Zoom Industry Analysis

US INDUSTRY (SPECIALIZED) REPORT OD4594

Video Conferencing Software Developers

Meeting up: The industry's product innovation and growing indispensability is expected to drive revenue growth Nick Masters | April 2020

IBISWorld.com +1-800-330-3772 [email protected]

Contents

About This Industry...........................................5

Industry Definition.......................................................... 5 Major Players................................................................. 5 Main Activities................................................................5 Supply Chain...................................................................6 Similar Industries........................................................... 6 Related International Industries.................................... 6

Industry at a Glance.......................................... 7

Executive Summary....................................................... 9

Industry Performance..................................... 10

Key External Drivers..................................................... 10 Current Performance................................................... 11

Industry Outlook............................................. 15

Outlook......................................................................... 15 Performance Outlook Data......................................... 16 Industry Life Cycle....................................................... 16

Products and Markets..................................... 18

Supply Chain................................................................ 18 Products and Services.................................................18 Demand Determinants................................................ 19 Major Markets.............................................................. 19 International Trade.......................................................21 Business Locations..................................................... 21

Competitive Landscape...................................23

Market Share Concentration....................................... 23 Key Success Factors................................................... 23 Cost Structure Benchmarks........................................ 23 Basis of Competition................................................... 26 Barriers to Entry........................................................... 26 Industry Globalization..................................................27

Major Companies............................................ 28

Major Players............................................................... 28

Operating Conditions...................................... 34

Capital Intensity........................................................... 34 Revenue Volatility........................................................ 36 Regulation & Policy...................................................... 36 Industry Assistance..................................................... 37

Key Statistics.................................................. 38

Industry Data................................................................ 38 Annual Change.............................................................38 Key Ratios.................................................................... 39

Additional Resources...................................... 40

Additional Resources.................................................. 40 Industry Jargon............................................................ 40 Glossary Terms............................................................ 40

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About IBISWorld IBISWorld specializes in industry research with coverage on thousands of global industries. Our comprehensive data and in-depth analysis help businesses of all types gain quick and actionable insights on industries around the world. Busy professionals can spend less time researching and preparing for meetings, and more time focused on making strategic business decisions that benefit you,your company and your clients. We offer research on industries in the US, Canada, Australia, New Zealand, Germany, the UK, Ireland, China and Mexico, as well as industries that are truly global in nature.

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Covid-19 Coronavirus Impact Update

IBISWorld's analysts constantly monitor the industry impacts of current events in real-time – here is an update of how this industry is likely to be impacted as a result of the global COVID-19 pandemic:

· The Video Conferencing Software Developers industry's products have become indispensable to business continuity and thus resulted in a surge in sales.

· Large organizations are investing in enterprise-level video conferencing solutions as entire organizations operate remotely due to social distancing practices.

· The sharp increase in usage has uncovered security flaws and controversial data- mining practices among some video conferencing software, thus causing a backlash from the public.

Note: The content in this report is currently being updated to reflect the trends outlined above.

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About This Industry Industry Definition Companies in this industry develop software and systems for online conferencing,

which enables multiple individuals to communicate and share information simultaneously across geographically dispersed locations over the internet. Most vendors also provide either a recorded copy of an event or a means for the user to record an event.

Major Players Microsoft Corporation

Cisco Webex

Zoom Video Communications Inc.

LogMeIn Inc.

Google

Main Activities The primary activities of this industry: Development of standalone video conferencing software

Development of unified communications as a services platform

Development of webinar software

The major products and services in this industry:

Video conferencing software

Webinar software

UCaaS

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Supply Chain

SIMILAR INDUSTRIES

Audio & Video Equipment Manufacturing in the US

Computer & Packaged Software Wholesaling in the US

Software Publishing in the US

Business Analytics & Enterprise Software Publishing in the US

RELATED INTERNATIONAL INDUSTRIES

Software Publishing in Australia

Software Publishing in the UK

Software Publishing in Canada

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Industry at a Glance Key Statistics

$7.3bn Revenue

Annual Growth Annual Growth Annual Growth

2015-2020 2020-2025 2015-2025

25.9% 8.3%

$1.3bn Profit

Annual Growth Annual Growth 2015-2020 2015-2025

21.2%

17.1% Profit Margin

Annual Growth Annual Growth 2015-2020 2015-2025

-3.6%

89 Businesses

Annual Growth Annual Growth Annual Growth

2015-2020 2020-2025 2015-2025

33.5% 8.2%

16,758 Employment

Annual Growth Annual Growth Annual Growth

2015-2020 2020-2025 2015-2025

27.2% 11.6%

$2.8bn Wages

Annual Growth Annual Growth Annual Growth

2015-2020 2020-2025 2015-2025

27.5% 10.9%

Key External Drivers % = 2015-2020 Annual Growth

1.1% US Gross domestic product (GDP)

-3.0% Corporate profit

8.2% Percentage of business conducted online

2.6% Research and development expenditure

Industry Structure

POSITIVE IMPACT

Life Cycle Growth

Capital Intensity Low

Regulation Light

MIXED IMPACT

Industry Assistance Medium

Concentration Medium

Barriers to Entry Medium

NEGATIVE IMPACT

Revenue Volatility High

Technology Change High

Globalization High

Competition High

Key Trends

The industry's products have only recently reached a higher level of integration into the modern business

Concerns over security and privacy are among the most prominent challenges to the industry's growth

The industry's level of profitability has fluctuated in line with revenue

Industry operators are expected to maintain the number of new users recently gained

A more stable macroeconomic landscape will assist in driving subscription upgrades during the five-year period

Industry growth will likely closely align with the sector as the industry approaches maturity

The industry's communications tools have become indispensable to the operation and continuity of large organizations

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Products & Services Segmentation

Video conferencing software

61.9%

Webinar software

20.1%

UCaaS

18.0%

Video Conferencing Software Developers Source: IBISWorld

Major Players % = share of industry revenue SWOT

STRENGTHS

Medium & Increasing Level of Assistance Growth Life Cycle Stage Low Imports High Profit vs. Sector Average Low Capital Requirements

WEAKNESSES

High Competition High Volatility High Customer Class Concentration High Product/Service Concentration

OPPORTUNITIES

Very High Revenue Growth (2005-2020) High Revenue Growth (2015-2020) High Revenue Growth (2020-2025) US Gross domestic product (GDP)

THREATS

Low Outlier Growth Low Performance Drivers Research and development expenditure

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Executive Summary

The Video Conferencing Software Developers industry is expected to expand rapidly over the five years to 2020.

