While tech companies scramble to offer meeting solutions, Zoom — despite its small size and with just eight years in the market — is a heavyweight in the video domain.
Second only to Cisco and on par with Microsoft, Zoom sits comfortably among the leaders in Gartner's Magic Quadrant for Meeting Solutions. Continued growth could bleed more market share from industry mainstays.
"Zoom is in a favorable position right now in the marketplace," Tom Eagle, senior research director at Gartner, told CIO Dive. The company is "independent, directly [competing] against giants, such as Cisco, Microsoft, Google and Adobe, and doing so successfully."
"The only way to account for that level of growth is that they are taking share away from some of these other players," he said. "They are actually displacing some of these other giant vendors."
Gartner said Zoom catapulted to the top of the leaders list because of consistent service and reliability, and video quality.
"The continued innovation in its conference room environments — with meeting join automation and smart devices — is notable," according to Gartner.
When the company went public in April, Zoom was banking on the "evolving nature of the modern workforce," and claimed its growth was meeting the demand, according to its public filings.
Now, nearly four months later, Zoom's claims match financial reality.
Small but mighty
Traditional shares of the market, like single codec room systems, are still the "foundation" of the video as a service (VaaS) market, according to according to Synergy Research.
Older services, like GoToMeeting or Cisco Webex, debuted solutions more than a decade ago and were focused on the idea of "let me provide screen sharing as the main experience" as a supplementary service, Oded Gal, head of product management at Zoom, told CIO Dive.
For Zoom, video has always been the number one collaboration enabler.
Zoom saw the market was in need of a "rehabilitation" and other vendors "were not addressing it the way we did," said Gal. Because Zoom was founded on a video-centric architecture, it had early success in crafting a tool harder to replicate by legacy video conferencing providers.
The market is expanding, coinciding with the increased demand for visual collaboration.
Gartner anticipated spending on cloud-based video conferencing to reach $3.1 billion in 2018 and expects a 4.4% growth in 2019.
As of April 2019, Zoom had about 58,500 customers with more than 10 employees, up from 31,500 in April 2018, according to its most recent quarterly report.
For FY 2018, more than half of the 344 Zoom customers that paid more than $100,000 in revenue began using the services with at least one free host before signing onto a subscription.
The growth that powered Zoom through its strong public debut is evident by its revenue. The company's revenue consistently doubled since fiscal year 2017 through 2019 from $60.8 million to $151.5 million to $330.5 million, according to its S-1 filing to the SEC.
Pure play sensitivities
For every successful pure-play vendor, there is an end-to-end service provider with an offering to challenge it.
This is a common theme for tech companies like Microsoft and Google, having the motivation and the financial backing to expand into more capabilities in software in the next two to three years, according to Eagle.
Microsoft, followed by Salesforce, AWS and the G Suite possess the most popular applications by the number of customers, according to data from Okta. Zoom sits among these technology juggernauts, and is the only application to show up on the lists for the most popular and fastest growing applications.
Compared to other video conferencing vendors — Cisco Webex and Skype — Okta found users identified Skype as their least favorite and most stressful application on the list, according to Okta.
Webex and Zoom, however, have "fewer detractors" for users. But given the smaller number of users compared to other solutions, Zoom's results are slightly skewed.
Skype user frustration isn't lost on Microsoft. Last month the company announced plans to retire Skype for Business Online in 2021, shifting its focus on Teams becoming a more holistic hub for collaboration.
"Teams is the future for Microsoft when it comes to unified communications," said Eagle. Microsoft is in a position to threaten the makeup of meeting solutions market and acts as a "gravity well."
There are a number of third-party solutions to integrate companies' legacy video systems, from Tanberg or Cisco, so customers can work with Microsoft Teams.
"You cannot natively make that happen," said Eagle, because Microsoft has pursued a course where customers "just have to have some kind of mediating mechanisms," according to Eagle.
The market responded by making sure the hardware for video communication, codecs, could work with Teams.
"There's such a large penetration of Microsoft unified communications in the marketplace, that it was well worth the other vendors efforts to make sure they secured some level of integration with Teams," said Eagle.
Video's sweet spot
The communication and collaboration market is healthy, regardless of service or tool. The video as a service and USB video conferencing and collaboration market is set to surpass $1.5 billion this year, according to Synergy Research.
"Employees are no longer working 9-to-5 from an office, but rather anywhere and everywhere, at any hour of the day," Diya Jolly, chief product officer at Okta, told CIO Dive. Video collaboration is normalizing flexible work solutions.
There is an expectation for consumer and workplace technologies to effortlessly mesh. And while people still want email, it can leave individuals out of conversations.
Newer solutions, like VaaS and USB, are starting to edge out older codec systems, just as new users are demanding it.
"If you think about the new generation, people come into the workplace, they get 21 [year olds], they don't know how to dial in the conference phone," said Gal, but "they do know how to join a Skype consumer meeting."
The video market is further supported by companies intentionally doubling-up on video tools.
Teams and Zoom can dually exist in a company's software as a service repertoire, according to Eagle. Customers have made strategic investments in Teams but maintain their Zoom subscription for more "formal" circumstances, or meetings with a large number of participants outside the company.
"Zoom works very well under those conditions" whereas Teams is favorable for informal, internal video chats between employees, according to Eagle.
Okta's data reinforces the trend of using both applications simultaneously.
"There is a gap in the market for one-off apps to fill," said Jolly. Software giants like Microsoft will need to rethink their all-in-one solutions to more effectively embrace best-of-breed apps like Zoom.