TalkingPointz Research Note:
Vidyo in 2018
Dave Michels, TalkingPointz

talkingpointzlogo189.jpgOverview

  1. Vidyo, Inc., is a privately held, venture-funded company founded in 2005 that provides software-based visual communications technology, including products and services. Over the years, the company has raised $163 million in funding.
  2. Vidyo disrupted the market with both its technical approach to videoconferencing and its embeddable approach to video-enabling applications.
  3. Soon after the company launched its development stack, it used its own suite to create an enterprise videoconferencing solution that was competitive with vendors (at the time) such as Cisco, Tandberg, Radvision, and Polycom.
  4. Though enterprise videoconferencing remains a viable market, Vidyo recently turned its focus back to developers with a cloud-centric platform approach.
  5. VidyoCloud is a platform as a service designed to simplify the deployment and administration associated with video infrastructure. On top of VidyoCloud are three product services: VidyoConnect, VidyoEngage, and vidyo.io.
    1. VidyoConnect is an enterprise-grade videoconferencing-as-a-service solution that spans rooms, browsers, and mobile apps. In addition to a pure-cloud model, it supports hybrid deployments.
    2. VidyoEngage is a turnkey video-based engagement solution that powers customer/patient interactions. It can be implemented with websites, kiosks, and apps, and includes engagement features such as skills-based routing, queueing, video hold, and post-call surveys.
    3. Vidyo.io is a communications platform-as-a-service (CPaaS) offering that provides video APIs and SDKS – related development tools and services for the creation of customized, embedded, video-enabled applications and devices.

Connect with a Video Collaboration Expert

Pay for Video?

  1. There is a common misconception that video technologies are free and open, so there is no need to purchase proprietary solutions. This is only partially true.
  2. In May 2011, Google released an open-source project for browser-based real-time communication known as WebRTC. Both the IETF and W3C standards organizations began to standardize the free technology suite.
  3. Prior to WebRTC, the primary video technologies were licensed. Thus, WebRTC stimulated the marketplace with freely available video technologies.
  4. In 2017, Microsoft and Apple joined Google and Mozilla in adding WebRTC support to their browsers, giving WebRTC more universal appeal. Both Android and iOS support WebRTC.
  5. Today, WebRTC offers codecs and related technologies that sufficiently enable audio and video communications. WebRTC is not a complete solution stack. It’s an endpoint solution that still requires video expertise regarding signaling, mixing, recording, and other services.
  6. WebRTC is exceptional as an ad-hoc endpoint and ideal for guest access. Regular users generally prefer installed video clients over browser-based WebRTC clients, because they tend to provide a more comprehensive UI and experience.
  7. Areas that are particularly challenging are interoperability across codecs, group conferencing, recording, and capacity planning. Although hard to confirm, it appears most organizations opt to outsource these complexities by choosing commercial platforms and services.
  8. Video remains complex and specialized. Vidyo and others allow developers to focus on other aspects of their work and outsource (with support) the video stack and/or video operations.
  9. Many predicted the end of the commercial PBX with the availability of open-source, free voice technologies such as Asterisk and OPUS. Yet proprietary telephony implementations remain viable and dominant. Enterprises place considerable value on support and maintenance.

Background on Scalable Video Coding  (SVC)