The industry's communications tools have increasingly become indispensable to the operation and continuity of large organizations, particularly large corporations. This trend has been encouraged by several key trends shaping the corporate landscape, including highly globalized work forces, work from home policies and flatter organizational structures. Additionally, the functionality and accessibility of video conferencing software has greatly improved as advancements have been made in both software and hardware during the period. This seamless functionality and greater degree of integration has popularized the unified communications as a service (UCaaS) designation for more robust, enterprise-level platforms. Overall, the industry's product innovation and growing indispensability is expected to drive revenue growth of an annualized 25.9% to $7.3 billion over the five years to 2020.

IBISWorld expects 2020 to be a banner year for the Video Conferencing Software Developers industry as companies and institutions turn to industry products to maintain business continuity. The COVID-19 (coronavirus) outbreak has resulted in a surge in demand for the industry's products. In particular, demand has increased for enterprise-level solutions to facilitate entire organizations working remotely. This has further popularized UCaaS platforms such as Microsoft Teams and significantly bolstered the industry's client base and profitability. In 2020, IBISWorld forecasts industry revenue to increase 19.1%.

Over the five years to 2025, the Video Conferencing Software Developers industry is forecast to grow at a slower rate. The industry is expected to approach the early stages of maturity as market opportunities become scarcer and the industry landscape approaches saturation. Nevertheless, IBISWorld expects the industry to maintain the level of new users gained in 2020 and further focus on building client relationships to facilitate upsells. Overall, IBISWorld forecasts industry revenue to grow an annualized 8.3% to $11.0 billion over the next five years.

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Industry Performance

Key External Drivers

Percentage of business conducted online The percentage of services conducted online is a broad driver indicative of technology adoption. The industry's software is increasingly appealing to wider audiences as businesses and consumers continue to depend on technology in their everyday operations. In 2020, the percentage of services conducted online is expected to increase substantially, representing a potential opportunity to the industry.

Research and development expenditure Research and development expenditure represents a long-term driver of growth for the Video Conferencing Software Developing industry. Industry operators thrive on product differentiation. In turn, companies in the industry are committed to ongoing product development to stay competitive. In 2020, research and development expenditure is expected to increase.

Corporate profit Corporate profit is indicative of the overall health of the private sector. The Video Conferencing Software Developers industry depends on corporate customers to maintain enterprise-level licenses to its products. IBISWorld forecasts corporate profit to increase in 2020.

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US Gross domestic product (GDP) US gross domestic product (GDP) represents the total output of the US economy. This driver is indicative of demand for video conferencing software because the software is used across a variety of sectors and industries. The performance of the industry's diverse client base thus correlates well with US GDP. In 2020, GDP is expected to decrease, posing a potential threat to the industry.

Current Performance

Over the five years to 2020, the Video Conferencing Software Developers industry has become increasingly essential to the corporate world.

As companies have become larger and more globalized, the need for unified communications solutions has soared. The industry has capitalized on this. During the period, the industry has also benefitted from numerous other tailwinds including better technology, cheaper hardware and widespread mobile internet connections. More recently, the industry's necessity become apparent during the COVID-19 (coronavirus) pandemic as businesses, schools and other institutions practiced social distancing. Taking these factors into account, IBISWorld expects the industry's economic output to grow an annualized 25.9% to $7.3 billion during the five-year period. This includes anticipated growth of 19.1% in 2020 alone.

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Widespread adoption among large organizations

In the years leading up to the 2020 pandemic, service-based businesses grew at a pace outpacing the overall economy.

As these businesses grew, so did their workforces. During the period, companies hired more individuals and opened more offices, thus growing the size and dispersion of their overall operations. With the further development of service- based companies both new (technology companies) and old (investment banks), the need for more robust communication systems has grown substantially.

Video conferencing software has been solving this problem for over two decades now; however, the industry's products have only recently reached a higher level of integration into the modern business. The industry has quickly adapted to provide specialized video conferencing solutions to a variety of markets. For example, standalone software for conducting webinars is now a standard part of an industry operator's product portfolio. Moreover, the recent popularization of unified communications as a service (UCaaS) platforms have changed the way large organizations communicate. Microsoft Corporation (Microsoft) replacing Skype for Business with Teams, a UCaaS application, characterizes this trend towards UCaaS platforms at the enterprise level.

Effects of COVID-19

During the 2020 coronavirus pandemic, the products developed by the Video Conferencing Software Developers industry became a pillar of economic and social stability.

As widespread social distancing has been practiced, industry operators have experienced a surge in usage and new subscribers across numerous use-cases. For example, numerous educational institutions have turned to video conferencing software to continue classes. While this usage is a boon to the industry in the short- term, IBISWorld expects this societal scale of adoption to have lasting benefits to the industry. This brief period of necessity will install a familiarity with the industry's products upon which users will likely leverage in other future use cases. In other scenarios, the effects of the pandemic may have been the final tipping point for companies long seeking to implement such software. Overall, the Video Conferencing Software Developers industry's importance is anticipated to far outlast the coronavirus pandemic.

Industry challenges

Concerns over security and privacy are among the most prominent challenges to the industry's growth.

The numerous data-mining and privacy violations that have occurred during the five-year period, particularly during the 2016 presidential election, have severely strained the image of the broader technology sector (IBISWorld report 51). The Video Conferencing Software Developers industry is on fragile footing when it comes to its users' trust.

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This is best exemplified by the recent publicization of Zoom Video Communications Inc. (Zoom) security flaws and controversial privacy policies. In March 2020, Zoom's platform suffered from hijacked video conferences by external parties in which offense or embarrassing content was shown. In addition to this, Zoom contended with scrutiny for sharing data with Facebook without user consent. These events have severely damaged Zoom's reputation as user trust has swiftly been lost. Although Zoom has since fixed such security flaws, the company's blunder is indicative of how important security and privacy are in the market for video conferencing software.

Industry landscape

The Video Conferencing Software Developers industry has grown at a rapid pace over the past five years.

2020 is expected to be a banner year for the industry as consumers, businesses and institutions practicing social distancing turn to video communication software solutions to maintain productive and personal communications. IBISWorld expects the industry's operations landscape to reflect the growing demand for its products.

Over the five years to 2020, IBISWorld anticipates the number of industry operators to increase an annualized 33.5% to 89 enterprises. This substantial growth is largely attributable to the vast number of software startups that have entered the industry within the past 10 years. The substantial growth of newcomer Zoom Video Communications Inc. exemplifies the opportunity some new entrants identify in catering to niche and emerging corners of the video communications market.

In line with growing enterprises, IBISWorld expects industry employment to increase an annualized 27.2% to 16,758 individuals during the five-year period. The majority of this workforce is concentrated among the industry's major players including Cisco Webex, Microsoft and Google LLC, among others.

The industry average profit margin is expected to account for 17.1% of industry revenue in 2020. This marks a decline from 2015, however, industry profit reached an all-time high in 2015 and thus represents a high base. On average, the industry's level of profitability has fluctuated in line with revenue during the five-year period.

