for 29 years and been doing annual predictions for the past 13 of them. This will be my 14^th! Jeez—I must be the Crystal Bald with my track record. I’ve made 130 predictions in the past 13 years, and got 93 of them right, for a batting average of .715 (72%).

And that’s no BS (in Math) from MSU either!

Just as I’ve done in previous Predictions editions, let me start out by telling you what my predictions are for this year, 2009, and then I’ll get to the scorecard for my predictions from last year.

As always, though, I just want to be clear: where I predict that a company will be successful, I am indeed cheering them on. Where I predict that a company is going to fail, I am wishing it wasn’t true. All of us want to share in a successful growing industry. Fact is, though, some things, some ventures, simply won’t make it. With nearly 30 years of watching this industry as closely as I have, I feel that my job is to tell you what is real, and what is not.

Ready? Okay, now the wind up, the pitch….

TeleSpan’s Prediction #1:

HD Video contributes over 80% of revenues by 2010.

Clearly, high definition videoconferencing sales are zooming. At the end of 2007, we at TeleSpan began asking our Big Six group videoconferencing vendors to tell us what percent of their group system shipments were HD. At that time, they were about 15% of unit sales. By the first quarter last year, they represented 20% of group unit shipments. And, by the end of the third quarter last year, they were about 40% of unit shipments. Polycom has already reported that HD accounts for 50% of revenues from the company’s videoconferencing end point sales. Heck, with Aethra, Sony, Tandberg, and certainly LifeSize selling more and more HD systems, this forecast is a no-brainer.

TeleSpan’s Prediction #2:

Telepresence sales flat, except those lower than $35,000.

Let’s look at the hard, really cold facts: Telepresence is more myth than money right now. Sure, the systems look nice, show the whole room, "immerse" you in the meeting, but, gee, isn’t that what Satellite Business Systems (SBS) said in 1980? In fact, that’s what AT&T said about Picturephone Meeting Service (appropriately abbreviated as "PMS") in 1978. Systems like that then cost a million bucks a pop, and folks just couldn’t afford them.

For the past 20 years, we’ve produced incredible, now HD, videoconferencing systems, which can be installed and up running for well under $20,000. In fact, you can go to any of TeleSpan’s Big Six and get darn good systems for under $6,000. Or, you can get an HD webcam from Logitech for $160, get a flat screen display for peanuts, and with your cable modem, you’re "immersed."

Today, we’ve got Cisco, HP, and a raft of others selling telepresence systems for $100,000 to $300,000 per endpoint, PLUS monthly fees of $4,000 to $7,000.

Tell me, would your customers rather get a paycheck this year, or get a telepresence system?

I think that you’re going to see prices fall, led by those Telanetix folks with their "re-presence" systems, with systems selling well at $35,000 and lower, while the $100,000 to $300,000 systems sit on the showroom floor.

Even John Chambers, CEO of Cisco, last week announced at CES that Cisco would take telepresence to the consumer market! That ain’t going to be the $300,000 system, folks!

I mean let’s face facts: We sold about 185,000 group videoconferencing systems in 2008, of which about 46,000 were HD, with only about 3,000 of them real "telepresence" systems. That’s 2% of sales!

By the way, I’m sure you noticed that I put quotes around the word telepresence in the paragraph above. That’s because so many vendors are now calling systems, some built with Legos, "telepresence." I don’t tend to count them in my total.

TeleSpan’s Prediction #3:

IBM makes major inroads in conferencing and collaboration market.

Yeah, yeah, I know, I’ve been saying for years that "Microsoft will eat everyone in the conferencing field!"

But, and you know my big but, do you realize how much time and effort IBM has put into conferencing and collaboration? Really it’s been Lotus, IBM’s SameTime toolkit provider, that has been teaming with folks in our field for the past several years. As a result, they’ve become a winning team called IBM.

Last year, for example, at IBM’s Lotusphere 2008, Polycom announced that it had teamed with IBM to integrate SameTime and Notes software into Polycom’s systems, allowing for "Click to Call" and "Click-to-Conference" with Polycom’s HDX systems. Proctor and Gamble (P&G), one of the world’s largest users of conferencing and collaboration, did the same thing with its Avistar desktop video systems.

Then, there’s the fact that IBM Lotus acquired WebDialogs, now calling it SameTime Unyte.

Longtime vets of the industry will recall that in the late 1980s and early 1990s, IBM was the leading provider of ISDN transport for videoconferencing networks in Europe. PicTel, before it became PictureTel, relied heavily on IBM for transport for its endpoint customers.

Longtime vets will also remember that IBM bought DataBeam in the 1990s.