  1. To understand Vidyo, it is necessary to understand SVC.
  2. From the beginning, Vidyo took a technically different approach to videoconferencing that leverages Scalable Video Coding (SVC).
  3. SVC is conceptually simple. It refers to an encoding method that produces multiple layers within a single bitstream. The base layer alone carries a complete signal, and each optional layer enhances the signal. The total number of layers used determines the received quality and frame rate, which can vary during a session.
  4. SVC is actually a subset of the broader approach known as Advanced Video Coding (AVC).
  5. Most AVC implementations assume a consistent resolution and frame rate for each endpoint. These settings are determined during call setup. The different approaches use different architectural models:
    1. AVC systems rely heavily on network infrastructure to manage/control network links.
    2. SVC relies on intelligent endpoints to encode and decode successive signaling layers.
  6. There are several standardized implementations of SVC such as H264/MPEG4. Vidyo’s intellectual property expands what SVC can do and extends it to many more codecs. For example, Vidyo recently announced its own implementation of scalable VP9 for real-time video, with significant performance and efficiency improvements over the open-source WebM VP9 (WebRTC) codec.
  7. The routing/filtering of layers is performed by a Selective Forwarding Unit (SFU) in the network. This process is significantly simpler (and less expensive) than transcoding, typically performed by a multipoint control unit (MCU) with AVC.
  8. AVC also supports a forwarding model, but instead of forwarding layers, it forwards one of several complete signals. In AVC this is called “simulcast.” Simulcast requires that the endpoint sends multiple complete streams at different qualities/rates simultaneously. Simulcast simplifies network operation, but it consumes more bandwidth and adds burden to the endpoints.
  9. These changes are significant with multiparty conferencing. AVC requires significant transcoding operations to customize content to each participant, where SVC simply routes/discards signals as appropriate.
  10. This SVC routing function determines the dynamic “scalability” of each endpoint. With Vidyo, scalability refers to temporal and spatial characteristics.
    1. Temporal relates to the frame rate.
    2. Spatial relates to resolution and image size.
  11. SVC is a concept, not a specific implementation. Other SVCs exist that don’t offer the same benefits. For example, Microsoft’s Skype for Business and Teams use SVC video, but its implementation is limited to temporal features. (Only Vidyo supports spatial features.)
  12. SVC solutions are particularly well-suited for environments where network capacity changes during a conference. The number of layers forwarded can adjust dynamically based on network conditions. Network conditions can change for a variety of reasons, such as congestion or a mobile user moving from Wi-Fi to cellular.

Vertical Focus

  1. More recently, Vidyo focused its attention on markets where its embedded approach is more valuable. Vidyo’s technologies are inherently embeddable into other software applications, devices, or workflows.
  2. Vidyo has made notable progress in several verticals, specifically healthcare, financial services, and customer engagement.
  3. All of these sectors utilize Vidyo’s technologies to enrich their own applications, devices, and/or websites with rich video capabilities.
  4. Healthcare/Telemedicine
    1. Vidyo’s technology is well-suited for telemedicine, as it can be embedded into browsers, apps, and devices.
    2. Vidyo is active across the “continuum of care” with solutions that support home-based telehealth, ambulatory services, emergency and urgent care telehealth, inpatient monitoring, specialist collaboration, and post-acute care, among others. Vidyo also has customers across different types of medical services including psychology (mental/behavioral health), pharmaceuticals, and elder care.
    3. Vidyo works with over 295 healthcare systems, and three of the top four electronic health record (EHR) vendors (Cerner, Epic, and Allscripts) now integrate with Vidyo. Vidyo’s impressive roster of customers and integrations allows it to conclude that 50 million patients per year have access to Vidyo-enabled healthcare. Other big Vidyo customers in healthcare include Philips, Mayo Clinic, Optum, OTN, Care Innovations, Mercy, and American Well.
    4. Vidyo has made inroads into the emerging sectors in telehealth with IBM Watson (AI) and NEC (biometrics).
    5. Mordor Intelligence forecasted that the global telemedicine market is estimated to be $34 billion by 2020, with the US accounting for 40 percent of the market.
    6. DigitalHealth hit a funding record last year of over $6.7 billion. At the current run rate, 2017 is on track to reach a new high of $9 billion according to CB Insights.
  5. Financial Services
    1. Vidyo has over 450 bank, credit union, insurance, and other financial services customers, including 6 of the top 25 global banks using Vidyo within their workflow applications.
    2. Barclays leverages Vidyo’s technology for its video banking application, which serves high- net-wealth customers. In 2017, Barclays video-enabled over 500 banking agents. Barclays has reported that video interactions result in consistently higher NPS scores compared to telephony.
    3. Bloomberg’s “Nexi,” developed and customized with Vidyo’s platform and APIs, is used by 19,000 employees for internal global communications.
    4. Other customer logos include HSBC, Santander, and RBC.
  6. In addition to Vidyo’s main verticals, customer engagement has also been a strong focus for the company. The hosted contact center market is experiencing rapid growth. Several brands are now touting improved customer engagement through video. Vidyo has developed contact center integrations with several major players including Genesys, NICE inContact, Verint, and ServiceNow.
  7. Vidyo also powers several UCaaS market leaders’ videoconferencing capabilities, including 8x8, Mitel, NEC, Ribbon, and Fuze.
  8. Several large providers, including West and Arkadin, use Vidyo technologies.