Historical Performance Data Year Revenue IVA Estab. Enterprises Employment Exports Imports Wages Domestic

Demand Percentage of services conducted

online ($m) ($m) (Units) (Units) (Units) ($m) ($m) ($m) ($m) (%)

2011 655 264 7 5 1,234 N/A N/A 193 N/A 7.00 2012 839 393 10 7 1,702 N/A N/A 265 N/A 7.90 2013 1,077 528 14 9 2,255 N/A N/A 349 N/A 9.60 2014 1,355 700 17 12 2,799 N/A N/A 453 N/A 11.0 2015 2,319 1,400 30 21 5,024 N/A N/A 831 N/A 12.7 2016 3,886 2,398 50 36 9,130 N/A N/A 1,516 N/A 14.3 2017 4,640 2,718 69 51 11,218 N/A N/A 1,852 N/A 16.0 2018 5,237 3,114 85 62 12,229 N/A N/A 2,098 N/A 17.6 2019 6,169 3,793 105 77 15,866 N/A N/A 2,526 N/A 19.1

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Year Revenue IVA Estab. Enterprises Employment Exports Imports Wages Domestic Demand

Percentage of services conducted

online ($m) ($m) (Units) (Units) (Units) ($m) ($m) ($m) ($m) (%)

2020 7,348 4,238 121 89 16,758 N/A N/A 2,805 N/A 20.4

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Industry Outlook Outlook The Video Conferencing Software Developers industry is expected

to continue expanding over the five years to 2025, albeit at a slower pace.

The industry is expected to approach saturation over the next five years as market opportunities become increasingly limited. The widescale adoption of video conferencing software during the COVID-19 (coronavirus) pandemic will likely be the precursor to this trend. Nevertheless, the industry is expected to continue improving its products and appealing to more niche and emerging markets. The expected rebound in the US economy will also serve as a tailwind to the industry in the coming years. Taking these factors into account, IBISWorld forecasts total industry output to increase at an annualized rate of 8.3% to $11.0 billion over the five years to 2025.

An established importance

Over the next five years, industry operators are expected to largely maintain the number of new users gained during the coronavirus pandemic.

The utility offered by video conferencing will be considered increasingly essential to the standard suite of productivity software such as word processors and spreadsheet software. Moreover, the inclusion of video conferencing capabilities in unified communication platforms will further encourage this trend of essentialism. Moving forward, this will give industry operators a unique opportunity to cultivate relationships with their clients with the ultimate goal of upgrading them to higher value-added products. In this scenario, IBISWorld expects revenue volatility to abate and profit to increase, albeit at a gradual pace.

From an additional perspective, the experience of using video conferencing software during the pandemic will encourage its use as a hedge against future commercial disruptions. Businesses will increasingly perceive robust unified communication platforms as a means of business continuity. This appeal to flexibility and safety is expected to further bolster the importance of the industry's products over the next five years.

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A rebounding economy

The US economy is anticipated to rebound strongly as the coronavirus pandemic comes to end.

Although the timeline remains highly uncertain, the reopening of the global economy will shore up now struggling industries such as airlines, restaurants, movie theaters and entertainment venues. While these industries are not anticipated to be heavy users of video conferencing software, there corporate operations will likely become targets of market expansion efforts by industry operators. Again, appealing to business continuity is expected to drive sales growth once the economic landscape becomes favorable.

From a broader perspective, a more stable macroeconomic landscape will also assist in driving subscription upgrades during the five-year period. Upselling current clients to more premium or comprehensive products is one of the primary means of margin expansion for industry operators. Nevertheless, this anticipated growth in new sales and client upselling will likely occur gradually as opposed to the rapid onboarding that took place in 2020.

Industry landscape

The Video Conferencing Software Developers industry's operational landscape is expected to grow over the next five years.

However, this growth is expected to more closely align with the sector as the industry approaches maturity. As market opportunities for video conferencing software begin to dry up, IBISWorld expects fewer industry operators to enter the industry over the next five years. The number of industry operators is expected to grow an annualized 8.2% to 132 enterprises during the five-year period. This growth will likely continue to be characterized by startups specializing in niche corners of the video conferencing and unified communications software markets.

Industry employment is anticipated to grow over the next five years as industry operators continue to build out their product portfolios and maintain client relationships. IBISWorld forecasts industry employment to increase an annualized 11.6% to 29,014 individuals over the five years to 2025. This growth is expected to be in line with annualized wage growth of 10.9% to $4.7 billion during the corresponding period. Overall, the industry's growth over the next five years will be defined by further product refinement and the developing of client relationships.

Performance Outlook Data Year Revenue IVA Estab. Enterprises Employment Exports Imports Wages Domestic

Demand Percentage of services conducted

online ($m) ($m) (Units) (Units) (Units) ($m) ($m) ($m) ($m) (%)

2020 7,348 4,238 121 89 16,758 N/A N/A 2,805 N/A 20.4 2021 8,178 4,772 134 99 19,477 N/A N/A 3,233 N/A 21.5 2022 8,864 5,249 147 108 22,169 N/A N/A 3,644 N/A 22.6 2023 9,563 5,704 158 116 24,697 N/A N/A 4,034 N/A 23.6 2024 10,254 6,140 168 124 26,862 N/A N/A 4,375 N/A 24.6 2025 10,955 6,596 179 132 29,014 N/A N/A 4,716 N/A 25.6

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Industry Life Cycle The life cycle stage of this industry is Growth

LIFE CYCLE REASONS

The industry is growing faster than the overall economy

New entrants are joining the industry at a rapid pace

The industry is characterized by technological innovation

The Video Conferencing Software Developers industry is in the growth stage of its life cycle. Industry value added (IVA) measures an industry's contribution to overall gross domestic product (GDP). Over the 10 years to 2025, IBISWorld estimates the industry's IVA to grow at an annualized rate of 16.8%. US GDP is estimated to grow an annualized 1.8% during the corresponding period. Typically, IVA grow outpacing GDP growth on a consistent basis is indicative of a growing industry.

The industry is in the growth state of its lifecycle due to the widespread adoption of video conferencing among large, dispersed organizations. This growth has coincided with the increased proliferation of internet-connected devices and faster, more accessible internet speeds. These broad trends have made seamless video conferencing a reality and now staple of communication. This level of importance has been exemplified during the COVID-19 (coronavirus) pandemic, with video communication being the closest one can get to in-person interaction.

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Products and Markets Supply Chain KEY BUYING INDUSTRIES

1st Tier Finance and Insurance in the US

Healthcare and Social Assistance in the US

Educational Services in the US

2nd Tier Consumers in the US

Information in the US

KEY SELLING INDUSTRIES

1st Tier Internet Service Providers in the US

Intellectual Property Licensing in the US

Computer & Packaged Software Wholesaling in the US

2nd Tier Electric Power Transmission in the US

Commercial Leasing in the US

Products and Services

Given the growing versatility of video conferencing software, there is some gray area in terms of which software product may fall under which product group.

