Frost & Sullivan Applauds Pexip for Disrupting the Video Conferencing Industry

2016 Global Video ConferencingTechnology Innovation Award

2016

BEST PRACTICES RESEARCH

© Frost & Sullivan 2016 2 “We Accelerate Growth”

Contents Industry Challenges .............................................................................................. 3

Technology Attributes and Future Business Value ..................................................... 3

Conclusion........................................................................................................... 7

Significance of Technology Innovation .......................................................................... 8

Understanding Technology Innovation .......................................................................... 8

Key Benchmarking Criteria .................................................................................... 9

Best Practice Award Analysis for Pexip .......................................................................... 9

Decision Support Scorecard ................................................................................... 9

Technology Attributes ......................................................................................... 10

Future Business Value ......................................................................................... 10

Decision Support Matrix ...................................................................................... 11

Research Methodology ........................................................................................ 12

About Frost & Sullivan .............................................................................................. 14



Background and Company Performance Industry Challenges Video conferencing adoption is undergoing rapid transition. Frost & Sullivan independent analysis confirms that the market has approached an inflection point driven by high quality and low-costs - combined with an escalating need for rich collaboration. Utilized in the past primarily as a high-end application deployed in conference rooms, the benefits of video conferencing are now available to everyone, resulting in a rapid democratization of the technology. The ongoing shift from hardware to software and the impact of cloud and consumerization is not only overturning traditional business models, but is also opening up exciting new growth opportunities for providers in this market. Technology advancements, improved cost-benefit ratio, availability of video over mobile devices, and a greater flexibility in deployment models have all resulted in viral adoption triggering not just B2B, but also B2C use cases, leading to pervasive video for everyone. According to a recent Frost & Sullivan research, the global market for business visual (web and video) collaboration stands at $5.8 billion in 2015 - and is forecast to grow to $9.5 billion by 2020. The shift to video in huddle rooms, open work spaces, and over desktop and mobile devices (along with greater cloud momentum) is expected to accelerate within the forecast period. Video conferencing technologies must meet changing user needs driven by the Bring-Your-Own-Device (BYOD) trend; yet many current offerings come up short. Today’s customers are ready for the new world of video collaboration that supports distributed workforce over their choice of devices and networks. Many customers and partners in the past have been frustrated with the limitations of dedicated closed solutions from technology providers. The new deployment model requires scalable and affordable video conferencing, backed by software-based and virtualized solutions that offer flexible licensing and deep multi-vendor integration. With its Infinity collaboration and communications platform, Frost & Sullivan applauds how Pexip is properly addressing the emerging needs of the market. Using Infinity, organizations can now offer video, audio, and web-based collaboration to every employee via existing IT or cloud infrastructures — greatly improving organizational efficiency, while saving costs. Technology Attributes and Future Business Value Criterion 1: Visionary Innovation Since its inception, Pexip has worked at a rapid pace to innovate. The Pexip team is constantly looking to change the status quo in the industry by bringing technology that can easily scale in a cost-effective way, which is becoming increasingly important to organizations having to deal with a rapidly growing mobile workforce.



Pexip Infinity is a software-based transcoding engine, MCU, and gateway in one. This solution is a scalable meeting platform that connects virtually with any communications tool, such as Microsoft Lync and Skype for Business, and traditional video- and audio conferencing together for seamless meetings. Constant innovation is part of the company DNA. Pexip has made 11 major releases to Infinity in the last 2 years and has 7 patents granted. As an innovator in scalable, distributed, and affordable collaboration, Pexip recently added Dynamic Hybrid Cloud, which is a clear industry differentiator. This capability allows an on-premises installation of Pexip Infinity to burst to an IaaS (Infrastructure as a Service) cloud when on-premise capacity is about to be exceeded. As a result, customers no longer need to worry about running out of resources. Infinity’s dynamic hybrid cloud functionality supports expansion from an on-premise deployment to a private or public cloud IaaS service whenever a company requires it. When capacity demand normalizes, the cloud instance can be shut down, keeping costs to a minimum. The on-premises deployment provides basic capacity for everyday usage, and the cloud-based extension provides extra capacity for special needs. Typical use cases include, for example, scheduled all-hands meetings that run once every month or quarter, where day-to-day platform conferencing capacity does not meet the needs of the organization. Criterion 2: Customer Acquisition Pexip’s commercial success is illustrated by its customers, and technology and partner ecosystem. Since its inception three years ago, Pexip has grown at a rapid pace.

• Pexip surpassed 100,000 licenses in February 2016. Its largest customer now has more than 83,000 VMRs provisioned. Its largest single deployment has 136 Pexip conferencing nodes.