Dave’s Thoughts

General

  1. Embedded video is poised for explosive growth. There are three concurrent trends aligned:
    1. Mobile devices are the new IT framework, and each device is video-ready.
    2. Millennials are video-savvy and are making video normal.
    3. Connectivity is extending well beyond our computers and mobile devices (IoT).
  2. Vidyo is ahead of its enterprise videoconferencing competitors with regard to its transition toward embeddable, infrastructure-free services. This advantage is likely the happy result of its lagging in the traditional videoconferencing market. However, Vidyo’s enterprise solutions remain viable and attractive to many large organizations.
  3. Vidyo provides a best-in-class solution set for embedded video.
  4. Visual technologies are rising in popularity, though often unnoticed. Video doesn’t seem like a new technology; the novelty is that the barriers to adoption have all quietly disappeared. The costs (usage and equipment) of video are negligible. The quality is tremendous. Business users and consumers are generally equipped and connected. Networks are available and capable.
  5. Businesses are rediscovering that human interaction is a service differentiator. For the past several decades, automation (such as interactive voice response) has been hiding the humans. The pendulum has begun to swing the other way.
  6. Video enables organizations to cost-effectively humanize their service or experience. These benefits are clearly evident with telemedicine and virtual banking. Other consultative services will follow. Part of the cost-effectiveness is achieved through centralization. Mercy’s ‘hospital without patients’ is a good example. It is a single facility expressly designed to supplement services at multiple remote facilities.
  7. Vidyo has created separate products and services for conferencing, enabling, and embedding. This is a refreshing and more logical approach than the typical model of adding APIs to existing application services.
    Vidyo Portfolio
  8. In an important shift, video is moving out of the confines of the conference room and into apps and devices. Vidyo was among the earliest to realize this change and is seeing rapid adoption of its embeddable technologies.
  9. Vidyo’s platform approach is also well-positioned for emerging technologies such as augmented reality (AR). It has already announced an integration with Vuzix, a leading maker of commercial wearables.
  10. Vidyo’s spatial encoding capabilities are unique and powerful. Many video solutions are now touting SVC as a competitive differentiator, but they are generally referring to temporal capabilities only.
  11. Vidyo has competitive strength by offering:
    1. Unique capabilities (such as being the only provider that can support SVC encoding with VP9 codec)
    2. A full suite of services (every major codec including software-based support for H.264 SVC, VP9 & H.265). Vidyo supports services such as Hangouts, Skype for Business, Slack,  HipChat and more. This positions Vidyo for ultimate interoperability.
    3. Vidyo is one of the few vendors/providers to support 4K video today, and has announced it will support AV1 for streaming soon after it is ratified.
  12. Thanks to WebRTC, many organizations and applications are using video now. Since WebRTC is very limited when it comes to scalability, multi-party, and error resilience, the trend is actually creating a larger potential market for Vidyo and similar companies. WebRTC is not the threat to revenue many initially feared.
  13. Because Vidyo provides enabling technologies rather than just a service, it has fostered some impressive partnerships. Most customers that embed Vidyo into their core offers effectively become partners. Notable partnerships include Alibaba, Nintendo, Google, Xiaomi, and Kaiser Permanente.