Overall, IBISWorld considers a software product group largely by the need it seeks to fulfil.

Video conferencing software

Video conferencing software is estimated to account for 61.9% of Video Conferencing Software Developers industry revenue.

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Video conferencing software as a product segment is straightforward, multiple user video conferencing meant for both consumer use and use among small-to-medium sized businesses. For example, Microsoft Corporation (Microsoft)'s Skype is considered video conferencing software but it is not used at an enterprise level. Typically, standalone video conferencing software is more cost-effective and easier to use than more robust, unified communication platforms used by large organizations.

Webinar software

Sales of webinar software or subscriptions are estimated to account for 20.1% of industry revenue.

Webinar software differs from standalone video conferencing software in that it is typically less collaborative and more presentation-oriented. Products such as GoToMeeting have dominated this space for many years; however, other solutions have entered in the market over the past five years such as Zoom Webinar. Overall, this area of the industry has become significantly more competitive.

Unified communications as a service (UCaaS)

The use of UCaaS has boomed over the five years to 2020 as large organizations have sought to consolidate the many forms of online communication.

Unified communication software is characterized by platforms such as Microsoft Teams and Slack. These platforms incorporate group organization tools with both text and video chat capabilities, making them ideal for large organizations that need to collaborate. IBISWorld expects UCaaS to account for 18.0% of industry revenue in 2020.

Demand Determinants

The Video Conferencing Software Developers industry largely depends on demand from enterprises and institutions.

These markets account for a significant portion of the industry's total revenue. In turn, demand determinants related to these markets include the geographic dispersion, size and nature of large organizations. From a corporate perspective, rising globalization and rapid adoption of technology have necessitated more robust communication solutions such as those offered by unified communication as a service platform.

Moreover, the growth of service-based industries has also been a major determinant of demand. This is due to the physical flexibility of service-based work. This is evidenced by the recent popularization of work from home policies. More recently, the effects of social distancing have put video conferencing software to the test and drastically raised its importance among large, dispersed organizations.

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Major Markets

The Video Conferencing Software Developers industry serves a wide range of industries. This is due to the essential function of the industry's products as communication tools. Overall, the industry's dispersion of customers helps to insulate it from potential shocks to downstream industries.

Corporate

Corporate organizations represent the industry's largest market. Video conferencing software is widely used in service-based sectors such as the Education Sector (IBISWorld report 61) and Finance and Insurance Sector (52). Major companies that operate in service-based sectors are often highly globalized and thus demand robust communication tools to maintain operations. Video conferencing software is also widely used by the corporate departments of retailers and manufacturers, sectors in which operations are typically widely dispersed.

In 2020, the importance of video conferencing software to the private sector grew tremendously as the COVID-19 (coronavirus) pandemic brought about social distancing practices. In 2020, IBISWorld expects corporate users of video conferencing software to account for 63.4% of industry revenue.

Education

As online education has grown, demand for video conferencing software has followed. Online learning has now been widely accepted across a variety of institutions including public schools, colleges and universities. Moreover, the growing flexibility and functionality of video conferencing software has increased the application to larger classrooms. Demand from educational institutions and organizations is estimated to account for 12.4% of industry revenue.

Healthcare

In the wake of the coronavirus, the Video Conferencing Software Developers industry also grew in importance in the realm of telemedicine. Using said software, doctors can access patients' symptoms and prescribe medications. From an administrative perspective, video conferencing among medical professionals has assisted in collaboration efforts among hospitals. IBISWorld expects demand from healthcare industries to account for 16.9% of industry revenue.

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Governments and institutions

IBISWorld estimates demand from governments and institutions to account for 5.3% of industry revenue in 2020. Notable applications of video conferencing include use by the US Department of Homeland Security and other government agencies. Additionally, non-profit and activist organizations also use video conferencing software to further their productivity.

International Trade

Exports in this industry are Low and Steady

Imports in this industry are Low and Steady

The Video Conferencing Software Developers industry does not conduct trade.

Business Locations

Business Concentration in the United States

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Percentage of Establishments (%)

Video Conferencing Software Developers Source: IBISWorld

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The Video Conferencing Software Developers industry is concentrated in the West. The West region accounts for an estimated 30.5% of industry establishments, more than any other region. California accounts for 22.0% of industry establishments with several major players being headquartered there. Companies concentrate in the West region due in part to the vast pool of skilled labor. In particular, California has an outsized proportion of software developers in relation to the rest of the country.

The Southeast region represents the second-largest concentration of establishments. IBISWorld estimates the region to hold 17.7% of industry establishments, with Florida accounting for 5.1% of locations. Texas is estimated to account for 6.1% of industry establishments. Other notable regions include the Mid- Atlantic and Great Lakes regions, both accounting for 13.8% and 9.9% of industry establishments.

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Competitive Landscape Market Share Concentration

Concentration in this industry is Medium

The Video Conferencing Software Developers industry exhibits a medium level of market share concentration. In 2020, IBISWorld anticipates the four largest companies to account for 62.2% of industry revenue. Several large technology companies have come to dominate the industry through extensive internal development of video conferencing software. Over the five years to 2020, large tech companies have incorporated video conferencing services with their suite of productivity software. For example, Microsoft Corporation (Microsoft) replaced Skype for Business with Microsoft Teams, a unified communications platform with video conferencing capabilities. Overall, IBISWorld expects market share concentration to increase gradually as mid-tier industry operators such as Zoom Video Communications Inc. continue to expand.

Key Success Factors

IBISWorld identifies 250 Key Success Factors for a business. The most important for this industry are:

Economies of scale: Industry operators are incentivized to maintain a large client base to spread out the costs of software development and iteration.

Product innovation: Companies in this industry need to differentiate their products to stand out from their competitors and reach new markets.

Qualified work force: Industry operators depend on skilled software developers to build reliable and robust video conferencing software.

Security: Concerns over security and privacy are major determinants of demand for certain video conferencing software.

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Cost Structure Benchmarks

Profit

Profit, measured as earnings before interest and taxes, is anticipated to account for 17.1% of revenue in 2020. The industry average profit margin is largely determined by volume and size of subscriptions sold. Industry operators seek to spread the costs of software development across a wider client base, thus bolstering profit. Overall, profit has exhibited volatility in line with industry revenue over the five years to 2020.

Wages

Wages are expected to account for 38.2% of industry revenue in 2020, marking a slight increase from 35.8% in 2015. Wages are high in this industry due to demand for skilled labor. Software developers are in high demand among the Information Sector (IBISWorld report 51), which is often referred to as the tech sector. Industry operators maintain high wages to attract and retain not only software development talent but also sales and client retention talent. This is due to the widely adopted subscription model that typifies the industry.

