Nanjing Yunyan Information Technology Ltd Award Write Up

2016 Global AVC Video Encoding Enabling Technology Leadership Award

2016

BEST PRACTICES RESEARCH

© Frost & Sullivan 2016 2 “We Accelerate Growth”

Contents Background and Company Performance ...................................................................... 3

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

Technology Leverage and Customer Impact ........................................................... 4

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

Significance of Enabling Technology Leadership ............................................................ 8

Understanding Enabling Technology Leadership ............................................................ 8

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

Best Practice Award Analysis for Nanjing Yunyan Tech Ltd. ............................................ 9

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

Technology Leverage ........................................................................................ 10

Customer Impact ............................................................................................. 10

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

The Intersection between 360-Degree Research and Best Practices Awards .................... 12

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

Best Practices Recognition: 10 Steps to Researching, Identifying, and Recognizing Best Practices ............................................................................................................... 13

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



Background and Company Performance

Industry Challenges

The video compression industry is on the cusp of technical disruption and roadmap uncertainty. On the one hand, there is continued pressure on broadcasters and Pay TV service providers to deliver more channels at improved quality and higher resolutions, in order to meet customer expectations and retain subscriber loyalty amidst growing competition. On the other hand, however, profitability is falling as costs increase and ability to charge additional fees is limited. Thus, investing in new infrastructure for additional delivery capacity is a troublesome proposition. The critical need is to achieve better compression such that more channels or better resolutions can be delivered over existing infrastructure or with only modest expansions in infrastructure.

High Efficiency Video Coding (HEVC) or H.265 is the next-generation video compression technology which is designed to provide nearly 2X improvement in compression efficiency. The challenge with HEVC for now is that implementations are not fully mature. Additional restraints to adoption include lack of end to end workflow components, lack of decoders, and uncertainty in patent licensing terms. Until HEVC can come of age, there is thus an urgent and critical gap in meeting customer needs for improved compression efficiency.

The predominant technology used for video compression today is H.264 or AVC. AVC implementations are widely considered to be mature, with a wide range of options across hardware and software technologies leveraging custom silicon, commodity silicon, FPGAs, or general purpose CPUs. A select set of companies are continuing to innovate in the area of AVC compression to continue to improve compression performance by leveraging state of the art CPU innovations and improved algorithm designs. Noteworthy among these is Nanjing Yunyan Technology Ltd, who has taken the approach of leveraging Intel’s state of the art CPUs which are designed to enable proprietary, high-performance AVC implementations. In doing so, they are raising the bar on AVC today while setting the stage for field upgrades once service providers and broadcasters are ready to deploy HEVC.

Most noteworthy is the fact that these state of the art encoders are provided at a price which is affordable by smaller customers or customers in emerging markets. These customers have low price tolerance but at the same time benefit significantly from the bandwidth and energy savings that high-performing encoders can deliver. Nanjing Yunyan’s technology plays a critical role in enabling these services to go live and expand in these emerging markets.



Technology Leverage and Customer Impact

Commitment to Innovation

Nanjing Yunyan partners with Tsinghua University’s distinguished video research group in order to continuously innovate and develop state of the art video compression products, optimized for use in emerging markets where price sensitivity is high, demands in terms of performance and reliability are high, and infrastructure is limited.

The company has a history of leveraging latest advances in Intel’s CPU product line (which is itself recognized as an enabling technology leader in the video space) and adding to them proprietary enhancements in terms of algorithms and implementation of those algorithms in order to deliver commercial-grade encoder products with avant-garde compression cores. In sharp contrast to the industry’s growing reliance on commodity off-the-shelf silicon encoder implementations from companies like Magnum, Nanjing Yunyan delivers differentiated encoders that are best in class from a compression perspective and yet priced at par with or even below the market average price point.

The company’s technologies are patent-pending, representing proprietary innovations that are unique to this line of products. The set of vendors offering continued improvements in AVC technology is rather small, reflecting the reality that conventional directions for improving quality in AVC have been more or less exhausted as the technology is quite mature. Only a select set of vendors are willing and able to continue to push the bar on AVC performance, for example leveraging new strategies embodied in HEVC but in an AVC context, or by bringing additional computation to bear in AVC as enabled by improved computational resources provided by modern processors.

Commitment to Creativity

Nanjing Yunyan takes a deep, algorithmic approach to achieving encoding excellence. As an example, there is in the market today a chorus of so-called perceptual filtering solutions available today who claim to achieve dramatic improvements in video compression by exploiting specific characteristics in how humans perceive images and video. Such solutions, while intriguing on the surface, rarely stand up to serious scrutiny against other state-of-the-art encoders with optimized presets. The gains delivered by this company’s latest update to its encoder products are based on a series of sophisticated and adaptive algorithms in rate control, mode decision and quantization. Accordingly, the current generation of improvements delivers the most compression gains for complex, fast-moving sequences such as action or sports which are typically the hardest to compress at low latency and high quality simultaneously. In the company’s own words, “the benefit is larger for more complicated sequences such as those with frequent scene changes, fast motion of textured objects, and details that can exhibit temporal pumping artifacts.” This is, in fact, the application where the need for improved compression is the most pressing. The achievement of these compression improvements without any



noteworthy increase in latency makes the products that much more compelling for use in highly demanding applications such as contribution encoding and DTT encoding.

