Synergy Research Group recently released some of their latest data surrounding the collaboration market, and surprise-surprise, Cisco and Microsoft continue to battle it out for dominance. The most recent data from Synergy shows Cisco gaining back a narrow lead in the collaboration space, after briefly slipping below Microsoft in the previous quarter.
So what does this tell us? First to explain, this data reflects revenues from collaboration. This includes: UC applications, enterprise voice, telepresence, enterprise content management, enterprise social networks, hosted communications and applications, and email software. Total revenues for Q2 2014 were valued at $7.7 billion, with Cisco holding a 16% share of that market and Microsoft just an bit behind at 15.8%.
In a recent interview, I asked Synergy CEO Jeremy Duke if he could comment on the collaboration market share battle, and describe the approach that Synergy takes in characterizing and quantifying this market:
"It's interesting, looking over history, Microsoft has kind of slowly come up," Duke said. "It's also interesting because Cisco and Microsoft are partners in so many other areas. It's kind of one of those interesting markets where when we add the numbers up, they're going for the same enterprise spend, the same wallet but they're still kind of cooperating and partnering on lots of other levels.
"The other thing too, whenever I talk about Microsoft in this sense, is to clarify what we're talking about, because collaboration, UC and enterprise voice means a lot to a lot of different people. When we talk about the UC market, that's where we count all of the Lync revenue. We count that [UC] as five separate markets: presence/IM server, web conferencing software as a service, web conferencing on premise, unified message, and LAN telephony call server. The LAN telephony call server is where we count PBX numbers and voice, whereas all those other markets we consider a software UC application."
A Closer Look at Enterprise Voice and UC Applications
Synergy largely agrees with other market research houses that have yet to find Lync Enterprise Voice making a run at the leaders in PBX/voice systems. The graph below showcases enterprise voice revenue market share, and you don't have to look too closely to notice that Microsoft doesn't even show up.
"When we talk about enterprise voice, you traditionally think about PBXs and Cisco. Microsoft has a much smaller piece of the market than they do for most of the competitors in that market," Duke said. "So for enterprise voice, if you're just looking at IP-PBXs, Microsoft is barely in the top 10. But when we throw in all the revenue for the applications – the presence, the Web conferencing, the unified messaging – that's where the bulk of their revenues are."
"When we expand that definition from UC applications to collaboration, then we pull in the email revenue, which is also a big chunk. Also in that collaboration piece, we count SharePoint, Exchange, and Lync. So that's three major product families that we count for collaboration."
This brings us to the graph below, which highlights revenue market share for the UC Applications segment.
"If we look at Microsoft's total revenue, if we add up all the collaboration revenue, it's just about 10% of their total revenue," Duke explained. "To give that context, email is about 6% of total revenue, which would be roughly 60% of their total collaboration revenue. So more than half of their collaboration revenue is email.
"And then when we look at the actual Lync revenue – where most of the attention goes to when talking about Cisco and Microsoft – for their total revenue, that's still under 3% of their total revenue. The reason why I bring that up is that when we have conversations about what's the battle between Cisco and Microsoft and where does the future lie, when you boil it down and when you take the email out of the equation, such a small percentage of their [Microsoft's] revenue is participating in this market."
"When we look at enterprise voice, which would be the traditional IP-PBXs, Microsoft is ranked tenth in that marketplace," Duke continued. "And from the Enterprise Voice standpoint, Cisco, Avaya, and now Mitel with the acquisition of Aastra, are really the three top players in that marketplace. And then when we look at the UC applications that ride on top of the enterprise voice hardware--that is, the IP-PBXs--we start to see where Microsoft Lync's revenue really starts to come in. While Microsoft is No. 2 to Cisco in UC applications, the gap between them is getting narrower.
"When we also expand the thinking or the measurement of enterprise applications to put in Sharepoint and Exchange in with Lync, that's when we really start to see the revenue numbers getting very close, in parity to Cisco. So Cisco could argue it's not fair that we're counting email software in that measurement, but Microsoft could say, well, that is an enterprise communication application. It's an interesting measure depending on what your perspective is, but at the end of the day, looking at the money spent, Cisco and Microsoft really do dominate that collaboration spend."
Moving Forward: Predictions
I asked Jeremy Duke to comment about the market overall and if he had and predictions for the future and what we might expect this "battle" to look like as time unfolds:
"As you change, going from hardware to software and now from software to cloud services, the competitive landscape is always shifting – you know, Jabber is now part of the equation, Microsoft is now part of the equation, and who knows, in the future Amazon may be part of the equation.
"As things continue to morph from software to cloud, the whole landscape of collaboration starts to get really interesting. And your traditional players of Avaya, Cisco, and Mitel-Aastra, Siemens, Alcatel-Lucent – that all starts to shift."
Duke said that while he doesn't typically make predictions, at a high level, he thinks that Cisco and Microsoft are going to continue to be the two tightest competitors.
"If we look at current information with the other players that are so much farther behind in terms of share count, it becomes clear that Cisco and Microsoft are really in their own league in the collaboration space. They are really fighting it out for that enterprise dollar. And for the foreseeable future, I don't see that changing."
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