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Purchases

Purchases are expected to account for 1.4% of revenue in 2020. Purchases are minimal for this industry since it relies on skilled labor as its key input.

Depreciation

Depreciation expenses are minimal for industry operators. IBISWorld estimates depreciation to account for 2.4% of industry revenue in 2020.

Marketing

Marketing expenses have remained steady, but remain slightly higher than the sector average. Industry operators rely on a certain extent of marketing and advertising to raise awareness of their service offerings. In 2020, marketing expenses are expected to account for 2.6% of revenue.

Rent

Rent is estimated to account for 1.0% of revenue in 2020.

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Utilities

Utilities are anticipated to account for 0.1% of revenue in 2020.

Other Costs

Other costs include legal, advisory and other specialty or one-time fees. Other costs are expected to account for 37.2% of revenue in 2020.

Basis of Competition

Competition in this industry is High and Increasing

Industry operators in the Video Conferencing Software Developers industry compete on the basis of product features and price.

Given the varied use cases for video conferencing software, industry operators have the opportunity of fulfilling numerous unique market opportunities. For example, the video communication needs of an education system differ in many nuanced ways from the video communication needs of a Fortune 500 company. In turn, industry operators compete on the basis of markets they are able to appeal to most. In the case of the industry's major players, many companies have launched products specific to certain use cases. For example, both Zoom Video Communications Inc. and LogMeIn Inc. have separate video conferencing software specifically catered to webinars.

Industry operators also compete on the basis of price. This is primarily the case with enterprise-level solutions. Industry operators seek to find the right balance between price and product differentiation to attract and retain subscription-based clients.

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Barriers to Entry Barriers to entry in this industry are Medium and Steady

The Video Conferencing Software Developers industry has a low-to- moderate level of barriers to entry. Skilled labor is the primary input and thus barrier to entry. Software developers are in high demand and thus command above-average wages. In turn, recruiting and retaining skilled software develops, among other key personnel, are among the key barriers to entry for aspiring industry operators. IBISWorld estimates the industry's average wage to amount to $167,394 in 2020, in line with other software publishing industries.

An additional barrier to entry is the highly competitive nature of the industry. Landing and retaining clients are the primary means of growth for the industry. Industry operators largely depend on the subscription model to drive revenue growth and margin expansion through upselling. Prospective entrants to the industry will have to compete with the robust sales forces of incumbent operators. In turn, access to limited market opportunities remains a key barrier to entry. However, new entrants have been able to overcome such barriers by touting unique and innovate features of their video conferencing software. Thus, product differentiation is a key determinant of demand.

Barriers to entry checklist Competition High

Concentration Medium

Life Cycle Stage Growth

Technology Change High

Regulation & Policy Light

Industry Assistance Medium

Industry Globalization

Globalization in this industry High and Steady

The Video Conferencing Software Developers industry maintains a high level of globalization. All of the industry's major players serve international markets and maintain offices in numerous regions. The industry has had a relatively high level of globalization from the start. Among the industry's pioneering companies, Skype Technologies was largely developed and distributed in European markets before making its way to the United States.

The industry's products are versatile and typically easy to install, thus making their use easy to integrate among foreign markets. As companies have become increasingly globalized, demand from large, globalized companies has underpinned the industry's high level of globalization during the five-year period. IBISWorld expects this level of globalization to continue as the industry seeks to innovate in the realm of language translation during video conferences.

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Major Companies

Major Players MICROSOFT CORPORATION

Market Share: 24.8%

Microsoft Corporation (Microsoft) is the largest operator in the Video Conferencing Software Developers industry. The company formally entered the industry in 2011 with its purchase of Skype. Initially released in 2003, Skype is among the pioneering companies characterizing the Video Conferencing Software Developers industry. Microsoft also operates in the industry through its Microsoft Teams offering, a product included in its Microsoft Office suite of productivity software.

Founded in 1975, Microsoft is among the world's largest technology companies. The company maintains its headquarters in Redmond, WA, just outside Seattle. The company employs an estimated 148,465 individuals across its global operations. Microsoft generated $125.8 billion in global revenue in fiscal 2019 (year-end June).

Microsoft Teams is a unified communication platform with video conference capabilities. Microsoft's release of Teams in 2017 was largely a response to the recent popularization of unified communication platforms and replacement of the

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company's former Skype for Business product. Large corporations have begun adopting such unified communication platforms as a more efficient means to communicate in large groups. Microsoft Teams is considered a competitor to Slack Technologies, a similar and trend-setting collaborative software solution. Overall, Microsoft has experienced tremendous success with Microsoft Teams due in part to its inclusion in the ubiquitous Office 365 suite of products.

Financial performance

Microsoft's financial performance has resembled steady growth in both revenue and operating income. The company's add-on approach is largely the determinant of the company's industry-relevant revenue growth. Since launching in 2017, a greater number of existing Office 365 clients have adopted Microsoft Teams. In turn, the company's financial performance has experienced significant external and internal tailwinds. IBISWorld expects Microsoft's industry-specific revenue to increase an annualized 11.0% to $1.8 billion over the five years to 2020.

Microsoft Corporation (US industry-specific segment) - financial performance* Year** Revenue Growth Operating Income Growth

($m) (% change) ($m) (% change) 2014-2015 1080.1 N/C 542.5 N/C 2015-2016 1050.0 -2.8 492.3 -9.3 2016-2017 1352.6 28.8 515.7 4.8 2017-2018 1434.9 6.1 517.1 0.3 2018-2019 1620.7 12.9 638.6 23.5 2019-2020 1819.9 12.3 688.9 7.9

Source: Annual report and IBISWorld Note: *Estimates; **Year-end June 30

CISCO WEBEX

Market Share: 14.8%

Cisco Systems Inc. (Cisco) entered the industry through its acquisition of WebEx in 2007 for $2.9 billion net of cash. Originally founded in 1995, WebEx was among the first companies to develop video conferencing software. Cisco Webex now operates as a wholly owned subsidiary of Cisco. On the parent company level, Cisco employs an estimated 75,900 individuals across numerous global offices. The company generated $51.1 billion in global revenue in fiscal 2019 (year-end July).

Cisco Webex's business strategy is largely determined by its parent company's business collaboration solutions product group. The product group provides an extensive range of solutions for remote work including unified communications, omnichannel contact centers, conferencing and collaboration endpoint solutions (hardware). Cisco Webex's inclusion in this broader Cisco ecosystem gives it a competitive advantage by increasing the combined utility of its video conferencing products.

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Financial performance

Over the five years to 2020, IBISWorld forecasts Cisco Webex's industry-relevant revenue to increase an annualized 7.3% to $1.1 billion. The company has steadily grown its industry relevant revenue through organic growth. The bundling of Webex services with other Cisco offerings has helped bolster the company's industry performance and market share. However, IBISWorld projects a slowdown in the company's financial performance in 2020 due to a broader deterioration of economic fundamentals adversely affecting the company's diverse client base. IBISWorld expects Cisco Webex to generate $282.9 million in operating income in 2020.

