As the Big Three vendors fight it out for leadership in Unified Communications, the latest report on revenue market share, from Synergy Research, shows Cisco holding its lead and, notably, Avaya showing signs of making gains. The report also shows Microsoft dropping in share--though there's some important caveats to that particular showing, and actually some good news for Microsoft in the report.
First, the numbers, then the deeper dive.
As shown by the figure below, Synergy's reporting on the UC collaboration market presents an overall trend in which Cisco began losing share to Microsoft starting in late 2011, continuing through early 2012. Starting this year, Cisco reversed its slide and began a climb that continues. Synergy shows Microsoft growing early in 2013, only to take a fairly significant dip in share in the latest quarter, 3Q13. Then there's Avaya, which, after two years of steady market share decline, showed a rise in the past quarter.
I had a chance to talk with Synergy's founder and president, Jeremy Duke, to get a little deeper dive into these numbers and what they mean. One interesting thing is that Synergy has as expansive a definition of "UC collaboration" as you'll find--but I think a pretty realistic one, since it embraces all of the elements that enterprises really have to consider together as they make their communications/collaboration decisions going forward. Here are the six elements--the percentages shown are the share of the total market revenue that each segment represented in 2012 (a year before the current data):
* Enterprise voice (PBX and phones)--39.8%
* UC applications (including software, unified messaging, contact center, and presence)--18.5%
* Telepresence/videoconferencing--11.6%
* Email software--20.3%
* Collaborative workspace software--6.4%
* Enterprise social networking--3.4%
This gives us a sense of how the vendors get to their baseline market shares. Microsoft is the dominant player in email, which represents 20.3% of the market, while Cisco leads in telepresence/video (11.3% of the overall market). Dominating in those two market segments give Cisco and Microsoft each a leg up in the overall market. It's also why Avaya will likely remain at a lower tier--its play in video is smaller and in email is nonexistent.
The two key areas where the Big 3 do compete are enterprise voice and UC applications. And here are some details Jeremy shared with me on Cisco, Microsoft, and Avaya in these market segments:
* Avaya actually does look like it's getting some good news out of Synergy's reports. In enterprise voice, Avaya revenues grew 11% Q/Q, while Y/Y figures showed revenues were down 7%--which happened to be the same percentage Cisco fell in the same Y/Y period in this segment.
And while it's never great news to be down 7%, that actually is a better number than what Avaya had been showing, Jeremy said.
"These numbers sugest Avaya has stabilized quite a bit," he concluded.
* Among the key dynamics for Cisco were moderate growth Q/Q in UC applications (just under 4%), and modest revenue growth (2.3%) Q/Q in telepresence/video.
The latter is an interesting turn of events. Jeremy explained that unit growth for room video (single-codec systems) actually was strong in 3Q13, rising 12.3%--yet that unit growth translated into essentially stagnant revenue growth.
The reason is simple: "Cisco and Polycom are really just battling it out in pricing," Jeremy said. And lower prices are stimulating unit shipment growth.
* That leaves us with Microsoft, and just how bad the news really is for Redmond this quarter. The real driver behind that dip, Jeremy explained, was that Microsoft took a hit on its Exchange email revenues, which thus dragged down Microsoft's revenue share overall and gave a revenue-share boost to Cisco.
In fact, in UC applications, Microsoft is lookin' pretty good. For this segment, Microsoft revenues grew 7.5% Q/Q, and Y/Y was an eye-popping 28% growth. "The momentum is increased growth for Microsoft," Jeremy said. "We expect to see that gap closing between Microsoft and Cisco."
To illustrate his point, Jeremy sent along this chart breaking out the trend in the UC Applications segment. It clearly shows Microsoft steadily catching up to Cisco, including the latest quarter:
So that's the great news for Microsoft.
In the enterprise voice segment--where Microsoft is making its big play and some pretty big claims recently--the news sounds great but amounts to less than meets the eye. Synergy's numbers show Microsoft enterprise voice revenues up a hefty 35% Y/Y for 3Q14--that's the good news. The bad news is, that's off a small base that's still small.
"Microsoft is still, for pure voice...they've almost made the top 10, but they're not in the top 10 yet," Jeremy Duke said. "But they have grown considerably over the last 2-3 years."
He continued that, while Microsoft "is making some headway in voice solutions for telephony," the prevalent story in most enterprises is still a hybrid approach--Cisco or Avaya voice solutions in place and not going away, with Microsoft UC apps being added on top.
"It's not really a rip and replace story," Jeremy said.
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