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Industry Perspectives: Enterprise Video Encoding—The Power & Promise of the Cloud in 2011
Managed cloud encoding helps enterprises decrease their CAPEX and OPEX, mitigate legal risk, and improve the quality of their videos

[Editor's Note: StreamingMedia.com publishes commentary from executives whose particular expertise can bring unique and meaningful "Industry Perspectives" to important issues in online video. If you're interested in submitted an "Industry Perspectives" column for consideration, please email it to erics@streamingmedia.com.]

All videos for internet and mobile delivery must be encoded. Plain and simple. Businesses need their videos to play back and look good wherever their customers are-on any device (including new devices like the iPad and Samsung Galaxy) and on any platform (including the living room). That means that virtually every business must have an encoding strategy and solution. Yet the encoding process (also commonly referred to as transcoding) is fully understood only by a few. For the rest (especially business executives), eyes glaze over. But, too much is at stake for that to be the case, especially as video distribution and consumption proliferate at an exponential rate.

Encoding refers to much more than simple compression. It means choice. The enterprise's choice for its encoding solution-home-grown or third-party provided or managed-matters in terms of video quality (including pre-processing and filters), delivery flexibility and ubiquity (across platforms, devices), scalability, cost, overall business risk, and potential legal exposure. For these reasons, enterprise video encoding has been considered by many to be a necessary evil-a critical, yet highly complex and costly endeavor that has been fraught with peril.

It doesn't need to be this way.

Welcome to 2011 and to the world of managed cloud encoding solutions.

Before I dig into the new promise of encoding made possible by the cloud, let me first take you on a brief journey of encoding "past" - essentially the brute force old world systems that are still used by most businesses, primarily due to a lack of awareness of the new possibilities and realities enabled by the cloud.

The Ghosts of Encoding Past
In the past, enterprise encoding meant purchasing, installing, and configuring servers to support unique and individualized video encoding workflows-welcome to the massive and massively expensive server farms of the past. Once deployed, these costly server farms also meant more costly investment in IT and other resources to manage those servers. Don't forget, companies were forced by past realities to purchase excess capacity hardware and software for peak periods, resulting in even more significant upfront (and usually dormant) CAPEX along with large and continuing OPEX to keep those systems running.

While cloud encoding solutions have existed in the past, only a small number of pioneering enterprises dipped their toes into the cloud to meet at least part of their transcoding needs. But, 2011 will be different-very different-as cloud-based solutions come into their own. Several choices now exist in the marketplace (Sorenson Media offers its own enterprise-grade transcoding solutions both in the cloud and on premises). Enterprises should put the various choices through their paces before making this important decision about whom their encoding service provider should be.

So, as Bob Dylan famously sang in the past, "the times, they are a changin'."  And, at the risk of mixing 1960s lyrics, "the answer my friends, is blowing in the wind" (er, I mean the cloud)! Welcome to 2011-the year that enterprises will fully embrace cloud encoding on a massive scale, whether via a public cloud transcoding solution, private cloud solution, or even more likely, a hybrid of both.

Enterprise Cloud Encoding 101: The 2011 Promise & Reality
What has changed as we begin 2011, and why do we see more and more enterprises trust the cloud and move to cloud encoding solutions? 

Significantly Less CAPEX
Not surprisingly, the ability to reduce or eliminate existing physical hardware and replace with on-demand cloud infrastructure is the primary driver for adoption of cloud encoding solutions. In the "spikey" world of enterprise video encoding (with periods of alternating high- and low-volume needs), the ability to automatically fire up and take down servers provides a true and frequently massive cost savings to the enterprise. There is no longer a need to purchase more than is needed to support peak encoding periods. In essence, all the headaches of encoding are efficiently off-loaded-and, if done right, with only upside (including higher video higher quality).