Cisco Webex (US industry-specific segment) - financial performance* Year Revenue Growth Operating Income Growth

($m) (% change) ($m) (% change) 2014-2015 764.1 N/C 167.4 N/C 2015-2016 822.5 7.6 211.4 26.3 2016-2017 854.3 3.9 213.1 0.8 2017-2018 939.8 10.0 234.5 10.0 2018-2019 1112.3 18.4 309.5 32.0

2019-2020* 1088.3 -2.2 281.9 -8.9 Source: Annual report and IBISWorld Note: *Estimates

ZOOM VIDEO COMMUNICATIONS INC.

Market Share: 9.4%

Founded in 2011, Zoom Video Communications Inc. (Zoom) is among the fastest growing video conference software developers. The company is headquartered in San Jose, CA, and employs an estimated 1,396 individuals globally. Zoom operates out of 10 offices, five of which are in the United States. In 2019, the company generated $622.7 million in revenue (latest data available).

Zoom's business is centered around numerous video conferencing products. The company has eight different video conferencing products targeting different markets. Zoom Meetings is the company's most popular offering and enables customers to hold high definition video meetings with up to 49 individuals. Zoom largely serves the commercial market for video conferencing software. The company's major markets are various and include education, media, finance and government customers, among others.

The company's growth strategy relies on customer retention and new customer acquisition. To a lesser degree, Zoom has also allocated efforts to streamlining and adding new features to its video conferencing platforms. Zoom has also popularized its app marketplace for expanding the utility of its video conference platforms.

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Zoom experienced a spike in usage during the COVID-19 (coronavirus) pandemic. Social distancing resulted in businesses, institutions and individuals turning to video conferencing platforms en masse. While Zoom realized a spike in customers, the company drew scrutiny over its privacy and security practices. The company has been found to engage in controversial data-mining practices which has led to the banning of the platform's use among numerous institutions.

Financial performance

Over the five years to 2020, IBISWorld expects Zoom's financial performance to outpace that of the industry. The company's aggressive customer acquisition strategy has largely been effective as businesses and institutions have become increasingly remote-oriented. The company's top-line revenue is expected to grow for each of the consecutive five years to 2020, with above-average growth characterizing the former half of the period. However, IBISWorld expects the recent damage to the company's reputation to affect its bottom line in 2020. Nevertheless, the spike in pandemic-related usage is still expected to offset losses incurred from Zoom's security struggles. Overall, IBISWorld forecasts Zoom's industry-relevant revenue to increase at an annualized rate of 108.4% to $691.8 million over the five years to 2020.

Zoom Video Communications Inc. (US industry-specific segment) - financial performance*

Year Revenue Growth Operating Income Growth ($m) (% change) ($m) (% change)

2015 17.6 N/C 0.0 N/C 2016 48.5 175.6 0.2 N/C 2017 119.1 145.6 1.0 400.0 2018 256.6 115.4 1.7 70.0 2019 475.6 85.3 9.7 470.6

2020* 691.8 45.5 15.3 57.7 Source: Annual report and IBISWorld Note: *Estimates

LOGMEIN INC.

Market Share: 7.8%

LogMeIn Inc. (LogMeIn) entered the industry in 2017 with its acquisition of GoToMeeting and related products from Citrix Systems Inc. LogMeIn primarily develops unified communications and productivity software for various markets. Founded in 2003, LogMeIn is headquartered in Boston and operates numerous global offices. The company employs an estimated 3,974 individuals. In 2019, LogMeIn generated $1.3 billion in total revenue (latest data available).

The company's GoTo line of products is considered industry-relevant. GoToMeeting was released in 2004, making it among the first entrants in the industry. The GoTo family of products includes GoToWebinar, GoToConnect and GoToRoom, among

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others. Overall, the company's strategy is similar to other industry operators. New account sales are the primary driver of revenue growth. LogMeIn provides free trials to its software to engage prospective customers and grow its lead base. The company also engages in extensive advertising and marketing to further bolster awareness of its products.

Financial performance

Over the five years to 2020, IBISWorld expects LogMeIn's industry-relevant revenue to increase an annualized 13.7% to $571.0 million. The company's industry-relevant financial performance has been volatile during the period due to the transfer of business from Citrix Systems Inc. Moreover, the transfer costs have weighed down the company's operating income, particularly in 2017. IBISWorld expects 2020 to be a solid year for the company as pandemic-related need increases the number of paying customers and prospective clients. In turn, IBISWorld expects LogMeIn's market share to increase in 2020.

LogMeIn Inc. (US industry-specific segment) - financial performance* Year Revenue Growth Operating Income Growth

($m) (% change) ($m) (% change) 2015 300.1 N/C 17.7 N/C 2016 315.7 5.2 4.1 -76.8 2017 402.4 27.5 -4.8 N/C 2018 521.0 29.5 37.2 N/C 2019 541.1 3.9 -0.7 N/C

2020* 571.0 5.5 4.2 N/C Source: Annual report and IBISWorld Note: *Estimates

GOOGLE

Market Share: 6.3%

Founded in 1998, Google LLC (Google) operates in the Video Conferencing Software Developers industry through its Hangouts Meet product included in its G Suite of cloud computing tools. Another technology giant operating in the industry, Google is headquartered in Mountain View, CA, and employs an estimated 114,096 individuals globally. In 2019, the company generated $160.7 billion in total revenue (latest data available).

Google Hangouts was released in 2013 and represents the evolution of its precursors Google Talk and Google+ Messenger. Originally targeted and widely used by consumers, Google Hangouts has emerged as a competitor in the enterprise realm of video conferencing. In 2017, Hangouts was divided into Hangouts Chat and Hangouts Meet, with the latter being a standalone video conference solution. However, Hangouts Meet and its predecessors have failed to capture substantial market share. This is due to in part to lackluster reviews of the

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software's performance as well as less-robust capabilities with similarly priced alternatives.

Financial performance

Google's Hangouts Meet product is included within its Google Cloud product group, and therefore has had robust sales due to its inclusion in the broader G Suite of productivity and collaboration tools. Over the five years to 2020, IBISWorld expects Google's industry-relevant revenue to increase at an annualized rate of 48.6% to $465.8 million. The company's operating income has grown in-line with revenue due to a gradually increasing client base. However, relative to other major technology companies, Google's market share in this industry remains at the lower tier of major players. This is because Google G Suite is better suited to small- to medium-sized organizations given its lower cost than more robust competitors.