• Pexip has 425 direct customers that have purchased on-premises solutions via its partners. That number does not include customers that have purchased Pexip through VCaaS providers (such as Whitlock, York Telecom, BCS Global and others). Pexip more than doubled the number of direct customers in 2015.

• With many more customers being reached through its 30+ CSP partnerships, Pexip has seen strong revenue growth. In 2015, it more than doubled its accrued business, with 159% increase in annual returning revenue and 128% in new bookings. It is on target in 2016 to grow at over 100% over 2015 revenue.

While these adoption and customer acquisition stats are quite impressive, more important are the usage stats over the Pexip solution. Pexip customers are now using the Pexip Infinity platform at a rate of 100 million minutes annually, a doubling from just 6 months ago. Its largest customer today, a US based global leader in business and technology services, consumes about 5.3 million minutes of video per month on average. Pexip renews annual licenses with a 20% capacity increase - and sees that trending up. As a



result of strong adoption, Pexip customers are making video collaboration and content sharing an integral of their workflows. Criterion 3: Interoperability and Application Diversity Pexip Infinity can integrate multiple applications and can be embraced in multiple environments. The overall goal is to enhance workflows, productivity and collaboration by decreasing the time required for workers to find and connect with appropriate contacts. Most UC vendors and service providers have focused primarily on their own solutions, rather than on deep integration with third-party platforms and inter-company support. The resulting solutions may be characterized as short-sighted and/or complex and expensive when multi-vendor and inter-company communications is involved. In contrast, Pexip has demonstrated a futuristic vision and has executed to truly extend the value of investments for its customers. In November 2015, Pexip announced Fusion, a technology that enhances user experience when Microsoft Skype for Business or Lync users meet with standards based videoconferencing users. Pexip Fusion ensures that every individual participant benefits from the client experience no matter what their platform of choice is. It consists of multiple elements that define and control how standards-based videoconferencing, as well as other video-enabled clients, work when they connect with Microsoft’s AV-MCU – commonly referred to as Skype meetings – using Pexip Infinity as a gateway or meeting platform. It offers bi-directional multi-stream video support between Microsoft’s AV-MCU and Pexip Infinity, ability to merge AV-MCU hosted conferences with Pexip Infinity VMR and establishment of multi-resolution H.264 simulcast video streams from Pexip Infinity to the AV-MCU. For enterprises that have invested in both legacy video conferencing and Skype for Business or Lync, Pexip Fusion means better adoption rates, better return on investment, and more intuitive usage. Overall, it’s clear to Frost & Sullivan that Pexip is going above and beyond other video conferencing developers. The company can address a broad range of devices and user environments to address the challenge associated with communication silos that exist today. Criterion 4: Industry Impact – High Price/Performance Value Pexip does not ask customers to compromise on functionality for affordability and flexibility. Pexip’s price performance value can be matched by few in the industry (including both incumbents and startups). Pexip offers a disruptive licensing model whereby organizations can increase or decrease conferencing capacity to their changing needs. The flexible licensing model allows them to buy what they need and grow when they are ready. Another compelling feature is that Pexip can work alongside existing infrastructure already in place allowing customers to



keep their existing video investments while growing on Pexip’s affordable and scalable platform. Pexip’s licensing, including enterprise level agreements, offers: · Pay as you go - subscription pricing · Pay as you grow - minimal initial investment · Buy what you need - capacity as needed Pexip is selling user licenses for a list price that starts at $25 per user per month for a 50 user license down to as low as $5 per user per month for enterprise agreements. The cost of hardware and virtualization is about $5 per port per month. Depending on assumptions around concurrency in a large enterprise level scenario, the hardware and virtualization cost per user can be as low as $0.50 per user per month. Customers can start with a low license count and increase their licensing at any pace (by month), and don't need to invest in the servers until they need them (delaying the purchase of some servers by 6-12 months will automatically increase performance and bring down costs). Overall, Frost & Sullivan firmly believes that the Pexip value is very compelling. For service providers, it offers revenue share models and pay per usage based models that allow them to grow at any pace, while staying profitable. As a result, Pexip-enabled cloud services as well as servers are not only more affordable, they are also more robust than leading alternatives and can open up the latent demand for ubiquitous video. Criterion 5: Human Capital Pexip’s team is made up of passionate developers that have in the past helped build industry leading products and services. Nearly everyone on its team has worked in the visual communications industry for a number of years and therefore understands the user pain points. With innovation in its core culture, the Pexip team is looking to disrupt the video conferencing market on a single core premise - everyone in an organization should have access to visual collaboration, just like they have an email address and a telephone number. The company has undergone several changes recently. It has presence in 15 countries in 5 continents, and customers in more than 50 countries around the world. It has grown from 40 employees to 80 in just a matter of few months, with offices in major locations such as Oslo, London, New York, Beijing, and Sydney. Pexip recently established a dedicated Customer Success Team with the objective to ensure a high level of client satisfaction. Åsmund O. Fodstad, took over as CEO bringing in a strategic vision. In addition, in January Pexip hired Amy Kim of Google, Inc. to serve as President for its Americas business. These changes show that Pexip is attracting greater talent in a very competitive



