As it is now traditional (here, here and here) , I update my video optimization market report mid-way from its release post mobile world congress.
This update sees many changes, including Cisco's new strategy in the space, together with company and product plans from Citrix ByteMobile, Allot, Flash Networks, Mobixell, Openwave Mobility, Opera Skyfire and many others.
Operator trends
The market trend for the segment reaffirms its maturity. Like last year, the summer has been quiet in term of activity while spring and the fall remain the high RFx quarters. We have recently seen two large groups select their vendor in the space (Telenor and Orange), more or less wrapping up the tier one group selection process for this cycle in mature markets. Growth in this segment now comes from Latin America and South East Asia, where many groups (Singtel, America Movil, ...) have yet to formulate / finalize a strategy in the space. As discussed in a recent post, coming back from LTE Asia, I have been able to experience first-hand both the interest and the confusion on how to manage efficiently OTT video in some of these markets.
Vendor trends
Citrix ByteMobile remains market leader, both in deployments and revenue. The deployment relative market share is decreasing slightly to 29%, while revenue market share is increasing. This is the result of the fact that new low-cost vendors are entering the market and tier 2 / 3 customers are buying solutions, depressing the average sale price, while increasing the volume of transactions.
Mobixell Networks remains number 2 in deployments with 23%, once again growing its market share over the period. The company's geographical growth comes from APAC and LatAm.
Flash Networks remains a strong third with 17%, growing as well faster than the market. The company is focusing on profitable growth in mature markets with large tier 1 groups.
While the vendors and their order remain unchanged at the top, the new entrants in the market are exceeding expectations, with good progress from Opera Skyfire and Avvasi for instance, while the mid-segment vendors are seeing their market shares and margin deteriorate.
For more information or to order my report, please contact me.
As usual, I provide market share calculations in term of deployment per vendor, the unit being one operator / country. For instance, Verizon Wireless counts for one deployment, even though the operator might deploy 40+ data centers. Groups such as Vodafone, Deutsche Telekom or Telefonica count for each of the properties where the technology is deployed.
The market share calculations are based on a proprietary {Core Analysis} database, collecting data such as vendors, resellers, value of the deployment in term of total cost of ownership for the operator, operator name, country and region. These data are cross-referenced from vendors' and operators' individual disclosures. This database also includes over 100 opportunities in video optimization that are at different stage of maturity (internal evaluation, vendor trial, RFI, RFx...) and will close over the next 18 months.
The market share is valid at the time of publishing but change on a weekly basis, as new deals are awarded.
I am just back from LTE Asia in Singapore, where I chaired the track on Network Optimization. The show was well attended with over 900 people by Informa's estimate.
Once again, I am a bit surprised and disappointed by the gap between operators and vendors' discourse.
By and large, operators who came (SK, KDDI, KT, Chungwha, HKCSL, Telkomsel, Indosat to name but a few) had excellent presentations on their past successes and current challenges, highlighting the need for new revenue models, a new content (particularly video) value chain and better customer engagement.
Vendors of all stripes seem to consistently miss the message and try to push technology when their customer need value. I appreciate that the transition is difficult and as I was reflecting with a vendor's executive at the show, selling technology feels somewhat safer and easier than value.
But, as many operators are finding out in their home turf, their consumers do not care much about technology any more. It is about brand, service, image and value that OTT service providers are winning consumers mind share. Here lies the risk and opportunity. Operators need help to evolve and re invent the mobile value chain.
The value proposition of vendors must evolve towards solutions such as intelligent roaming, 2-way business models with content providers, service type prioritization (messaging, social, video, entertainment, sports...), bundling and charging...
At the heart of this necessary revolution is something that makes many uneasy. DPI and traffic classification, relying on ports and protocols is the basis of today's traffic management and is becoming rapidly obsolete. A new generation of traffic management engines is needed. The ability to recognize content and service types at a granular level is key. How can the mobile industry can evolve in the OTT world if operators are not able to recognize a content that is user-generated vs. Hollywood? How can operators monetize video if they cannot detect, recognize, prioritize, assure advertising content?
Operators have some key assets, though. Last mile delivery, accurate customer demographics, billing relationship and location must be leveraged. YouTube knows whether you are on iPad or laptop but not necessarily whether your cellular interface is 3G, HSPA, LTE... they certainly can't see whether a user's poor connection is the result of network congestion, spectrum interference, distance from the cell tower or throttling because the user exceeds its data allowance... There is value there, if operators are ready to transform themselves and their organization to harvest and sell value, not access...
Opportunities are many. Vendors who continue to sell SIP, IMS, VoLTE, Diameter and their next generation hip equivalent LTE Adavanced, 5G, cloud, NFV... will miss the point. None of these are of interest for the consumer. Even if the operator insist on buying or talking about technology, services and value will be key to success... unless you are planning to be an M2M operator, but that is a story for another time.