I think IBM is going to make major inroads in our market over the next few years, and that customers will go to IBM to avoid the big "M," Microsoft.

TeleSpan’s Prediction #4:

Microsoft settles with Avistar, maybe buys it to win back accounts lost to Lotus/IBM.

Yes, I just said that IBM Lotus was going to make major inroads in the market, and that customers will buy IBM’s solution to avoid Microsoft. Heck, think the big M will take that lying down?

Nope!

Yes, when Avistar filed a patent infringement suit against Microsoft, I said, "Yikes—are you folks at Avistar nuts?" I even said that I thought Avistar was just another Forgent.

Well, I did a little research on Avistar’s patents last year and pointed out in ET that Tandberg paid around $12 million in 2005 to use Avistar’s patents, and that Polycom settled with Avistar to the tune of $21.5 million for patent licenses. Well, in total, Avistar claims to have 15,000 license agreements in place across 40 countries.

And now, it’s sued Microsoft.

When it did, Microsoft went to the United States Patent Office and tried to, in my words, have the patent claims rejected, and was shocked when the Patent Office said, "Nope, they’re good to go!"

Well, Microsoft announced last year it was entering the conferencing and collaboration space with its Microsoft Online Services (MOS), and announced SharePoint Online , and all of this, I remind you, after they paid $225 million in 2003 to buy Placeware, which is the core of Microsoft’s Webconferencing package, LiveMeeting.

Heck, M’s got billions of dollars in the bank. I figure if it loses the suit with Avistar, Microsoft just buy ‘em! With "’em," Microsoft could become a major force competing with IBM—in fact, with everyone.

TeleSpan’s Prediction #5:

Polycom, Avaya totally withdraw from CSP market.

I find this one sad.

Long-timers will recall that up until this decade, the conference call market’s conference service providers (CSPs) got nearly all of their audio bridging hardware from two providers: MultiLink and Voyant. As a result, the two bridge makers were so attractive that they got snapped up.

First MultiLink got snapped up by what was called Spectel, which had a software solution, vs. MultiLink’s hardware solution, and that mix drew the attention of Avaya to buy them both. Avaya bought them to service a newly won IBM contract (which I address below under Prediction #10), offering an "enterprise" solution, which didn’t need the ol’ MultiLink hardware. MultiLink folks got laid off. Then, Avaya began tanking, lost part of the IBM contract, and the recession set in…. I’ll get back to Avaya in a sec.

Second, Voyant got snapped up by Polycom, which didn’t see a need to focus on the CSP market, and chose instead to focus on the enterprise market, just like Avaya did. When they did, Polycom lost CSPs accounts to Compunetix . Yet, to their credit, Polycom did a good job of engineering up for the enterprise market, through Accord, which Polycom had previously bought in the video bridging area.

Yet, when Polycom changed from its reliance on Voyant to Accord, it cut quite a few of the Voyant staff. Then came the layoffs announced two weeks ago. More Voyant folks were let go.

Now, both Avaya and Polycom are being forced to watch their spending, their headcounts, and watch the economy downturn. With their eyeballs on those things, I figure they’ll take their eyes off the CSPs, and get out of that business.

The good news is that Avaya, Polycom, and the CSPs will survive, with the CSPs simply migrating their buys to Compunetix and possibly a few others still focusing on their needs.

TeleSpan’s Prediction #6:

Skype video used by a growing number of corporate users from home for business calls.

I can’t remember if I disclosed this in Electronic TeleSpan already, but one of my colleagues at TeleSpan is a member of the Polycom User Group (PUG), and logs onto the PUG blogs all the time. The colleague reported to me a series of entries from a Polycom video equipment user who wanted to find a Polycom MCU that could bridge calls.

Duh!

A Polycom user asking other users for a Polycom MCU!

Well, what we found out was that it wasn’t that simple. The PUG-er was trying to connect with a group of others in Europe, who were on video… as in Skype video.

Don’t think Skype is being used by a growing number of corporate users? Skype reports now that 25% of its Skype callers use video during their calls. Then Skype reports that 30% of Skype’s users use "Skype" (could be audio, could be video, could be both) for business.

Did I hear you yawn when I said Skype?

Okay, consider this: Skype had 370 million users at the end of the third quarter of 2008, after adding 32 million new users during the quarter. Those users made 16 billion minutes of Skype calls during the quarter, compared to 6.1 billion minutes of Skype calls during the third quarter the year before. Oh, and they made an additional 2.2 billion minutes of Skype-Out calls during the third quarter last year, compared to 1.4 billion minutes the year before. In total, that’s 18.2 billion minutes for the third quarter 2008. vs 7.5 billion minutes during the third quarter of 2007.

