Blue Jeans Network Undercuts Cisco Video Pricing

Blue Jeans Network, which offers videoconferencing in the cloud, has introduced a new pricing model intended as a direct broadside to expensive systems from vendors such as Cisco Systems and Polycom. It will now offer its service at a rate of $299 per port, per month, which should be dramatically less expensive than those competitors that sell customers a multipoint control unit (MCU) to install and maintain on the customers' premises. In fact, Blue Jeans calls its strategy an "MCU Killer."

An MCU can cost hundreds of thousands of dollars to buy and just as much to also manage and maintain, but the total cost of ownership (TCO) of a "virtual MCU" from Blue Jeans can be anywhere from 65% to 90% percent less over three years than the physical MCU, said Stu Aaron, chief commercial officer for Blue Jeans.

The Blue Jeans Network service enables users to hold a videoconference in the cloud, allowing participants to connect any number of ways, including via Skype, Google Talk, or other cloud videoconference services and even from Cisco or Polycom systems. Users also can also connect from any number of devices, including desktops, laptops, smartphones, or tablets. The Blue Jeans pitch is that it makes videoconferencing as easy to do as audioconferencing.

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"Customers were telling us, 'We love Blue Jeans,'" Aaron said. "But not every customer was looking at this directly as an audioconference replacement. There was a large class of our customers that were seeing Blue Jeans as an MCU replacement."

A physical MCU has a fixed number of ports so buyers typically have to buy more capacity than they usually need in order to be prepared for when videoconferencing traffic spikes, so most of the time that excess capacity is "wasted," he said. If an MCU has 10 ports, for example, and someone wants to add an 11th participant to a conference, they have to buy another box. With the new Blue Jeans pricing, however, a customer can buy a license for 20 ports per month, and if usage spikes to 50 ports, the customer can get that added capacity immediately.

"We give them the ability to burst and pay an overage for just that one particular day," Aaron said.

Although Blue Jeans has a compelling cloud offering, there are some drawbacks to using a virtual MCU instead of a physical one, said Andrew Davis, a partner with Wainhouse Research, which estimated the market for video infrastructure vendors at between $700 million and $750 million in 2011. (IDC estimates the unified communications market, of which videoconferencing is a component, will grow to $44 billion by 2015.)

With an MCU in the cloud, the user is sharing an online resource with other people, which can be a security concern for banks and other enterprises, Davis said, then added, "With a service like Blue Jeans, your connection to the service is over the Internet; performance cannot be guaranteed and may be unreliable." Physical MCUs operate at a specified quality of service (QoS) level.

Aaron is confident of the video quality of the Blue Jeans service. He also says the virtual MCU model is appealing to small-to-medium size businesses that can't afford the capital expenditure and operating expense of a physical MCU. But Blue Jeans might also appeal to larger enterprises who already own physical MCUs but will consider Blue Jeans as an alternative to buying another physical box to add capacity.

Big vendors such as Cisco and Polycom are not oblivious to the demands for more affordable alternatives. Cisco in December 2011 introduced Cisco Callway, a $99-per-month-per-endpoint subscription service. However, it's designed to work only with Cisco TelePresence desktop systems or on a laptop using a Cisco Movi Web camera.

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