Answers to the Most-Often Asked Questions Regarding Integrated Voice-Data Terminals.
All that has changed. Early in the 1980s, a new product was introduced into the communications world: the integrated voice/data terminal. The IVDT was a hybrid--a combination telephone and data terminal. The concept was new; the technology was not. By year-end 1984, more than 35,000 IVDTs had been shipped from manufacturing plants around the country.
In a report entitled "Ten-Year Market for Integrated Voice/Data Terminals," published by my Parsippany, New Jerseybased Eastern Management Group, the rapid evolution of the IVDT marketplace is spotlighted and explained. During the research process that resulted in the study, many questions were posed to EMG consultants. Ten of the most frequently asked are addressed below. The majority of the accompanying data is drawn directly from the study.
Devices Merge Technologies
What qualifies a unit as an integrated voice and data terminal?
The devices that qualify are those that combine in a single desktop unit both telephone and data access. The amount of data and voice capability will vary from product to product, but the basic device contains the following components: telephone (or speakerphone), display screen, integrated modem, keyboard, communications software and computer access. Such a unit represents a microcosm of what's happening in the information industry as a whole--the accelerating merger of voice and data.
Purchasers receive a device that brings to their fingertips the benefits of both voice and data. Despite alleged limitations of some products currently on the market, IVDTs represent an important step closer to the much-coveted and little-realized integrated office.
Who's buying IVDTs today?
Initially, senior executives were identified as the target market for IVDTs, or "executive workstations." Close to 55 percent of low-volume IVDT purchases between 1981 and 1984 were intended for senior management exclusively. The main reason? Experimentation--and prestige.
Vendors were banking on the idea that usage would eventually trickle down into the lower strata of organizations. The idea seems to be working out--but not for the reasons that vendors might have originally supposed.
Workstations "Scare" Bosses
The real reason is rooted in a bias against workstations that permeates executive ranks. It stems from the fact that senior executives are not accustomed to gathering their own data, scheduling their own meetings, or using information-processing equipment. This problem is compounded by lack of exposure to "terminals" in general. The specter of technology can even today make many people uneasy.
While Fortune 1000 companies that purchased IVDTs in large volume situated their workstations more evenly throughout their organizations, they too were confronted with an uncertain acceptance. For example, although only 19 percent ended up at the senior-management level while 52 percent acquired space on the desks of middle management, reluctance to use the units on a continuous basis still surfaced.
Regardless of these instances of hesitancy, it's clear that buyers today, for the most part, range from middle management to the ranks of executives.
What will motivate purchasers in the future?
As noted, the most-important criteria for IVDT selection by low-volume purchasers was experimentation or prestige. In total, 75 percent of today's users have installed the devices for purposes other than operations and applications.
By contrast, future users will have a different motivation. Indeed, 83 percent of future IVDT users will buy them for daily, noncontinuous operational needs, especially data-based access, software applications and electronic mail. Moreover, with incrased frequency, users will buy IVDTs to replace both telephone and terminal equipment. (Very simply, closely scrutinized budgets leave little room for redundancy.)
In general, the IVDTs that provide the most user-sought hardware features and software applications will be the most successful products. After all, what motivates users is pragmatism.
It is important to keep in mind that users consider the IVDT more as a data terminal that has a telephone, rather than as a phone with a screen and keyboard. Therefore, integral modems are becoming of greater importance to potential IVDT purchasers. That's because both present and future users are beginning to feel the constraints placed upon them by the "slow" modems that are integrated into most IVDTs today. A 300-baud modem takes approximately 40 seconds to fill an entire screen. Even optional 1200-baud modems exhaust about 10 seconds, which is still unnecessarily slow.
It's attributes such as speed, reliability and support that motivate the practical user. And to be successful in this relatively young IVDT market, vendors are going to have to take note of that important fact.
Who are the current players in the IVDT game?
