Home Analysis The leap to next-generation operations “is straining the vendor ecosystem”

The leap to next-generation operations “is straining the vendor ecosystem”

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The current technology refresh cycle in the traditional TV industry is unlike any we have seen before, and has led to a pause in buying as broadcasters and platform operators prepare for a leap into more IP, software-defined and cloud operations. Media companies are refusing to invest in ‘old’ hardware-based playout and headend technologies but many are still not ready for the ‘new’, encompassing software-defined solutions and in, the case of facilities, a move from SDI into IP. This, combined with consolidation among producers, distributors and platforms, has led to a slowdown in spending  and we are currently at the bottom of a ‘U-shape’ sales curve.

This is all according to Charlie Vogt, CEO at Imagine Communications, the technology supplier known for its advertising management, playout and headend solutions. “With the move from SD to HD, for example, the underlying technology was largely the same, but the current refresh cycle involves a complete revolution,” he explains. “Everyone knows they must move from SDI [to IP] and into software [from hardware-based processing] and to the cloud. Nobody wants to put precious CapEx into the old technology with 7-10 year depreciation lifecycles and they are focused on moving to next-generation architectures, but they are still making decisions on the new solutions.

“More and more customers are sweating the assets they have so we are witnessing a lull in spending, something that is affecting everyone in this space. This is stressing the ‘system’. But we are at the bottom now.”

Although talking about the industry as a whole, Vogt is not denying the impact that the slowdown has had for Imagine Communications. His company used IBC last month to show off its solutions for SDI-to-IP migration and its microservices-based playout and video processing that is expected to dramatically accelerate the rate at which media companies can innovate. “We must convince customers that the technology is here, ready and stable, and that it is secure,” Vogt said at the Amsterdam show.

Imagine Communications is leading the way towards IP and microservices based media playout and distribution and while sales of traditional products are declining, the company is seeing rapid growth in sales of its next-generation products, including those based on its Zenium microservices platform such as the Versio playout solutions and Selenio encoding/transcoding.

The company has quietly grown its next-generation portfolio by over 40% in the last few years. “Five of the last seven products we have launched were built on top of our microservices platform,” Vogt notes. “Our pipeline is mostly made up of next-generation projects. We have established hundreds of proofs-of-concept in the last 18 months and are turning these into some big wins.”

It was clear from the Imagine Communications press event at IBC that the company feels pressured to grow those next-generation sales faster and get up the other side of that revenue ‘U-shape’. It has spent $90 million on R&D over the last few years as part of its own transformation to ensure it is ready for what Vogt believes is the era of platforms where, instead of buying products, media companies buy platforms on which they can deploy products. There was a subtle call for investors to see the job through to the end.

“There are lots of rumours about us, a private company four years into an investment cycle, including rumours that we were selling the company or doing some M&A [mergers and acquisitions activity]. It is a good time for our investors to double-down, and they are investing more money into the company.”

Vogt stressed how well Imagine Communications is positioned to lead the market in the transition to IP and microservices-based cloud operations, noting how much work it takes for any supplier to become microservices-centric, which requires a cultural as well as technological pivot. He added: “We have convinced our investors that we are going to be first, and we are first – and early adopters are rewarded.”

Vogt claims market leadership in microservices-based solutions. This stems from the acquisition of Digital Rapids in April 2014. That company, with its software-based workflow management, transcoding and encoding solutions, was already architecting its solutions on a microservices platform and this became the foundation for Zenium, the Imagine Communications microservices platform.

[You can read more about microservices at the bottom of this story].

Zenium is already at an advanced stage of development, as Disney will testify. The content giant is in the midst of a transformation to IP and cloud-based playout and delivery using VersioCloud, the software-defined playout solution that is built on Zenium. This is actually an IP-playout-as-a-service implementation where Disney pays for the resource it uses on a metered basis.  Disney is currently preparing to deploy in international facilities, like in Japan.

“When you win a big project like Disney it creates lots of opportunities,” Vogt observes. “We see 2018 as a year of next-generation cloud deployments and we see top line revenue coming back in 2018-20. Imagine Communications is going to be in a good place.”

Vogt is not sure the same will be true of all vendors. He views the transition to microservices-based workflows, in particular, as an inflection point for the industry and one that is likely to lead to a vendor shake-out.

He points out that there has been consolidation among media companies (customers) but little consolidation among suppliers. This is already putting a strain on the ecosystem as a whole, but now everyone will have to keep up with some complex new requirements. In normal circumstances we should be seeing more vendor consolidation, he reckons.

“Two to three years ago I thought we were going to see more consolidation among suppliers but now I think it is going to get harder and harder for supplier consolidation as the industry moves towards software-based solutions. It is hard to acquire companies if they do not fit perfectly into the software stack you are building and which you develop your own technologies upon. It is becoming hard to incorporate products into your roadmap.”

Vogt is referring to the impact of microservices development, which requires that any media workflow/processing software is architected in a completely new manner, from the ground-up usually. If the software at the target company (to be bought) does not fit into the microservices approach at the buying company, then it is harder to find the technology synergies.

“The only value you get then is consolidating their customers, but you cannot assume that if you acquire a company for their customers, those customers will just migrate onto your platform.”

Brick Eksten, Chief Product Officer for Playout, Networking & Distribution at Imagine Communications, revealed at IBC that the company would like to make acquisitions but is being hamstrung for the reasons his boss outlined. “We would like to add more scale to the company and we are trying, but the M&A process is tough and frustrating.”

This is bad news for companies that want to scale and perhaps even worse news for companies that want (or need) to sell. “I think this industry needs to consolidate but it is hard to see the best way forward,” Charlie Vogt warns. “It will be hard for small companies to innovate, and challenging for them to survive.”


More about microservices software architectures

In very simple terms, microservices-based software is virtualised for use in a public or private cloud but is also deconstituted into the smallest component parts that are viable. In the words of Brick Eksten, each component part provides the minimum functionality that you can put into a network that gives you some business value.

A microservices cloud software architecture is credited with many advantages, including:

  • The ability to scale cloud resources (e.g. compute power) only for the sub-segments of an application or service that need them at any given moment. This avoids the need to scale an entire platform that the applications are part of (where other parts of the system are not currently under strain).
  • The isolation of software development so developers can work on part of a service without requiring extensive knowledge about the rest of the software stack.
  • The ability to update, release and – if necessary – pull back a software release without impacting the applications around it, which is the basis for faster software releases and reduced innovation risk. Because of their isolation, it is easier to replace microservices-based components or groups of them.
  • The way processing tasks can be spread more effectively across cloud resources, with high levels of automation. This boosts elasticity and scalability but also gives more flexibility when establishing redundancy systems (and the infrastructure and policies that underpin them).
  • Microservices are also credited with encouraging software commonality that helps to eliminate operations siloes within media companies.

You can read much more about microservices in this Videonet report, ‘How microservices take cloud-based TV operations to another level’. The report explains what microservices are, how they differ from standard software virtualisation into the cloud, why they are so important and the likely migration path to a microservices cloud.

Download the free report here.

Photo: The Versio playout solution from Imagine Communications

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