Google LLC (US industry-specific segment) - financial performance* Year Revenue Growth Operating Income Growth

($m) (% change) ($m) (% change) 2015 64.3 N/C 16.6 N/C 2016 111.2 72.9 29.2 75.9 2017 190.6 71.4 45.1 54.5 2018 268.5 40.9 54.2 20.2 2019 410.2 52.8 87.4 61.3

2020* 465.8 13.6 88.1 0.8 Source: Annual report and IBISWorld Note: *Estimates

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Operating Conditions

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Capital Intensity The level of capital intensity is Low

The Video Conferencing Software Developers industry exhibits a low level of capital intensity. The industry relies primarily on skilled-labor to develop and distribute video conferencing software. In 2020, IBISWorld estimates that for every dollar spent on labor, $0.06 will be spent on capital (property, plant and equipment). This represents a decline from $0.11 in 2015. This decline is primarily due to wages' share of revenue growing faster than depreciation's share of revenue. Overall, IBISWorld expects the industry's level of capital intensity to remain stable over the five years to 2025 as industry growth levels out.

The Video Conferencing Software Developers industry does not contend with technological disruption.

Any potentially disruptive developments would be considered industry-relevant and thus not disruptive.

The level of technology change is High

Over the five years to 2020, the Video Conferencing Software Developers industry has thrived on technological advancements in both software and hardware.

From a software perspective, developments have been made in both performance and overall utility. Cloud-based video conferencing has greatly increased the reach of video conferencing products. With cloud-based video conferencing, users connect through a shared organization directory or system such as Microsoft Office 365. This reduces the hardware requirements for video conferencing, thus making it one of the most cost-effective means of video conferencing.

From a hardware perspective, computers and webcams have become more accessible and integrated. Advancements in core processor speeds and graphics cards have enabled for more streamlined performance of video conferencing software. Moreover, the proliferation of internet connected mobile devices has increased the utility and flexibility of video conferencing software. Many

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smartphones now incorporate high definition forward-facing cameras intended for video chatting purposes. Overall, IBISWorld expects advancements in hardware to continue clearing technological obstacles for the Video Conferencing Software Developers industry.

Revenue Volatility The level of volatility is High

Note: Revenue growth and decline reflective of 5-year annualized trend. Y-axis is in logarithmic scale. Y-axis crosses at long-run GDP. X-axis crosses at high volatility threshold.

The Video Conferencing Software Developers industry has exhibited a high level of revenue volatility over the five years to 2020.

This is due the industry's high growth rate. Moreover, the industry has experienced abnormal surges in revenue due to the effects of numerous new entrants to the industry. 2020 is expected to be a high-growth year for the industry due to widespread social distancing practices encouraged by governments and health officials. Overall, IBISWorld expects revenue volatility to abate as the industry approaches maturity.

Regulation & Policy

The level of regulation is Light and is Increasing

The Video Conferencing Software Developers industry is subject to a low level of regulation.

However, IBISWorld expects regulatory authority to increase gradually as security and privacy concerns continue to dominate the conversation surrounding internet and software regulation and policy.

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The industry is primarily subject to the authority of the Federal Trade Commission (FTC). However, the FTC is a reactive authority, settling cases brought up by consumers and users of software. In recent years, the FTC has cracked down on software companies conducting data-mining processes within their software. For example, in 2019, Google LLC was fined by the FTC for violating the Children's Online Privacy Protection Act by collecting data on children's usage of YouTube.

More recently, major player Zoom Video Communications Inc. (Zoom) has come under scrutiny for its data-mining practices and security flaws. In March 2020, the company contended with significant backlash for sharing data without consent. However, the company has since fixed these issues and is seeking to repair its reputation. This event has attracted the attention of the New York State Attorney General, putting into question the company's privacy and security practices. Overall, with the increasing instance of security flaws and privacy violations, IBISWorld expects regulatory scrutiny to increase over the five years to 2025.

Industry Assistance

The level of industry assistance is Medium and is Increasing

The Video Conferencing Software Developers industry does not receive any government subsidies or grants.

The industry does receive assistance, however, through industry associations and partnerships. Industry associations relevant to the industry include the following: the Cloud Software Association, Software and Information Industry Association (SIIA), the Association of Software Professionals and The Software Alliance. Industry associations provide assistance to industry operators through lobbying efforts, certifications and research. Working with policymakers on different levels of governments to promote and protect industry interests is among one of the most essential forms of assistance associations provide to the industry.

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Key Statistics Industry Data

Year Revenue IVA Estab. Enterprises Employment Exports Imports Wages Domestic Demand

Percentage of services conducted

online ($m) ($m) (Units) (Units) (Units) ($m) ($m) ($m) ($m) (%)

2011 655 264 7 5 1,234 N/A N/A 193 N/A 7.00 2012 839 393 10 7 1,702 N/A N/A 265 N/A 7.90 2013 1,077 528 14 9 2,255 N/A N/A 349 N/A 9.60 2014 1,355 700 17 12 2,799 N/A N/A 453 N/A 11.0 2015 2,319 1,400 30 21 5,024 N/A N/A 831 N/A 12.7 2016 3,886 2,398 50 36 9,130 N/A N/A 1,516 N/A 14.3 2017 4,640 2,718 69 51 11,218 N/A N/A 1,852 N/A 16.0 2018 5,237 3,114 85 62 12,229 N/A N/A 2,098 N/A 17.6 2019 6,169 3,793 105 77 15,866 N/A N/A 2,526 N/A 19.1 2020 7,348 4,238 121 89 16,758 N/A N/A 2,805 N/A 20.4 2021 8,178 4,772 134 99 19,477 N/A N/A 3,233 N/A 21.5 2022 8,864 5,249 147 108 22,169 N/A N/A 3,644 N/A 22.6 2023 9,563 5,704 158 116 24,697 N/A N/A 4,034 N/A 23.6 2024 10,254 6,140 168 124 26,862 N/A N/A 4,375 N/A 24.6 2025 10,955 6,596 179 132 29,014 N/A N/A 4,716 N/A 25.6

Annual Change Year Revenue IVA Estab. Enterprises Employment Exports Imports Wages Domestic

Demand Percentage of services conducted

online (%) (%) (%) (%) (%) (%) (%) (%) (%) (%)