Significantly Less Ongoing OPEX
Here are potentially massive cost savings, round two. Enterprise IT staffs are already stretched to the limit. And, confronting those staffs with ever-more-complex encoding responsibilities is simply too much to ask and frequently leads to an inefficient and inferior patchwork of encoding systems and bottlenecks in deploying or managing those systems. Thanks to the cloud, companies can instead hand off their growing video encoding needs and burden to a managed service provider that is focused on one thing and one thing only-i.e., providing the highest quality, most flexible and most cost effective video transcoding solutions.  But caveat emptor (buyer beware)-shop around wisely when you pick your managed service provider. Make sure that it is rock-solid financially and will be there for you in the future.

Scalability & Elasticity
Video content for web and mobile delivery is growing exponentially, and this isn't going to change any time soon. In fact, we are still early, early, early in the web and mobile video game (I like to say we're only in the second inning). This means that many companies understandably struggle to forecast their future encoding needs accurately. But here comes the cloud to the rescue again. The cloud provides virtually unlimited scalability and elasticity, enabling companies to pay for only what they need today with the assurance that more capacity (i.e., encoding servers) can be brought online automatically and seamlessly to meet those unpredictable needs.

Enhanced Performance-Multiple Renditions & Queue Management
The right cloud transcoding solution can offer enhanced performance over out-dated on premise precursors. While one encoded video file (also known as a "rendition") may have worked in the past, that just ain't the case in 2011 where there is a need for high quality playback across the growing multitude of devices and platforms. Think of a company like Netflix. Its movies must look great on every platform (the big screen, the small screen) and every device. Customers expect it. The hyper-competitive market demands it. That's why Netflix now typically creates more than 100 renditions of varying speed and format permutations to optimize quality and performance for just about any customer use case (some, like NBC Universal, now apparently create more than 200 renditions!). And, remember, each of these renditions is frequently created from a large video file. This means massive high volume concurrent and frequently "spikey" transcoding needs.

Enterprises can address this problem in one of two ways - i.e., throw more hardware at the problem (the traditional way) or move to the cloud (the 2011 enterprise solution way). Let's look at the traditional approach first. As discussed above, it is extremely expensive (CAPEX and OPEX) and it is imprecise - essentially guesswork to determine how much hardware is needed for anticipated spikes. Imprecision leads to all kinds of inefficiencies and waste. This archaic approach also fails to solve ongoing needs for queue management and ultra-fast turnaround times. And, let's face it-all enterprises (think of media companies as just one example) want what they want, and they want it yesterday. Patience is not a virtue in the fast-paced demanding and competitive world of video production and delivery.

Now, let's take a look at the cloud in the face of these issues. In the hands of the right service provider, the cloud elegantly solves the problem of high volume transcoding with seamless queue management and scalability. Enterprises can attack the video encoding queue horizontally - where all the benefits of the cloud are realized - by activating high power compute instances (i.e., a virtual server in the cloud) against encoding jobs as needed (or automatically turning them off when demand slackens). In other words, cloud encoding solutions can enable enterprises to manage encoding queues with intelligence and auto-scaling to match any business objective to deliver the most efficient and cost-effective solution

Enhanced Flexibility & The Hybrid Cloud-Dynamic Scalability
Let's face it, no CIO or CFO (or certainly, not many) wants to dump expensive and already purchased hardware and software. But, have no fear!  The right enterprise cloud encoding solution offers flexibility and choice. Businesses can leverage their existing physical hardware until capacity is reached and then seamlessly "hand-off" additional jobs to the public cloud (this is called "dynamic scalability"). It is not an "either/or" decision-enterprises need not go cold turkey on their existing transcoding farms and shift all encoding jobs to the cloud (although ultimately many, if not most, will). Welcome to the hybrid cloud model. Dynamic scalability (i.e., the hybrid cloud) is a fast and growing use case. Rather than lose productivity while troubleshooting failed encoding jobs and "hung" servers, the enterprise can now automatically and cost-effectively hand off work to servers in the cloud. In so doing, they witness the benefits of the cloud first-hand. They can crawl and walk before they run.