With these improvements, Nanjing Yunyan’s latest AVC encoder is able to match the performance of state of the art HEVC encoders, providing much needed gains in compression efficiency without incurring the expense of overhauling infrastructure or the uncertainty of patent licensing fees, as discussed in the challenges section above.

Commercialization Success

Nanjing Yunyan’s encoders have won significant adoption by mobile service providers and IPTV providers in China, with growing footprint in China and other parts of Asia. An analysis of return on investment expected through bandwidth savings, using a model developed by their research team (see study here), shows that greenfield DTT service providers can break even within an year by leveraging higher efficiency HEVC encoders. With similar compression performance now being provided through AVC encoders, the savings are that much more accessible since custom decoders and receivers are not necessary.

Product Performance

For this factor, we rely on data provided by the vendor. Encoder performance is judged along the trifecta of latency, compression efficiency and density. Nanjing Yanyun offers both state of the art HEVC encoders and state of the art AVC encoders. Their HEVC implementation is reported to be 30% faster than the reference standard implementation X265 at comparable compression efficiency. Conversely, the encoder can deliver 20-30% reductions in bandwidth or bitrate for comparable latency, quality and encoder complexity. In 2013, the company was among the first to demonstrate AVC to HEVC transcoding for 4K content at 30 frames per second in a 1U box, in partnership with Intel and Quickfire Networks. This was doubled to support for 4K at 60 fps in a 1U box by NAB 2014, again in partnership with Intel and Quickfire Networks). The company continues to push the bar higher in terms of compression efficiency, capacity and latency.

Competition comes from three fronts – continued improvements in open source libraries, continued improvements from other encoder vendors, and freelance researchers who seek to develop new disruptive innovations. The company’s close partnership with leading video compression researchers helps ensure that they continue to outpace competitive innovation while retaining extremely competitive price points which allow the products to be received well in cost-sensitive markets like China and Eastern Europe.

Breadth of Applications

A key advantage of Nanjing Yunyan’s CPU-based encoder approach is that the implementation is inherently cloud-friendly and can thus be deployed in a variety of

http://www.frost.com/sublib/display-market-insight.do?id=293083154



architectures – on-premises as an appliance, on-premises in a data center, or fully virtualized in the cloud.

While a pure software approach is the most well received today, the technology is not limited to running on CPUs alone. The company’s technology can be adapted to run in a CPU-GPU hybrid environment, and can also be ported to AISCs. The product is available both as a library and as a finished appliance, so that the technology can be adapted and deployed in a manner that best suits the existing architecture and future needs of the customer.

With a choice of settings ranging from ultra-fast encoding in “speed” mode at up to 165 frames per second to quality-intensive encoding in “quality” mode at closer to 50 frames per second, the encoder can be adapted to optimally meet the individual needs of file, live, sports, news and VOD content. The encoder can capably handle high-motion, highly complex video as well as simple talking-head videos, making it suitable for the full gamut of contribution and distribution needs.

Moreover, because the encoder’s AVC-compliant performance becomes comparable to X265 compression performance, service providers can deliver higher quality video to a broader community of subscribers. For example, the encoders can compress sports content to bitrates low enough to cover close to 100% of a lower-end cell service carriers' customer base in terms of bandwidth. Furthermore, because the bitstream uses AVC rather than HEVC compression, even legacy phones can decode the content. Additional benefits include, as discussed earlier, removal of complications from HEVC licensing and the ability to continue to use existing streaming, packaging, quality control and playback infrastructure.

Price/Performance Value

There is wide disparity in pricing in the encoders industry. The most expensive contribution encoders priced at over USD 30,000 for an HD AVC encoder and over USD 80,000 for a real time 4K HEVC encoder. The lowest end encoders are open source (i.e. free to use), with commercial encoders often sold at prices under $1,000 per HD AVC channel, although such rates are typically available for appliances which aggregate 64-256 channels. Encoder implementations vary widely across characteristics like latency, reliability, uptime, compression efficiency, power consumption and density. Vendors also vary widely in their level of support for smaller sized orders, timely technical support, and expert assistance in project planning and implementation.

Nanjing Yunyan provides a level of per-channel pricing that is well below the market average of ~USD 11,000 in the contribution encoding market and ~USD 3,500 in the Pay TV encoders market. Furthermore, because the encoder is implemented for Intel CPUs, customers have the option of purchasing competitively priced off-the-shelf Intel based servers or even to leverage existing cloud infrastructure to run the encoder images. This



price point is provided in tandem with a level of performance that is comparable to top-tier vendors, thus delivering an attractive price-performance value proposition to customers.

Finally, because Nanjing Yunyan’s products can be leveraged as a library or as a complete standalone encoder, the company benefits from tapping into the market for compression cores as well as formal compression product markets.

