Small Businesses to Increase Spending on Web Conferencing, Report Finds

An AMI-Partners report finds small businesses are increasingly employing Web conferencing technology--and sticking to low-quality but free services.

A report from IT research firm AMI-Partners found small businesses (firms with less than 100 employees) in the United States are increasingly using Web conferencing solutions like GoToMeeting, LiveMeeting and WebEx.

According to the report, nearly half of U.S. small businesses are using Web conferencing solutions today, with penetration expected to grow to 80 percent in 2011. However, the study warned that this trend also brings challenges to many Web conferencing providers. With increased use of these services, AMI is forecasting significant displacement to free Web conferencing offers.
"The recent economic downturn heightened cost management among U.S. SBs, and they identified Web conferencing as a viable, affordable alternative to travel," said Brian Galgay, manager of cloud services for AMI's marketing strategy consulting group. "Over the last three years, U.S. SBs have seen additional benefits in using these solutions. Today, they no longer view Web conferencing as a cost-cutting measure, but rather as an effective, real-time collaboration tool."
However, any optimism among Web conferencing vendors regarding potential revenue growth should be balanced, Galgay said. This growth could be limited by displacement of U.S. small businesses' current budget allocation, as well as by actual reductions caused by these businesses' uptake of free Web conferencing services. Galgay noted that this trend is a part of the rapid growth of cloud services over the past 24 to 36 months, which has produced a large number of low-quality, free Web conferencing solutions.
The report said with more conferencing solution providers competing for market share, free Web conferencing providers have started to differentiate their services by adding more robust features. As a result, the gap in features between free and paid solutions has narrowed significantly. AMI concluded that this poses a direct challenge to the paid solution providers: As free solutions add more features like multiple user video conferencing and desktop sharing, the paid solutions need to offer increasingly more enhanced Web conferencing solutions.
"Cloud services has had a significant impact on ICT growth and, in particular, on this software category. The concept of premium Web conferencing solutions will evolve over the upcoming two to three years. Paid providers will have to bring the next generation of more advanced Web conferencing solutions to market, as the lower end of the market, enticed by free, limited offerings, moves away from premium, paid services," Galgay said. "Conferencing solution providers willing to generate revenue from usage, and not from advertising, could protect such revenue erosion by investing in a richer, fuller product feature set or by specializing in targeted industry verticals."
A 30-country study about cloud services is in the works at AMI, covering insight on these businesses' usage, perception and plans of conferencing solutions. Small to medium-size business (SMB) preferences for cloud-based application bundles, their price sensitivity and purchase channel preferences are further explored in AMI's upcoming Worldwide SMB Cloud Services Study. The study provides comprehensive coverage of platforms and devices; IT infrastructure services; business productivity applications; business management/line of business applications; and unified communications. AMI said the research will be available later in 2010.