Juniper’s Strategic Investment in Vidyo: Why it Matters

Juniper Networks announced that it made a strategic investment in Vidyo, a software-based HD video conferencing provider. The terms of the deal were not disclosed, though it is in addition to the $97M already raised through the Series D round closed last September. This announcement is significant for Vidyo in that it provides additional momentum and credibility to its message of affordable telepresence. Additionally, the deal caught our attention because of its potential to alter the competitive landscape. 

Vidyo? 

Although Vidyo is not a household name, it has very interesting technology that many people have used. It is the base technology platform that Google uses for GTalk. Vidyo is able to deliver high-quality video conferencing to nearly any device under almost any network conditions. It does this in software, so it can scale to 100+ participants using existing network infrastructure and without the need for adding hardware multipoint conference units (MCUs). Vidyo’s approach changes the business model and is threatening to disrupt the telepresence market. 

How Vidyo threatens telepresence incumbency

Vidyo has developed and is delivering an alternate approach to HD videoconferencing. Instead of utilizing hardware MCUs to enable multipoint conferences, the company uses a software-based system. The software approach is much lower in capital cost as it can run on existing devices or off-the-shelf hardware. It also utilizes lower bandwidth, eliminating the need to purchase additional hardware when scaling. Vidyo’s claim is that it can provide multipoint HD conferencing for a 10X savings in both capital and operation expenses. 

Vidyo implements an interactive video standard called Scalable Video Codec (SVC, a part of the H.264/AVC standard).  SVC is an analogous to the adaptive streaming used in streaming (for example, Apple’s HLS and Microsoft’s Smooth Streaming), where several qualities are encoded simultaneously and the clients continuously negotiate to receive the maximum quality that the device and network can deliver at the moment. Like adaptive streaming, the resolution and bit rate can change very frequently and avoid the pixelization, artifacts and buffering delays that were common with older generation streaming. The effect is much more pleasing to watch as the change in resolution does not affect the picture as greatly as the delays or missing blocks.

SVC works by specifying a base layer encoding at the lowest acceptable quality for video conferencing. Typically, the base layer could be QCIF (Quarter Common Intermediate Format of 144 lines and 176 pixels per line) at 7.5 frames per second (FPS), which would require 64kbps, a speed that most networks can handle easily. In addition, the Codec simultaneously encodes enhancement layers for larger sizes, higher resolution and higher frame rates. The client and server continually monitor conditions, including network congestion and the size of the screen in the player, and negotiate the appropriate level of enhancement.  

Why this deal is important

Anytime a start up gets a strategic investment it is important; it is a validation of the company’s strategy/execution as a customer and as potential go-to-market partner. Although this investment provides those benefits to Vidyo, it also got our attention because Juniper goes beyond obtaining another Junos ecosystem partner. Juniper is not a telepresence vendor but competes heavily with Cisco, the market share leader in the space. Cisco has stated that telepresence is a strategic segment. Telepresence is a relatively high-growth and high-margin segment, and its high bandwidth consumption drives greater network equipment, Cisco’s core business. Accelerating adoption of the disruptive technology and shortening the life of existing telepresence products could impact Cisco in a material way. 

Even if Vidyo and SVC are successful in turning the telepresence market into a commodity segment, it is not necessarily a serious threat to Cisco. Cisco is a master at managing market transitions, is likely monitoring SVC and working on a response. Also, Cisco is expert at steering market perceptions around technologies. After all, it essentially redefined videoconferencing and created the telepresence segment.  

Juniper was very careful to position this as a strategic investment that makes sense for both promoting Junos and providing a return on investment and not as competitive shot across the bow to Cisco. We take Juniper on its word in this regard, even though it appears to be a smart, long-term competitive move. 

While the eventual outcome cannot be fully ascertained, this is investment by Juniper certainly caught our attention.

For more information about ACG Research's Video Infrastructure service, click here or contact sales@acgresearch.net.

David Dines

ddines@acgresearch.net

www.acgresearch.net