market. Its strong human capital has enabled Pexip to have a strong focus on engineering, as well as sales. As a result, Pexip is on a strong R&D and sales growth track. Frost & Sullivan expects that the company's aggressive road map for the rest of 2016 will lead to further strengthening of its solution and customer acquisition. Conclusion The next generation of video conferencing solutions is designed to break down the challenges of costs, complexity, and interoperability that impede effective collaboration. Pexip’s solution is founded upon an advanced, flexible, and differentiated platform that enables organizations to scale quickly, effectively and affordably connecting users to create agile businesses. Pexip has become a successful disruptor and challenger to the collaboration incumbents. Frost & Sullivan is proud to recognize Pexip with the 2016 Global Technology Innovation Award.



Significance of Technology Innovation Ultimately, growth in any organization depends upon finding new ways to excite the market, and upon maintaining a long-term commitment to innovation. At its core, technology innovation or any other type of innovation can only be sustained with leadership in three key areas: understanding demand, nurturing the brand, and differentiating from the competition.

Understanding Technology Innovation Technology innovation begins with a spark of creativity that is systematically pursued, developed, and commercialized. This spark can result from a successful partnership, a productive in-house innovation group, or the mind of a single individual. Regardless of the source, the success of any new technology is ultimately determined by its innovativeness and its impact on the business as a whole.



Key Benchmarking Criteria

For the Global Technology Innovation Award, Frost & Sullivan analysts independently evaluated two key factors—Technology Attributes and Future Business Value—according to the criteria identified below.

Technology Attributes Criterion 1: Industry Impact Criterion 2: Product Impact Criterion 3: Scalability Criterion 4: Visionary Innovation

Criterion 5: Application Diversity

Future Business Value Criterion 1: Financial Performance Criterion 2: Customer Acquisition Criterion 3: Technology Licensing Criterion 4: Brand Loyalty Criterion 5: Human Capital

Best Practice Award Analysis for Pexip Decision Support Scorecard To support its evaluation of best practices across multiple business performance categories, Frost & Sullivan employs a customized Decision Support Scorecard. This tool allows our research and consulting teams to objectively analyze performance, according to the key benchmarking criteria listed in the previous section, and to assign ratings on that basis. The tool follows a 10-point scale that allows for nuances in performance evaluation; ratings guidelines are illustrated below.

RATINGS GUIDELINES

The Decision Support Scorecard is organized by Technology Attributes and Future Business Value (i.e., the overarching categories for all 10 benchmarking criteria; the definitions for each criteria are provided beneath the scorecard). The research team confirms the veracity of this weighted scorecard through sensitivity analysis, which confirms that small changes to the ratings for a specific criterion do not lead to a significant change in the overall relative rankings of the companies.



The results of this analysis are shown below. To remain unbiased and to protect the interests of all organizations reviewed, we have chosen to refer to the other key players as Competitor 2 and Competitor 3.

Measurement of 1–10 (1 = poor; 10 = excellent)

Technology Innovation Technology Attributes

Future Business Value

Average Rating

Pexip 9.1 9.0 9.1

Competitor 2 8.8 8.6 8.7

Competitor 3 7.8 7.2 7.5

Technology Attributes Criterion 1: Industry Impact Requirement: Technology enables the pursuit of groundbreaking new ideas, contributing to the betterment of the entire industry

Criterion 2: Product Impact Requirement: Specific technology helps enhance features and functionality of the entire product line for the company

Criterion 3: Scalability Requirement: Technology is scalable, enabling new generations of products over time, with increasing levels of quality and functionality

Criterion 4: Visionary Innovation Requirement: Specific new technology represents true innovation based on a deep understanding of future needs and applications

Criterion 5: Application Diversity Requirement: New technology serves multiple products, multiple applications, and multiple user environments

Future Business Value Criterion 1: Financial Performance Requirement: High potential for strong financial performance in terms of revenues, operating margins and other relevant financial metrics

Criterion 2: Customer Acquisition Requirement: Specific technology enables acquisition of new customers, even as it enhances value to current customers



Criterion 3: Technology Licensing Requirement: New technology displays great potential to be licensed across many sectors and applications, thereby driving incremental revenue streams

Criterion 4: Brand Loyalty Requirement: New technology enhances the company’s brand, creating and/or nurturing brand loyalty

Criterion 5: Human Capital Requirement: Customer impact is enhanced through the leverage of specific technology, translating into positive impact on employee morale and retention

Decision Support Matrix Once all companies have been evaluated according to the Decision Support Scorecard, analysts can then position the candidates on the matrix shown below, enabling them to visualize which companies are truly breakthrough and which ones are not yet operating at best-in-class levels.