There are already several, and their number will continue to grow. Since the IVDT is a hybrid product, the vendors are often hybrids as well. Mergers, OEM arrangements and joint ventures have helped produce a wide array of players before the proverbial "window" closes on the IVDT market. Present vendors vying for a slice of the pie may be divided into five categories: telecommunications vendors, information-processing vendors, startups, system integrators, and mergers and joint ventures.
Units That long Dominated the Marketplace
Between 1981 and 1984, the IVDT market was dominated by Northern Telecom's Displayphone, which accounted for 68 percent of all unit sales. Approximately 11 percent of the company's sales in this area were of its proprietary IVDT, the Displayphone Plus; the remainder were of the stand-alone Displayphone. Never again will any IVDT come so close to being a one-man show as that product did during the concept's introductory stage.
While northern Telecom was staging its spectacular showing, Mitel cornered about six percent of the market with its Kontact; GTE's XT-300 and XT-300E amounted to five percent of all installed IVDTs; and Rolm's Cypress also pulled in five percent. Certain startups were also able to make a strong showing: Ambi with two percent, Davox with four percent, and Zaisam with an impressive six percent. All other vendors comprised the remaining four percent (see Figure 1).
How much revenue will IVDTs generate in the short-term?
Just as the personal-computer market exploded in one year (shipments increased 150 percent when IBM entered the market), 1985 will be a leapfrog year for the IVDT. The entire installed base will increase by 88 percent, as shipments in 1985 jump to 51,000. It must be kept in mind that between four and five percent of annual shipment will remain stored in distributors' warehouses at the end of the year. Regardless, by year-end 1985, the installed base will approach 75,000 units,
Revenues Are Tied into Pricing
Obviously, revenues are directly tied into pricing structure. The average price of an IVDT in 1984 was $1,680. Due to lack of competition and the low sales volume, unit prices had dropped only seven percent since 1981.
That's about to change. The years between 1985 and 1989 will witness the greatest decline in price. By year-end 1985, the average IVDT price will descend to $1,460. That alone is a substantial decrease. Next year, a 12-percent drop will ensue, with reductions in subsequent years following suit.
Precipitating this price deflation: the entry of IBM/Rolm, InteCom/Wang and AT&T. Their established presence plus economies of scale will drive demand up and prices down.
And resulting sales revenues? At last year's end, total sales revenue slightly exceeded $51 million. The years 1985 through 1989 will be ones of rapid growth, with annual sales revenues increasing from 29 percent to 45 percent during that time frame.
What about revenues over the long-term?
In fact, the revenue floodgate will open wider the farther we ascend the 1980s ladder. The end of 1985 will see $74.5 million pour into vendors' coffers. By 1990, the amount will surge to more than four times the '85 level, easily exceeding the $335-million mark (see Figure 2).
Early Birds May Drop the Worm
Who is most likely to be the long-run winner?
Since the first entry into the market was Northern Telecom, IVDTs first fell into the domain of the telecommunications vendors. And because they had the advantage of an installed base of PBXs, there was a ready market for both stand-alone and proprietary units.
Despite this historic strength, it's highly likely that a newcomer to the communications market will come away with the IVDT laurel. Who? Who else? Big Blue.
IBM's commitment to research and development is almost peerless. In the last five years, it invested billions in new plants and better equipment. Six hundred new IBM computer-related product announcements found their way to the market in 1983--1984. The fact that the company has been so nimble indicates that it has no intention of becoming sluggish now or ever. Its acquisition of Rolm complements the long-distance transmission capacity from SBS and virtually assures IBM of a leading role (eventually) in the IVDT market.
Largest Vendors Will Fare Well
IBM/Rolm, Northern Telecom, AT&T: Many of the largest vendors will fare well in the IVDT industry. But will they succeed in forcing all of the small companies that are often the most flexible and innovative right out of the market? Maybe not. The fact is that IVDTs may become so diversified, and the demand so specialized, that no one or two companies will ever fill everyone's needs. Niche opportunities will be abundant, regardless of who might occupy the market throne.
