Bringing HD video to SMBs

LifeSize leads a down-market charge with low-cost videoconferencing.

A pioneer in high-definition videoconferencing is hoping to crack the small and medium-sized business market with dramatically low-priced HD conferencing gear. But its business will depend largely on distribution partners.

LifeSize, a small, four-year-old Texas firm, has made a business out of undercutting the prices of Polycom and Tandberg TV, which dominate the videoconferencing space. This month, using the latest silicon and a proprietary camera, the company unveiled a new product priced even lower. While Cisco Systems' three-screen “telepresence” system exceeds a quarter of a million bucks, LifeSize's newest offering, Express, goes for about $6000 — a price Ira Weinstein, senior analyst for Wainhouse Research, calls “ridiculously low, lower than anybody can touch.”

Polycom and Tandberg, which serve larger businesses, could follow LifeSize down market, just as they followed it into HD. So could Cisco, which has vowed to eventually bring a cheaper version of its telepresence system to residential consumers. But those vendors may not want to do that, Weinstein said. “SMBs are expensive to reach; you have to go door to door,” he said. “There's a certain price point at which the business is not interesting.”

The global videoconferencing market is worth about $1 billion annually, Weinstein said, estimating the SMB segment at about 20% to 25% of that, and the HD portion of the SMB segment at roughly 10% to 15% of that. (In other words, between $20 million and $40 million annually.)

LifeSize thus has first-mover advantage in a market that competitors may not chase very hard. Its challenge will be largely one of distribution, as it relies on resellers. To that end, service providers targeting SMBs may be valuable partners for LifeSize. The company now has 100 resellers and has seen particular interest in its new SMB offering from voice-over-IP (VoIP) resellers, a group that has its own plans to attack the space.

By January, Appia Communications, which sells managed VoIP, will begin selling its own managed HD videoconferencing service for SMBs. The as-yet-unpriced service is based on Appia's own video codec and will save customers money, Appia said, because they'll buy the hardware components of the systems themselves.

All SMBs are cost-sensitive, but those who see videoconferencing as a cost-saver (because, with HD, they can substitute it for travel or shipping, for example) will be ripe targets. Distinguishing those customers from the rest of the herd, though, will be another challenge for LifeSize and its partners.