Cloud is the Future

  1. VidyoCloud provides a highly versatile framework, further enhanced with highly versatile business models. Vidyo offers per user, concurrent user, and named user options.
  2. Vidyo’s routing approach simplifies network operations and infrastructure. Now that Vidyo has expanded from vendor to provider as well, it now reaps these benefits itself. Many of the new competitors in video CPaaS will need to build-out transcoding infrastructure.
  3. Vidyo has taken the approach of offering a single cloud infrastructure to host and run all of its products. This is the right move forward.
  4. VidyoCloud provides a platform for its future. The most well-known CPaaS providers are Twilio and Vonage/Nexmo, but neither are particularly focused on video. They have, however, proven large demand for CPaaS exists among developers. Vidyo.io offers rich video capabilities. VidyoEngage provides turnkey video capable customer engagement solutions and/or integrates with leading contact center providers.
  5. IDC forecasts that the market for video CPaaS will grow from $60 million this year to $1.7 billion in 2020. That’s aggressive growth, which may be unrealistic, but the fact is, many companies  are adding video to their apps. There are no barriers anymore, as practically all mobile devices are video-equipped, the bandwidth is available, and usage barriers are disappearing as users grow increasingly comfortable with video. Additionally, workflow and business processes are increasingly digital. That is, it’s easier to add interactive video to an app than to a paper form.

Verticals

  1. Vidyo has made impressive inroads into three key verticals (healthcare, financial services, and customer engagement) and is poised to benefit from more adoption as the value of real-time communications will inevitably follow suit across industries. Potential sectors include insurance, public safety, the judiciary, education, and . . . all others.
  2. As more and more businesses rely on self-service models (such as retail cashiers, virtual receptionists, hotel front desk and concierge workers, etc.), the need for remote assistance will increase.
  3. In 2013, Amazon introduced Mayday on its Kindle devices. This was a great example of a how a vendor could create differentiation through superior service even on a low-cost device. Most companies do not have the technical wherewithal or desire to engineer their own video- enhanced solution, nor do they have to, with services such as VidyoEngage.

Pivot?

  1. Vidyo’s platform approach is not a pivot. Since Vidyo’s inception, it has been on a mission to video-enable applications and processes. The Vidyo platform was initially designed for and launched to embed video applications.
  2. As the technologies and business practices evolved, Vidyo effectively adapted the core capabilities of VidyoWorks and relaunched it as vidyo.io. This evolution to ‘as a service’ reduces the cost and increases the reach of the technology.
  3. Most premises-based vendors are adapting their business models to cloud-delivered services, but they are struggling to differentiate beyond billing models.
  4. Although Vidyo does resell hardware, hardware has never been a core part of its business. Vidyo assembles, not manufactures, its hardware. Vidyo is largely skipping the painful transition away from hardware margins as it moves toward cloud services. Vidyo continues to sell packaged room-system hardware.
  5. The pivot, if any, was an evolution from premises-based applications to cloud-based services. The mission remains to video-enable business practices.

Competition

  1. The competitive threats come from open standards, direct competitors, and overall demand for video-related technologies.
  2. Regarding open standards, there is evidence that WebRTC is actually fueling Vidyo’s growth. Vidyo encourages prospects to adopt and explore WebRTC. The company appears confident that WebRTC will a) prove the value of video and b) increase demand for Vidyo’s services. Vidyo’s strength lies between the endpoints in areas such as scalability and interoperability.
  3. Regarding direct competitors, in the near term, the company has few competitors that offer the same scale and breadth of features. Competitive pressures will increase, so Vidyo’s head start is critical.
    1. Cisco recently launched new SDKs and Widgets for embedding video capabilities into applications. These offerings will be most attractive to existing Cisco customers that intend to connect apps to conference rooms. Cisco Collaboration is highly focused on Cisco Spark, its Team Messaging App.
    2. Polycom, Zoom, Cisco, and others remain highly competitive over the enterprise videoconferencing market, which continues to grow, with lower usage and device costs.
    3. In the CPaaS space, both Twilio and Vonage Nexmo are primarily focused on telephony and messaging services.
    4. Telefónica acquired TokBox in 2012. Its OpenTok platform is probably the most similar service to vidyo.io. TokBox is a service offering, where Vidyo is offering a service backed by its own technologies and IP. Vidyo claims several customers that came from Telefónica due to reliability and quality issues.

