Federal Funding to Drive Videoconferencing Adoption in Government, Distance Education, and Healthcare Verticals

Business Wire, July 13, 2005

PALO ALTO, Calif. -- While the self-funded corporate vertical expects to be a huge revenue driver for videoconferencing markets in the United States, contributions from other verticals such as government, distance education, and healthcare, depend largely on federal, state, and local funding.

New analysis from Frost & Sullivan (www.enterpriseapplications.frost.com), U.S. Vertical Markets and Applications for Videoconferencing, reveals that revenue in this market totaled $388.0 million in 2004 and expects to reach $1,153.9 million in 2011.

"There are no specific funds for acquiring videoconferencing technology in the government vertical," says Frost & Sullivan Program Leader S.V. Purushothaman. "This technology will be funded through overall technology acquisition and upgrade programs."

If you are interested in a virtual brochure, which provides manufacturers, end users, and other industry participants with an overview of the U.S. Vertical Markets and Applications for Videoconferencing, then send an e-mail to Mireya Castilla, Corporate Communications, at mireya.castilla@frost.com, with the following information: your full name, company name, title, telephone number, e-mail address, city, state, and country. Upon receipt of the above information, a confirmation/pass code for the live briefing will be emailed to you.

The government has always been keen to deploy videoconferencing devices and approximately 11 to 12 percent of the total defense budget expects to be used for IT expenditure.

Erratic government funding for the distance education and healthcare verticals also hampers revenue generation from these markets. Vendors can help improve this situation by increasingly lobbying to influence E-rate-specific legislation, press for higher education grants, and pass legislations encouraging adoption of telemedicine.

"Lobbying efforts in healthcare can focus on initiatives for a national regulation on telemedicine, standardized state regulation plan that is accepted by a majority of the states and proper coverage of telemedicine in private insurer health coverage plans," notes Purushothaman.

The relatively less complex corporate vertical has been beneficial to the videoconferencing market mainly due to its need for converged and collaborative conferencing solutions.

The convergence of conferencing technologies such as video, audio, Web, and the ever-increasing need for collaborative applications, creates new opportunities for videoconferencing vendors. They need to understand the future need for integrated conferencing applications and accordingly incorporate their offerings with that of complementary vendors or engage in acquisitions.

While stand-alone videoconferencing solutions have not reached the expected critical mass, the audio conferencing segment is approaching saturation and is showing stable single digit growth rates. Web conferencing, on the other hand, is in the early growth phase and is experiencing huge success among enterprises.

Web conferencing sessions also provide a successful attach rate for audio conferencing. Videoconferencing will find far greater success if it integrates with audio and Web conferencing.

Although videoconferencing vendors have successfully penetrated individual segments, they have not had much success in the small and medium business (SMB) segment. Their main focus is the large enterprises market.

"Once the easy revenue streams in the large enterprise segment dry up, vendors will be compelled to use effective product and pricing strategies for the SMB market," observes Purushothaman.

Vendors need to provide an attractive price-to-performance ratio for the SMB market to increase adoption and revenue opportunities. They could potentially and temporarily sacrifice their margins in the form of penetrative pricing to gain future opportunities through cross selling and up selling.

U.S. Vertical Markets and Applications for Videoconferencing is part of the Conferencing & Collaboration subscription and looks at the U.S. vertical markets in which videoconferencing has found significant adoption, namely corporate, government, distance education, and healthcare. The study focuses on the current state of the markets, its drivers, restraints, revenue forecast, and strategic recommendations for each of the verticals. This research service enables companies to align their positioning strategies to benefit from the changing markets and obtain maximum return on investment. Analyst interviews and executive summaries are available to the press.

Frost & Sullivan, a global growth consulting company, has been partnering with clients to support the development of innovative strategies for more than 40 years. The company's industry expertise integrates growth consulting, growth partnership services, and corporate management training to identify and develop opportunities. Frost & Sullivan serves an extensive clientele that includes Global 1000 companies, emerging companies, and the investment community by providing comprehensive industry coverage that reflects a unique global perspective and combines ongoing analysis of markets, technologies, econometrics, and demographics. For more information, visit www.frost.com.