Conclusion

Because of its compelling advances in AVC compression and its competitive offerings for HEVC encoding, delivered in cost-efficient manner and supporting a wide range of applications, Nanjing Yunyan Technology Ltd. has earned Frost & Sullivan’s 2016 Global Enabling Technology Leadership Award. Broadcasters, pay TV operators and mobile service operators in emerging economies are already benefiting from the superior price/performance value proposition with Nanjing Yunyan is delivering in collaboration with Tsinghua University. Frost & Sullivan's independent analysis clearly shows that this patent-pending technology represents a superior solution to the dilemma content companies currently face between balancing the need to deliver more content at higher quality and resolutions, over bandwidth-limited infrastructure with a large percentage of legacy devices and clients.



Significance of Enabling Technology Leadership Ultimately, growth in any organization depends upon customers purchasing from your company, and then making the decision to return time and again. In a sense, then, everything is truly about the customer—and making those customers happy is the cornerstone of any long-term successful growth strategy. To achieve these goals through technology leadership, an organization must be best-in-class in three key areas: understanding demand, nurturing the brand, and differentiating from the competition. This three-fold approach to delivering enabling technology leadership is explored further below.

Understanding Enabling Technology Leadership Product quality (driven by innovative technology) is the foundation of delivering customer value. When complemented by an equally rigorous focus on the customer, companies can begin to differentiate themselves from the competition. From awareness, to consideration, to purchase, to follow-up support, best-practice organizations deliver a unique and enjoyable experience that gives customers confidence in the company, its products, and its integrity.



Key Benchmarking Criteria

For the Enabling Technology Leadership Award, Frost & Sullivan analysts independently evaluated two key factors—Technology Leverage and Customer Impact—according to the criteria identified below.

Technology Leverage Criterion 1: Commitment to Innovation Criterion 2: Commitment to Creativity Criterion 3: Product Performance Criterion 4: Commercialization Success Criterion 5: Application Diversity

Customer Impact Criterion 1: Price/Performance Value Criterion 2: Customer Purchase Experience Criterion 3: Customer Ownership Experience Criterion 4: Customer Service Experience

Criterion 5: Brand Equity

Best Practice Award Analysis for Nanjing Yunyan Tech Ltd. 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 Leverage and Customer Impact (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, Frost & Sullivan chooses to refer to the other key players as Competitor 2 and Competitor 3.

DECISION SUPPORT SCORECARD: ENABLING TECHNOLOGY LEADERSHIP AWARD Measurement of 1–10 (1 = poor; 10 = excellent)

Enabling Technology Leadership Technology Leverage

Customer Impact

Average Rating

Nanjing Yunyan Technology Ltd. 9 8 8.5

Competitor 2 8 7 7.5

Competitor 3 6 7 6.5

Technology Leverage Criterion 1: Commitment to Innovation Requirement: Conscious, ongoing adoption of emerging technologies that enables new product development and enhances product performances

Criterion 2: Commitment to Creativity Requirement: Technology is leveraged to push the limits of form and function, in the pursuit of “white space” innovation

Criterion 3: Product Performance Requirement: Adoption of technology to set the bar and continually advance the bar in product performance, thus challenging competition while delivering best in class value to customers

Criterion 4: Commercialization Success Requirement: New technologies enable customers to take new products and services to market with a high rate of success

Criterion 5: Application Diversity Requirement: The development and/or integration of technologies that serve multiple applications and can be embraced in multiple environments

Customer Impact Criterion 1: Price/Performance Value Requirement: Products or services offer the best value for the price, compared to similar offerings in the market

Criterion 2: Customer Purchase Experience Requirement: Customers feel like they are buying the most optimal solution that addresses both their unique needs and their unique constraints

Criterion 3: Customer Ownership Experience Requirement: Customers are proud to own the company’s product or service, and have a positive experience throughout the life of the product or service



Criterion 4: Customer Service Experience Requirement: Customer service is accessible, fast, stress-free, and of high quality

Criterion 5: Brand Equity Requirement: Customers have a positive view of the brand and exhibit high brand loyalty

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: ENABLING TECHNOLOGY LEADERSHIP AWARD

High

Low

Low High

Cu

stom

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mp

act

Technology Leverage

Nanjing Yunyan

Technology Ltd.

Competitor 3

Competitor 2



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

TechnologyObsolescence

DisruptiveTechnologies

NewApplications

CEO

Demographics

Needsand

PerceptionsSegmentation

BuyingBehavior

Brandingand

Positioning

CompetitiveBenchmarking

EmergingCompetition

CompetitiveStrategy

CapitalInvestments

Availabilityof

Capital

CountryRisk

EconomicTrends

CrowdSourcing

GrowthStrategies

CareerDevelopment

GrowthImplementation

IndustryEvolution

New VerticalMarkets

IndustryExpansion

IndustryConvergence

EmergingTechnologies

Smart Cities

Sustainability

New BusinessCultures

GeoPoliticalStability



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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Nanjing Yunyan Information Technology Ltd Award Write Up

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