Leadership Change

  1. This month, Vidyo announced a change in leadership. Michael Patsalos-Fox, Vidyo's chairman, has been named the company’s third CEO. Patsalos-Fox has management and board experience from McKinsey and has been the on the Vidyo board since 2013. He also currently serves on the boards of several other companies including Cognizant, Quid, and CloudPay.
  2. Patsalos-Fox was with McKinsey from 1981-2013 and served as its Americas chairman from 2003-2009. He holds a degree in computer science and mathematics from Sydney University in Australia and an MBA with distinction from the International Institute of Management Development (IMD) in Switzerland.
  3. Patsalos-Fox has additional prior CEO experience with Stroz Friedberg, a cybersecurity company that specializes in digital forensics, incident response, and other security sciences. Patsalos-Fox was CEO from November 2013 through November 2016, when Aon acquired the company.
  4. Eran Westman was Vidyo’s CEO from February 2014-November 2017, and brought sales leadership experience to Vidyo. Under his purview, the company launched its financial vertical, and he led the expansion into the cloud.
  5. Patsalos-Fox has signaled no change in the current Vidyo strategy, which he helped shape. His experience with companies in transition may bring about an acceleration.
  6. As noted above, Vidyo currently enjoys a head start in embedded video and cloud services, and needs to move quickly to make the most of it. Acceleration can be accomplished with focused execution, additional funding, partnerships, and/or acquisition.

Concerns and Threats

  1. Vidyo is a private company, so it’s not possible to evaluate its financial strength. What we do know: Developing a cloud service is not a trivial endeavor.
  2. Vidyo has made impressive progress with its transition to CPaaS. It is impossible to determine if the change in leadership will result in no change, acceleration, or disruption.
  3. Vidyo could be acquired. This is ultimately true of all companies and is not necessarily a negative, just a concern for any customer.
  4. Vidyo’s success with embedded video may have woke the giant. Just last month Cisco announced new APIs for embedded video.
  5. Vidyo’s broad approach to the market has placed it in numerous video sectors. Vidyo technology is now being used in UC, UCaaS, Video Managed Services, Enterprise Collaboration, Group Video Systems, Video and Web Conferencing Services, contact centers, platform as a service, and several industrial vertical segments. Each vertical sector has unique engineering requirements. For example, telehealth required accommodation for electronic stethoscopes. This may be too many markets for a company of this size.

Dave Talking Vidyo

Dave Michels

Dave is an independent analyst focused on enterprise communications. He provides public content on TalkingPointz and other industry websites, and also works with to advise clients directly.

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Table of Contents

  1. Overview
  2. Pay for Video?
  3. Background on Scalable Video Coding  (SVC)
  4. Vertical Focus
  5. Dave’s Thoughts

Key Pointz

  • Vidyo continues on its mission to video-enable everything.
  • The company has made an effective transition to cloud services.
  • Vidyo revised and simplified its portfolio to VidyoConnect, VidyoEngage, and vidyo.io. All three are built atop VidyoCloud.
  • Vidyo is well-positioned on several fronts:
  • Leadership in embedded video capabilities.
  • Momentum in several verticals.
  • Partnerships and alliances that include Google, Kaiser Permanente, and more.
  • Technological advantages in current and emerging video technologies.
  • Visual communications are rapidly expanding into workflow and business processes.

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