Part of preparing an industry level forecast extending out several years into the future involves taking a position on the trajectory of a particular technology segment. Each time this means using past performance and a read of the collective outlook, within a broader economic context, to plot growth. The resulting trendline reflects a point in time along with any inherent biases that may be prevalent at the particular moment. So it is with all of the forecasts within the IOTA report, but one in particular stands out as we prepare to begin our revision process to generate the 2023 edition. I'm speaking here of conferencing and collaboration.
According to the 2022 version of IOTA, the conferencing and collaboration (CnC) solution area saw massive growth during the pandemic recovery period, with global revenues increasing by 16% in 2021. Even more impressive than the growth number alone, which was 5 points higher than the industry average, was that the solution area never saw the pandemic induced declines hitting the rest of the solutions. This makes sense given the massive need for connective technologies as enterprises went fully remote in many parts of the world. The net result of this shift was a further bolstering of CnC in its top spot as the largest solution area, which is expected to generate $52.4B in AV product and service revenue in 2022.
All good so far. Or at least all consistent with conventional wisdom about the investments happening over the past two years. Where things may start to look off to some is the forward outlook. This shows growth tapering down gradually over the next 5 years, falling to 1.9% by 2027. The gradual decline and the small outer year growth means recession would not be the likely culprit. Instead, this reflects the theory that perhaps investments in conferencing are playing themselves out after the widespread push to update systems in response to the shift to hybrid work modes during the past 24-36 months. With work still to be done as many conference rooms are yet to be equipped with video conferencing systems, one might wonder, why are the forecasts showing declining growth?
The are several possible reasons here, all of which we will challenge as we go through the forecast update process. One is that companies may actually be waiting to see how the return to office goes and so are planning to meter their investments in a test and see fashion. This could mean the actual results might show more peaks and valleys in the future, even if forecasts are smoothed out to reflect averages. But another reason could be a shift towards more 'good enough' options for conferencing. Options that are lower end, like laptops equipped with USB cameras and mics, and so somewhat fall outside of the purview of professional AV and are more IT. Under this scenario the total market for CnC could still be growing at a faster clip but in a way that does not benefit AV providers. Certainly, there are anecdotal reports of a move towards lower cost options as companies emphasize scalability of solutions. If true, this suggests fundamental weakness for the solution area as a truly pro AV opportunity and would at least partially explain the current forecast trajectory.
Reason for optimism comes from the notion of a continuum of approaches to any given business need, and CnC is no exception. Solutions have always ranged from low-cost scalable options up to more high-end custom. Yes, technology has advanced such that there are more low-cost products available. But, pro AV has arguably never really been about just the provision of hardware. It is about the combination of the technology or hardware, the space, and the content being consumed to create experiences for the user. That is where the value resides and where the ultimate opportunity exists for CnC. It is in helping companies determine how to best use the spaces available to them, with properly specified well-integrated and situationally appropriate technology, so that the sharing and collaboration of content becomes optimized. Bringing in brands focused on the quality of the experience further creates upside for all. In the end, this is also the concept that challenges the waning growth for the conferencing and collaboration solution area going forward. Time will tell.