How important is ergonomics?
These primary ergonomic features are considered in making purchase decisions about IVDTs:
* Keyboard Layout--Most IVDT users are not skilled in keyboard usage, so ease of use is an imperative.
* Footprint--Both present and future users consider footprint (the amount of space taken up on a desk) as being only slightly less important than keyboard layout. Indeed, it is probably sage to say that desktop space is the most-sought-after real estate in the world. Few workers would be comfortable sharing their desktop with a large IVDT. Most vendors realize this, and have tried to streamline the devices.
* Keyboard Size--If the worker using a keyboard is suffering from the "fat-finger syndrome," keyboard size is an important consideration. In addition, any serious word processing can only be accomplished with adequate keyboard space.
* Screen Size--Since several screen sizes are available, users may choose the one that best accommodates their needs. Some vendors offer different screen sizes for a given IVDT. Vendors have discovered that telecommunications managers want the IVDT to look more like a phone; they prefer smaller screens. Information-processing managers want the IVDT to appear more like a computer terminal; they prefer larger screens. And the vendors? Dilemmas, dilemmas.
Other principal ergonomic features include screen color, swivel and tilt. The importance of all these factors will certainly increase as professionals and managers develop a firsthand awareness of the discomfort that can result from terminal usage.
What are the keys to success?
Our research indicates that users consider the IVDT more as a data terminal that has a telephone, rather than as a phone with a screen and keyboard. This is due to two factors.
Workers Not Terminal-Oriented
First, white-collar workers have always had their own phone, but not always their own terminal, and are not yet totally convinced that they need one. Accordingly, vendors must be able to persuade workers that they would be more productive using a data terminal.
Second, the pricing structure of the IVDT has been aligned more closely with terminals, and even personal computers, than with telephones. Vendors have had to stress this kinship with data products so that users understand--and accept--the higher price.
The implications of these facts are critical for IVDT vendors. The products that excel in data features will come either from manufacturers that have expertise in that area, or from ones that have merged with companies that possess such capabilities. Both communications and data processing concerns can usually meet this need, so long as they recognize the criticalness of doing so.
What products stand to be displaced by IVDTs?
IVDTs have the inherent potential to act as a replacement for both telecommunications and data processing equipment. To date, 25 percent of IVDTs have been purchased to replace voice equipment (the telephone primarily). Sixteen percent have replaced data terminals (dumb, smart and intelligent terminals), and 57 percent took the place of both voice and data equipment.
Users Becoming Sophisticated
The last statistic is interesting because it's indicative of a new breed of user: more sophisticated, more cost-sensitive. As new management, clerical personnel and small-business professionals require workstations, they will be likely to utilitize an IVDT. And that bodes very well indeed for prospective vendors.
Ten questions: Not many when you think of the youth of this marketplace, the potentially explosive revenues it could generate. There are certain to be many more questions in readers' minds.
But that's good. The questions will evoke answers; and if the answers aren't there yet, well, you can bet that someone in the industry's ranks will eventually supply them.
This is, after all, a young market. The span covering 1981 through 1984 proved conclusively just how young it was. Market participants blindly groped for awareness and acceptance; potential users muddled through specs and sales pitches, wondering what contributions IVDTs could make to their office efficiency.
Fortune Companies Stay Cautious
So it's not surprising that, in most cases, the Fortune 1000 companies' responses to IVDTs have been cautious. With the exception of some companies that employ large quantities of the devices, most of the participating Fortune 1000 have opted for small doses of them.
There are encouraging signs, however, that IVDTs are being elevated from their Tinkertoy status to a level of constant professional utility. Acceptance has begun to trickle down into the halls of middle management; it's there that the success of the industry lies. Vendors know that; or at least, many of them do. The trick will be to jettison plans for the initial target market--executives--and become a path-breaker through middle-management terrain. Those that recognize this fact early on in the game will be best situated to be the long-term winners.
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|Date:||Jul 1, 1985|
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