Video conferencing market showing growth

Expectation of economic recovery prompts corporate spending

With the economy expected to pick up in the Asia Pacific, the video conferencing market is likely to benefit as more companies invest in video conferencing solutions.

According to a new study by Frost & Sullivan, spending for video conferencing solutions is expected to continue its pickup from late last year, with revenues reaching US$367.5 million by the end of the year.

Pranabesh Nath, Frost & Sullivan industry manager, said this optimism comes from the expectation that the economy is off to a recovery.

In a new industry analysis titled 'Asia-Pacific Video Conferencing Endpoints Market', the consultancy firms said the region, including Japan, will grow 9.5 per cent year-on-year by the end of the year with shipments growing by 14.1 per cent to 108,434 units.

The market is expected to grow at a compound annual growth rate (CAGR) of 13.6 per cent till 2016 reaching nearly US$820 million. Unit shipments, meanwhile, are predicted to grow at a CAGR of 16.3 per cent from 2009 to 2016.

Corporate spending

Corporate spending for the video conferencing market was obviously affected by the global credit crunch. Frost & Sullivan particularly noted that for the banking and financial sector, the sector most badly hit by the crunch, investments in video conferencing solutions declined.

"The corporate sector saw the sharpest decline in video conferencing investments last year, most notably the banking and finance sector," Nath said. Corporate cutbacks, however, were offset by a rise in government sector adoption.

Growth of the video conferencing endpoints market dropped sharply to post a modest 5.4 per cent on the back of just over US$335 million revenues in 2009.

"Spending in the first three quarters of 2009 showed a decline in almost all Asia-Pacific countries, but by end-2009, enough deals were closed to bring the market back from the red," said Nath.

HD adoption

All is not that bad in the market, however. Despite the global slowdown, Frost & Sullivan noted that sales and marketing activities in the video conferencing sector remained active last year with high definition (HD) systems bringing in more business

"As a result, almost all of the units sold in 2009 in the mid- to high-range market were high definition solutions," said Nath.

The market for HD is expected to grow up to 2016 even for countries such as China and India where standard definition currently dominates.

The challenge for HD adoption in the region, though, is bandwidth. One solution is for companies to consider when they plan their Internet protocol (IP) networks infrastructure is that video applications can run on IP.

"Pure IP systems are already widely deployed in urban cities of the region. As bandwidth costs continue to decline and become more available beyond these urban areas, we expect pure IP systems to see huge uptake in the mid to long-term," said Nath.

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