After all the hype and chatter, Cisco finally closes Tandberg and can start moving forward with its video plans. It should be obvious to all the Cisco watchers out there that video is one of the top initiatives at Cisco and the company plans to leverage the heck out of it to make corporate video an everyday tool for workers. Whether you believe in video communications or not, this acquisition is good for the entire industry. Cisco will commit more time, dollars and energy into making the case than anyone else would have been able to do on their own. The acquisition sets up some interesting dynamics though for Cisco, Polycom and all the other little guys that compete in video.For Cisco, it gives them a much broader portfolio of products that it can put under its TelePresence umbrella giving Cisco customers many more options than existed pre-merger. However, acquiring here versus partnering does nothing to dispel the thought that Cisco is becoming more and more vertically integrated and is putting itself on an island. Cisco is aware of this perception and they're strongly pushing telepresence interoperability protocol (TIP) but many view this as Cisco's way of pushing the industry in their direction. While there's some truth to that (who would push it in a direction that wasn't in their favor?), at least Cisco is attempting to try and solve the industry's problem of vendor interoperability (which was a huge theme at VoiceCon). There may be nothing that Cisco can do in the short term to shed this image but long term they'll need to demonstrate interoperability much more then they have in the past. Maybe at Enterprise Connect 2011, Cisco can showcase the cool stuff on some other vendor's gear!
For Polycom, there are mixed opinions as to whether this is good or bad. I think there's no bigger short term winner than Polycom. Long term depends on how well Polycom executes on things, but this could be big for them. Polycom has done a great job of waving the "ABC" (anything but Cisco) flag and have invited any and all that want to see Cisco fall to join the "Open Collaboration Network". Cisco is actually part of this but we'll see if that materializes into anything that's customer beneficial.
Since Cisco's intent to acquire Tandberg was announced, Polycom has strengthened its relationships with the other "Cisco chasers" such as Juniper, HP, Avaya and Microsoft and stands to gain a fair bit of business from these alliance partners as they will lessen their reliance on Tandberg. Most of these companies will not do anything willingly to contribute revenue to Cisco so Polycom stands to be a winner with everyone in this market not named Cisco. I find it interesting that Polycom has been yelling and screaming of late about open and standards based but until recently, Polycom has had a solution that is as every bit as proprietary and vertically integrated as Tandberg and Cisco. So Polycom can go ahead and throw their stones but they lived in their own glass house for decades.
Additionally, a few of the Tandberg channel partners that are pure video specialists have expressed some concern that Cisco might move some of the business away from them and to channel partners that are more adept at selling network infrastructure along with the video. Cisco has stated this won't be the case but those channel partners that have had cold feet have jumped ship to Polycom.
The other question surrounding Polycom is will they be acquired by someone who wants to compete with Cisco in a bigger way (HP is the obvious choice), but the stock is twice what it was last year at this time and it has a market cap of almost $2.7B, meaning that only the biggest of the big companies could really afford this. Also, if Polycom were to be acquired, this would cause some of the alliance partners that compete with the acquiring firm to jump ship and look for someone else, so I think the possibility of acquisition right now is low.
For all the other guys involved in the video ecosystem such as Lifesize, Kontiki, Vidtel and Magor, the rising tide that is Cisco and Polycom will lift these guys as well. These companies may also make great alliance partners for other, smaller UC or network vendors that don't have the might to align themselves with a Polycom or a Cisco. Additionally, other vendors that may look to acquire (Avaya, Siemens, etc) may find that these smaller vendors give them the technology without the fat premium that's built into the Polycom stock right now.
I think the vendor with the most potential to disrupt (at least the pricing in the market) is Lifesize. Lifesize is owned by the consumer electronics company, Logitech. Logitech may be willing to live on margins far lower than Polycom and Cisco, bringing some price pressure to this market. If this opens the door to a broader market, then Lifesize will be a catalyst to making videoconferencing a tool for more than the large enterprise.
So, the deal is finally done and Ultimately I think this will be a good thing for all the vendors involved in video but Polycom and Cisco in particular, will do more good for customers and themselves if they took interoperability seriously.