2011 31.1 29.7 -36 -37 21 N/A N/A 22.6 N/A 9.37 2012 28.1 49.1 43 40 38 N/A N/A 37.1 N/A 12.8 2013 28.4 34.2 40 29 33 N/A N/A 31.6 N/A 21.5 2014 25.8 32.6 21 33 24 N/A N/A 29.9 N/A 14.6 2015 71.1 99.9 77 75 80 N/A N/A 83.3 N/A 15.4 2016 67.6 71.3 67 71 82 N/A N/A 82.4 N/A 12.6 2017 19.4 13.4 38 42 23 N/A N/A 22.2 N/A 11.9 2018 12.9 14.6 23 22 9 N/A N/A 13.3 N/A 10.0 2019 17.8 21.8 24 24 30 N/A N/A 20.4 N/A 8.52 2020 19.1 11.7 15 16 6 N/A N/A 11.0 N/A 6.80 2021 11.3 12.6 11 11 16 N/A N/A 15.2 N/A 5.39 2022 8.39 10.0 10 9 14 N/A N/A 12.7 N/A 5.11 2023 7.88 8.66 7 7 11 N/A N/A 10.7 N/A 4.42 2024 7.21 7.64 6 7 9 N/A N/A 8.45 N/A 4.23 2025 6.84 7.43 7 6 8 N/A N/A 7.77 N/A 4.06

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Key Ratios Year IVA/Revenue Imports/Demand Exports/Revenue Revenue per

Employee Wages/Revenue Employees per

estab. Average Wage

(%) (%) (%) ($'000) (%) 2011 40.3 N/A N/A 531 29.5 176 156,726 2012 46.9 N/A N/A 493 31.6 170 155,817 2013 49.0 N/A N/A 478 32.4 161 154,812 2014 51.7 N/A N/A 484 33.5 165 161,986 2015 60.4 N/A N/A 462 35.8 167 165,446 2016 61.7 N/A N/A 426 39.0 183 166,024 2017 58.6 N/A N/A 414 39.9 163 165,065 2018 59.5 N/A N/A 428 40.1 144 171,592 2019 61.5 N/A N/A 389 40.9 151 159,227 2020 57.7 N/A N/A 438 38.2 138 167,395 2021 58.4 N/A N/A 420 39.5 145 165,970 2022 59.2 N/A N/A 400 41.1 151 164,387 2023 59.6 N/A N/A 387 42.2 156 163,352 2024 59.9 N/A N/A 382 42.7 160 162,881 2025 60.2 N/A N/A 378 43.0 162 162,528

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Additional Resources Additional Resources

The Software & Information Industry Association http://www.siia.net/

G2 Software Marketplace http://www.g2.com/categories/video-conferencing

Cloud Software Association http://www.cloudsoftwareassociation.com/

US Census Bureau http://www.census.gov

Industry Jargon CLOUD COMPUTING Using remote servers hosted on the internet to store data and offer software services.

SOFTWARE AS A SERVICE Software as a service is a component of cloud computing. It is software made available via

the internet as opposed to locally.

UNIFIED COMMUNICATION AS A SERVICE (UCAAS) UCaaS platforms are the Swiss army knives of communication platforms. They have chat

and video conferencing capabilities and are intended for enterprise-level usage.

Glossary Terms BARRIERS TO ENTRY High barriers to entry mean that new companies struggle to enter an industry, while low

barriers mean it is easy for new companies to enter an industry.

CAPITAL INTENSITY Compares the amount of money spent on capital (plant, machinery and equipment) with

that spent on labor. IBISWorld uses the ratio of depreciation to wages as a proxy for capital

intensity. High capital intensity is more than $0.333 of capital to $1 of labor; medium is

$0.125 to $0.333 of capital to $1 of labor; low is less than $0.125 of capital for every $1 of

labor.

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CONSTANT PRICES The dollar figures in the Key Statistics table, including forecasts, are adjusted for inflation

using the current year (i.e. year published) as the base year. This removes the impact of

changes in the purchasing power of the dollar, leaving only the "real" growth or decline in

industry metrics. The inflation adjustments in IBISWorld’s reports are made using the US

Bureau of Economic Analysis’ implicit GDP price deflator.

DOMESTIC DEMAND Spending on industry goods and services within the United States, regardless of their

country of origin. It is derived by adding imports to industry revenue, and then subtracting

exports.

EMPLOYMENT The number of permanent, part-time, temporary and seasonal employees, working

proprietors, partners, managers and executives within the industry.

ENTERPRISE A division that is separately managed and keeps management accounts. Each enterprise

consists of one or more establishments that are under common ownership or control.

ESTABLISHMENT The smallest type of accounting unit within an enterprise, an establishment is a single

physical location where business is conducted or where services or industrial operations are

performed. Multiple establishments under common control make up an enterprise.

EXPORTS Total value of industry goods and services sold by US companies to customers abroad.

IMPORTS Total value of industry goods and services brought in from foreign countries to be sold in

the United States.

INDUSTRY CONCENTRATION An indicator of the dominance of the top four players in an industry. Concentration is

considered high if the top players account for more than 70% of industry revenue. Medium

is 40% to 70% of industry revenue. Low is less than 40%.

INDUSTRY REVENUE The total sales of industry goods and services (exclusive of excise and sales tax); subsidies

on production; all other operating income from outside the firm (such as commission

income, repair and service income, and rent, leasing and hiring income); and capital work

done by rental or lease. Receipts from interest royalties, dividends and the sale of fixed

tangible assets are excluded.

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INDUSTRY VALUE ADDED (IVA) The market value of goods and services produced by the industry minus the cost of goods

and services used in production. IVA is also described as the industry's contribution to GDP,

or profit plus wages and depreciation.

INTERNATIONAL TRADE The level of international trade is determined by ratios of exports to revenue and imports to

domestic demand. For exports/revenue: low is less than 5%, medium is 5% to 20%, and high

is more than 20%. Imports/domestic demand: low is less than 5%, medium is 5% to 35%,

and high is more than 35%.

LIFE CYCLE All industries go through periods of growth, maturity and decline. IBISWorld determines an

industry's life cycle by considering its growth rate (measured by IVA) compared with GDP;

the growth rate of the number of establishments; the amount of change the industry's

products are undergoing; the rate of technological change; and the level of customer

acceptance of industry products and services.

NONEMPLOYING ESTABLISHMENT Businesses with no paid employment or payroll, also known as nonemployers. These are

mostly set up by self-employed individuals.

PROFIT IBISWorld uses earnings before interest and tax (EBIT) as an indicator of a company’s

profitability. It is calculated as revenue minus expenses, excluding interest and tax.

REGIONS West | CA, NV, OR, WA, HI, AK

Great Lakes | OH, IN, IL, WI, MI

Mid-Atlantic | NY, NJ, PA, DE, MD

New England | ME, NH, VT, MA, CT, RI

Plains | MN, IA, MO, KS, NE, SD, ND

Rocky Mountains | CO, UT, WY, ID, MT

Southeast | VA, WV, KY, TN, AR, LA, MS, AL, GA, FL, SC, NC

Southwest | OK, TX, NM, AZ

VOLATILITY The level of volatility is determined by averaging the absolute change in revenue in each of

the past five years. Volatility levels: very high is more than ±20%; high volatility is ±10% to

±20%; moderate volatility is ±3% to ±10%; and low volatility is less than ±3%.

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WAGES The gross total wages and salaries of all employees in the industry.

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