DECISION SUPPORT MATRIX FOR TECHNOLOGY INNOVATION AWARD

High

Low

Low High

Futu

re B

usi

nes

s V

alu

e

Technology Attributes

Pexip

Competitor 2

Competitor 3



The Intersection between 360-Degree Research and Best Practices Awards

Research Methodology Frost & Sullivan’s 360-degree research methodology represents the analytical rigor of our research process. It offers a 360-degree-view of industry challenges, trends, and issues by integrating all 7 of Frost & Sullivan's research methodologies. Too often, companies make important growth decisions based on a narrow understanding of their environment, leading to errors of both omission and commission. Successful growth strategies are founded on a thorough understanding of market, technical, economic, financial, customer, best practices, and demographic analyses. The integration of these research disciplines into the 360-degree research methodology provides an evaluation platform for benchmarking industry players and for identifying those performing at best-in-class levels.

360-DEGREE RESEARCH: SEEING ORDER IN THE CHAOS



Best Practices Recognition: 10 Steps to Researching, Identifying, and Recognizing Best Practices

Frost & Sullivan Awards follow a 10-step process to evaluate Award candidates and assess their fit with select best practice criteria. The reputation and integrity of the Awards are based on close adherence to this process.

STEP OBJECTIVE KEY ACTIVITIES OUTPUT

1 Monitor, target, and screen

Identify Award recipient candidates from around the globe

• Conduct in-depth industry research

• Identify emerging sectors • Scan multiple geographies

Pipeline of candidates who potentially meet all best-practice criteria

2 Perform 360-degree research

Perform comprehensive, 360-degree research on all candidates in the pipeline

• Interview thought leaders and industry practitioners

• Assess candidates’ fit with best-practice criteria

• Rank all candidates

Matrix positioning all candidates’ performance relative to one another

3

Invite thought leadership in best practices

Perform in-depth examination of all candidates

• Confirm best-practice criteria • Examine eligibility of all

candidates • Identify any information gaps

Detailed profiles of all ranked candidates

4 Initiate research director review

Conduct an unbiased evaluation of all candidate profiles

• Brainstorm ranking options • Invite multiple perspectives

on candidates’ performance • Update candidate profiles

Final prioritization of all eligible candidates and companion best-practice positioning paper

5 Assemble panel of industry experts

Present findings to an expert panel of industry thought leaders

• Share findings • Strengthen cases for

candidate eligibility • Prioritize candidates

Refined list of prioritized Award candidates

6 Conduct global industry review

Build consensus on Award candidates’ eligibility

• Hold global team meeting to review all candidates

• Pressure-test fit with criteria • Confirm inclusion of all

eligible candidates

Final list of eligible Award candidates, representing success stories worldwide

7 Perform quality check

Develop official Award consideration materials

• Perform final performance benchmarking activities

• Write nominations • Perform quality review

High-quality, accurate, and creative presentation of nominees’ successes

8 Reconnect with panel of industry experts

Finalize the selection of the best-practice Award recipient

• Review analysis with panel • Build consensus • Select winner

Decision on which company performs best against all best-practice criteria

9 Communicate recognition

Inform Award recipient of Award recognition

• Present Award to the CEO • Inspire the organization for

continued success • Celebrate the recipient’s

performance

Announcement of Award and plan for how recipient can use the Award to enhance the brand

10 Take strategic action

Upon licensing, company may share Award news with stakeholders and customers

• Coordinate media outreach • Design a marketing plan • Assess Award’s role in future

strategic planning

Widespread awareness of recipient’s Award status among investors, media personnel, and employees



About Frost & Sullivan Frost & Sullivan, the Growth Partnership Company, enables clients to accelerate growth and achieve best in class positions in growth, innovation and leadership. The company's Growth Partnership Service provides the CEO and the CEO's Growth Team with disciplined research and best practice models to drive the generation, evaluation and implementation of powerful growth strategies. Frost & Sullivan leverages almost 50 years of experience in partnering with Global 1000 companies, emerging businesses and the investment community from 31 offices on six continents. To join our Growth Partnership, please visit http://www.frost.com.

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