Resale Channel: Resellers View Opportunity in Document Conferencing

Posted: 09/2000

Resellers View Opportunity in Document
Conferencing
By Josh Martin

Wholesale document conferencing is about to take off.
As more companies link audio and visual conferencing, the demands for data and
document sharing are growing.

For wholesalers, this presents a major opportunity in total revenues and bottom-line profit margins.

"Most
audio conferencers are moving into document conferencing," says Ann Earon,
chair of the Interactive Multimedia & Collaborative Communications Alliance
(www.imcca.org). "They can’t stay alive
without it."

The document conferencing industry is made up currently of 60 vendors, 10 of whom are wholesalers, selling to CLECs, ILECs and RBOCs.

While
some major telecoms–such as AT&T Corp. (www.att.com)
through AT&T Tele-Conferencing Services, WorldCom (www.wcom.com)
through its WorldCom Conferencing division, and SBC Communi-cations Inc. (www.sbc.com)–have
developed and marketed document conferencing services to their customers, most
smaller telecoms license the service from a wholesaler.

"It comes down
to an issue of core competency and economies of scale," says Charlie
Bernstein, director of conferencing services at Gentner Communications Corp. (www.gentner.com).

While
data conferencing has been around for more than 15 years, it only recently has
begun to catch on. "Many service providers [initially] found demand
limited," recalls Andrew W. Davis, a senior analyst with Wainhouse Research
LLC (www.wainhouse.com) in Brookline,
Mass. "But now there’s a newer concept of document conferencing as a remote
conferencing service. It models the way most business meetings are conducted:
The presenter presents."

This model is expected to help wholesale and retail vendors overcome customer resistance.

“Our biggest challenge has been creating market awareness,” says Bernstein. “We have to show customers how they can use applications.”

Davis
adds, "All savvy vendors believe this is the key part of the future of
audio conferencing."

For these vendors’ telecom clients, the economic logic is inescapable: The average audio conferencing call lasts 45 minutes. But when audio is combined with document, call times increase to one hour–a 33 percent increase in billable service.

Wholesale conferencing vendors have been helped by advances in related technologies, which allow for easy access and use.

"By
allowing companies to grab bandwidth, we can allow them to combine document
conferencing and videoconferencing," says Santiago Testa, vice president of
marketing and communications at Sonic Telecom Ltd. (www.sonictelecom.com).
"With the ability to grab bandwidth, performance issues in
videoconferencing go away."

Show Me the Money

For all its promise, document conferencing is a small service sector. Industry analysts estimate that less than 5 percent of total conferencing revenues comes from document conferencing.

According
to Brian Martenson, director of wholesale services at InterCall Inc. (www.intercallwholesale.com),
the Bryn Mawr, Pa.-based conferencing services firm, total revenues of all
wholesale document conferencing companies last year totaled only $30 million.

Thus,
sales at industry leaders remain small, even when including retail sales. Last
year, InterCall’s conferencing revenues were $100 million; at Vialog Corp. (www.vialog.com),
revenues were $68 million.

But businesses (and the telecoms they use) rapidly are seeing the value of linking audio, visual and document conferencing, which should fuel a boom for conferencing wholesalers.

"Look
at the numbers," says Elliot Gold, president of TeleSpan Publishing Corp. (www.telespan.com),
based in Altadena, Calif. "The numbers of conferencing calls foretells an
enormous growth in data conferencing."

Martenson forecasts document conferencing revenues will exceed $2 billion before the end of 2003.

Profit margins are shifting as the wholesale side of the document conferencing sector grows. Still, it is more profitable to do retail marketing. Retail document conferencing yields profits ranging upwards from 35 percent; telecoms can realize margins in excess of 100 percent. At the same time, industry sources say wholesale margins now are averaging 30 percent and rising.

The
Fine Print

As profit margins grow, many wholesalers report that stricter terms are being incorporated into contracts.

“Each retailer has their own needs and market variables,” says Bernstein. “They’ve come to us trying to do just about anything.”

SLAs
have become more widespread. "More contracts will include more stringent
SLA clauses," says Larry Kreitman, COO of Genesys Conferencing Inc. (www.genesys.com).

Martenson agrees. “SLA conditions have been rising,” he says, especially those involving uptime and speed of answer. However, currently only one of Intercall’s 30 contracts includes SLA provisions.

Other
aspects of the contracts have remained unchanged. And it may take years before
the full impact of SLAs is felt: Industry sources say service contracts between
wholesale conferencing vendors and their telecom clients typically range
anywhere from one to three years.

But mergers and acquisitions within the conferencing sector, and among their target client telecoms, have had a more immediate impact, changing the face of the industry. The merger and acquisition activity has been driven by the determination of conference service providers to consolidate and expand their market share.

For example, in the past year, six conferencing operations (A Business Conference-Call Inc., Access Conference Call Service, CallPoints, The Conference Center, Conference Pros International, and Conference Source International Inc.) were merged into Vialog.

“There has been a dramatic trend of mergers and acquisitions,” says Virginia A. Ostendorf, president of Virginia A. Ostendorf Inc. and publisher of Bridging Service Options, a detailed portrait of the conferencing services industry. “A lot of companies were ma-and-pa operations,” she observes. “It’s changing now. Services are becoming more standardized.”

Going
Global

Pressure to standardize comes from three sources. First, within the industry, mergers have created larger entities, which present themselves to telecom clients. Second, service vendors will want to show their products to have the broadest possible end use. Finally, independent service vendors and telecoms with in-house products are looking to opportunities in overseas markets.

As with the Internet and other communications advances, the first overseas markets to see document conferencing boom are expected to be the United Kingdom and Canada, followed by France and the Pacific Rim countries.

“We want to entertain large opportunities in the global wholesale conferencing market,” says Genesys’ Kreitman.

Despite mergers and the in-house products offered by telecom giants like AT&T and WorldCom, independent wholesalers are expected to survive and thrive in this global market.

“It’s a profitable industry,” says Ostendorf. “Every year, people say it’s going to fade, but every year revenues grow.”

And independents have a signal advantage: “Telecoms are slower to move,” explains Martenson. “Document conferencing is only 2 [percent] or 3 percent of MCI [WorldCom] or Bell sales, hence only 2 [percent] or 3 percent of their effort. They don’t feel compelled to fight for wholesale clients.”

The independents will fight. Their future depends on it.

Josh
Martin is a freelance writer based in New York City. He can be reached at martin
[email protected].