TeleGeography now claims that 6.0% of all global long distance calls are carried by Skype.

Can you get your jaw back off the floor now?

Skype WILL be a major player in business video calls—case closed!

TeleSpan’s Prediction #7:

Big Six dive/grow due to recession.

Yes, Polycom announced layoffs last week. No, we don’t have Polycom’s unit shipments yet, nor do we have them for the rest of TeleSpan’s Big Six yet, but I figure that sales will be soft for the quarter, but will be up again during the present "year of recession."

Don’t believe me? Just look at the following data, which shows year-over-year gains in unit sales since 2001.

Polycom’s Group Unit sales growth Year over Year

Remember when Premiere Global announced that it had lost IBM, which represented something like 25% of its conferencing call revenues? Premiere lost IBM to Avaya (as I said above), which offered IBM an "enterprise" solution… "Hey, conference calls are so simple, you don’t need no stinkin’ CSP… you just need some servers, and some VoIP phones, and some PINs, and we’ll have a person there next to the server if you ever have any problems (during your hundreds of millions of minutes of conference calls each year)."

Well, to its credit, Premiere didn’t take this lying down, but went huntin’ and gatherin’ and bought a bunch of competing CSPs, and gained back that lost 25%.

Well, quietly, over the last six months, well below the radar, IBM has begun to bring back its conference call business to Premiere, starting first with its event business, its operator-handled calls. Seems IBM wasn’t real pleased with the way Avaya was handling them.

I figure that Premiere will be very, very focused this year and win back more, if not all, of IBM’s business. Fact is, Premiere needs the business. You won’t see this in any other publication, but TeleSpan has confirmed that Premiere recently lost its current largest customer, Procter & Gamble (P&G) to BT Conferencing. Soooooooooooo, Premiere needs IBM back, and I figure with that motivation, it’ll get ’em.

At the last minute, I pulled one prediction-"ThinkEngine ‘expires’." As you now know, ThinkEngine indeed did file for Chapter 7, total liquidation, this week.

I pulled the prediction, as I felt you’d think I made it up after reading it on the wire.

Nope! It was in the original list of predictions, I made two weeks ago, before I read the news item.

Predictions from 2008: How’d we do?

Okay, let’s see how the Crystal Bald did last year..

TeleSpan’s Prediction #1

Skype (along with Apple) leads consumers to video.

Don’t need to spend much time on this as I showed the Skype statistics up there in my 2009 Prediction #6.

Allow me, though, to share a story with you that really highlights Skype’s video presence in the consumer market. Well, two stories.

First—I was at the local florist yesterday, buying some flowers for my bud who’s in a rehabilitation center. I buy flowers for him once a month, along with a "Get Well Soon" balloon. The lady who owns Altadena Florist knows me, and I’m typically in and out of the shop in about five minutes. Pick flowers, lay my credit card down, sign the receipt and leave.

This week was different.

"It’s so nice that you do this for your friend each month," said the owner.

‘Thanks,’ I said.

"You know, I’ve never asked you, what do you do for a living?"

‘Oh, I’m a writer. I write about videophones. I’m sure you don’t know much about videophones.’

"You mean Skype?"

She had to administer CPR on me!

‘How do you know that Skype is in the videophone business?’ I asked.

"Oh, you know, whenever there’s a story on the news and they can’t get a crew out there, they use Skype video. Here’s your receipt, Mr. Gold."

Then, that night, a member of the TeleSpan team informed me that Oprah, as in the show with one of the largest consumer viewing audiences in the country, uses Skype video all the time, and touts it on the show.

If my florist knows about videophones through Skype, and all those viewers of Oprah know about it, I think it’s safe to say that Skype is winning over consumer users for video.

I’ll take a thumbs up on this one.

TeleSpan’s Prediction #2:

Polycom’s market share of TeleSpan’s Big Six group video falls to under 40% by Q1 2009.

Well, while Polycom’s share has fallen below 50%, down to between 47% and 49% during the first nine months of 2008, it’s certainly not at 40% as I predicted.

That said, indeed, I do not have the Q4 2008 data yet and won’t have the Q1 2009 data for four more months.

For now, I’ll be happy to take a thumbs down on this one.

Congrats to Polycom, by the way!

TeleSpan’s Prediction #3:

ACT slumps big time after AT&T fails to renew international contract in 2009.

Tragic, I’d say.

ACT Teleconferencing really was out there leading the way in international conference call traffic, and has had a great contract with AT&T TeleConferencing , hosting international calls.