Faster Deployment, Future Proofing & Even More Flexibility
The proliferation of new complex video formats (think WebM) and devices (think tablets everywhere) continues unabated, and this reality will only accelerate as the biggest companies in the world compete for video market share. In an attempt to address this increasing complexity and need for device support, most enterprises to date have abruptly (and painfully) invested in costly new encoding hardware and software to augment their existing systems. But, this isn't the way it needs to be done in 2011. Once again, here comes the cloud to the rescue.

Accessible through APIs, the right cloud-based encoding solution can be quickly and seamlessly integrated into existing workflows to give a reduced time to market and fewer resources to deploy and manage. And, the right solution has the benefits of a SaaS model, providing instant seamless upgrades and support for new platforms and devices (like the iPad or Galaxy) on day 1 in the marketplace (this is what I call "future proofing"). There are no downsides here.

As discussed above, IT teams are already taxed to the limit, and encoding is hard. That means that encoding innovation rarely comes from within organizations (they simply have too many other things to do). Instead, innovation comes from third-party video specialists focused only on solving these problems. Innovation can be found in a variety of third party applications that can be integrated seamlessly into an overall cloud solution.

Examples include fast file upload of large video files into the cloud. This capability is mission critical to enterprises with massive video files (think media companies), thereby making cloud encoding a real-world alternative in 2011. Another example is cloud server management. Third party specialists now offer innovative management of entire cloud server systems (also known as deployments). Within such deployments, each server can be pre-configured and controlled using a cloud-ready template. These are just some examples, as innovation comes directly from the right transcoding service provider as well (think of them as being a solutions provider that combines the best overall elements to meet the enterprise's specific and frequently unique needs).

Mitigating & Handing Off Business & IP Risk
Listen up, executives. Here's another critical reason to ditch server farms and head to the cloud via the right service provider that covers all bases for you-i.e., mitigation of risk and IP exposure. Most existing pre-2011 enterprise transcoding solutions use FFmpeg-an open-source encoding technology. But, in a little understood fact, FFmpeg requires codec licenses just like any encoding solution. And, many (if not most) that rely upon FFmpeg-based encoding systems (including FFmpeg-based service providers who market transcoding services!) don't have those requisite licenses. In fact, most enterprises likely don't even know they are needed!  This means real business risk and real potential legal exposure.

Don't believe those risks are real?  Take a look at FFmpeg's own official website. Right there - in plain sight - FFmpeg not only acknowledges those risks, it expressly cautions its users that any commercial usage (which is what we are talking about here) is at their own peril. Here is FFmpeg's official word on the subject in the form of a relevant Q&A that is taken verbatim from its website:

Q: Is it perfectly alright to incorporate the whole FFmpeg core into my own commercial product?

A: You might have a problem here. There have been cases where companies have used FFmpeg in their products. These companies found out that once you start trying to make money from patented technologies, the owners of the patents will come after their licensing fees. Notably, MPEG LA is vigilant and diligent about collecting for MPEG-related technologies.

So, there it is. Thousands of companies (including many media companies where videos are their business) use and rely upon FFmpeg right now to encode their videos (either directly or indirectly) for commercial purposes without a net-without the codec licenses and royalties that patent holders and licensing bodies demand.

Move to the cloud. And move to a service provider that has covered all these bases, taking this highly complex and confusing licensing burden off the enterprise's hands and assuming that risk. More and more enterprises are beginning to understand these business and legal risks. That's why more and more businesses are disqualifying FFmpeg-based transcoding services (both in the cloud and on-premise) at the start. Life is simply too short.

2011 - The Year of the Cloud
2011 is the year of the cloud.

Video encoding is at the heart of video distribution. It is absolutely mission critical. But, it is hard, hard, hard to do right. The right cloud solution can take that pain away by offering significant cost savings, scalability, enhanced performance and higher video quality, flexibility and choice, security, innovation, and the mitigation and offloading of business and legal risk and exposure. All of this upside comes with little to no downside.