Though no one is talking about it, I know that ACT’s former president, Gene Warren, was told, "Hey, as long as you can keep AT&T as a customer, you can keep your job."

Gene is gone. Guess that tells us what happened to the ACT contract with AT&T, doesn’t it.

Sometime this year, we’ll see the AT&T announcement, so I’ll take a thumbs up on this one.

TeleSpan’s Prediction #4:

TelePresence waits for price to fall to $1,000, and becomes consumer tool by 2010.

I’m so sure of this, I’m willing to bet I’ll be bald by 2010!

Oh—I already am bald!

But then, remember that John Chambers, CEO of Cisco, did say last week at the Consumer Electronic Show (CES) that Cisco was going to bring telepresence to the consumer market. He didn’t say when, but I think he’ll do it by 2010, and it’ll be around $1,000 a pop (display extra).

For now, to be fair, I’ll have to take a sideways thumb on it.

TeleSpan’s Prediction #5:

Freeconference.com survives FCC Iowa maze through 2009 or later.

Freeconference.com, or really Global Conference Partners did indeed survive, and is still growing.

Yes, the company changed management in the fourth quarter (I’ll introduce you to the new folks later this year), but based on confidential data I have from Freeconference, it’s doing just fine, thank you very much.

So, I’ll take a thumbs up on this one.

TeleSpan’s Prediction #6:

Google enters collaboration space with Skype-like model.

Last year I led off by saying, "Ha, ha, ha (sorry I had to laugh at this prediction, it’s so obvious!)."

This year, I’ll lead off with, "Ha, ha, ha, (sorry I have to laugh, at this prediction, as it WAS so obvious!)."

In November, Google announced it would offer videoconferencing and collaboration for free through Gmail, using software acquired the previous year from Marratech . Yes, the service begins as a point-to-point videoconference, though with text chat available in groups. The cost, as I said in the November 17, 2008 edition of Electronic TeleSpan (pp 1-3), is "nada."

So easy to take a thumbs up on this one.

TeleSpan’s Prediction #7:

MeetingZone acquired by CSP by 2010.

Well, I said 2010, so I can take a thumbs sideways, right?

I’m still convinced that there’s a good chance that MeetingZone (http://www.meetingzone.com/) will be acquired by 2010 by another CSP. The only hiccup might be the economy, which I think will slow acquisitions down. But, after that eases, or possibly before, during 2010, I’m convinced that MeetingZone will be acquired.

TeleSpan’s Prediction #8:

Archived video becomes feature/offering by "audio" CSPs by 2009.

I just haven’t seen any conference service providers (CSPs) announce support for archived video, so I’ll have to take a thumbs down on this one.

If you know of one who is offering it, or offers it "by 2009," as in this year, let me know, so I can reverse the direction of my thumb on this one.

TeleSpan’s Prediction #9:

Virtually all CSPs follow Genesys and now Premiere Global’s model in pricing, bundling all "collaboration," but the move has no effect on price erosion of voice conferencing calls.

Look, AT&T is about to take the lead again, and it’s busy bundling all of its collaboration services over IP using InterWise. Then, there was the announcement in the Los Angeles Times, via Bloomberg, that "Verizon Communications Inc., the second-biggest U.S. telephone company, plans to do away with traditional phone lines within seven years as it moves to carry all calls over the Internet." Heck, you know Verizon’s going to force its conferencing division to bundle its offerings.

Global Crossing has been on IP for years.

Yes, existing contracts continue to have prices depending on services offered, but with these main carrier-based providers rolling bundles down IP, it’s simply a matter of time before everyone will have to follow.

As a result, I’m taking a thumbs up on this one, too.

TeleSpan’s Prediction #10:

Spike in e-mail scheduling of "conference calls" tips market share over to Microsoft and IBM, and then, Microsoft kills "us" by 2012.

Indeed, we are seeing an increase in e-mail and Outlook and Lotus Notes scheduling of conference calls, and indeed lots of conferencing managers ("users") are calling us about it. But, I can’t say yet that it "tips market share over to Microsoft and IBM...", as I said it would happen by 2012.

So, I’ve got time. For now, I’ll just take a thumbs sideways on it.

We will, by the way, be discussing this at TeleSpan’s Fourth Annual Future of Conferencing Workshop in Las Vegas, March 30 and 31.

You can hear a replay of the Predictions at www.telespan.com

Want to listen to a recording of my annual predictions radio show? By Monday or Tuesday, you should be able to go to our Web site (http://www.telespan.com), enter, and click on a link to hear and see what JD and I said about these predictions during our show recorded Friday, January 16. You can as well go directly to ConferencePlus’s site to log on.