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Cisco-Microsoft Collaboration Market Tug-of-War Continues

Synergy Research Group recently released its latest collaboration market figures, highlighting a number of notable developments in this competitive field. Perhaps the two most interesting findings relate to the market leaders and emerging trends in solution types.

As Cisco and Microsoft continue battling it out, Synergy's Q2 2015 numbers show Cisco continues to further its lead over its main rival when looking at the total collaboration market. (For Synergy's earlier forecasts, see our related coverage, "Microsoft: A 'Significant Disruptor of Collaboration'" and "Cisco vs. Microsoft: The Collaboration Battle Continues.")

Synergy includes enterprise voice, UC applications, telepresence, email software, enterprise content management, enterprise social networks, and hosted/cloud communications and apps when calculating total collaboration revenues, which amounted to nearly $9 billion in Q2. Year over year, the total collaboration market grew 5%, with Cisco's share growing to 15%, Synergy reports. Outside of Microsoft and Cisco, Avaya, IBM, Polycom, Citrix, Mitel, Unify, and Alcatel-Lucent Enterprise come up in Synergy's market assessment.

Cisco's Q2 success is largely attributable to its substantial growth in premises-based systems, of which Cisco has a 25% market share, Synergy reported. When looking at hosted/cloud collaboration, however, Microsoft is the clear leader, with Cisco and Google trailing behind, as shown below. Although not reflected in the infographic, Verizon's and AT&T's market shares in hosted/cloud are nearly identical to Google's, Synergy reported.

Hosted/cloud solutions revenues were up 10% year over year, while premises-based systems remained flat. Especially strong Q2 growth was seen in hosted contact center, hosted video, hosted voice and UC as a service (UCaaS), pointing to the continued trend that sees more enterprises turning to hosted solutions and putting their faith in the cloud. "Hosted teamwork applications is a new emerging area that will see aggressive growth, featuring Cisco's Spark and vendors like Slack, Cotap and Redbooth," Synergy wrote in its release on this data. (See related article, "UCaaS: The Gold Rush is On!")

The good folks at Synergy provided me with the below graphic that shows the evolution of the Cisco vs. Microsoft collaboration market share battle. As you can see, these two tech giants have been engaged in a pretty intense competition, which should come as no surprise to our avid No Jitter readers.

Jeremy Duke, Synergy's founder and chief analyst, shared some of his expert insights on the latest developments in this active market. In an email exchange, he said:

"In this aggregated view of collaboration spending we are measuring a market size of $30B plus. While elements of the market are not directly comparable (i.e., email software vs. PBX call control), what this does show us is the total roll up of enterprise spending on all forms of collaboration investments. And we believe this is important when looking to the future. As an example, the emerging areas of team work applications from vendors such as Slack and Cisco's Spark are poised to be potential disruptors to email, providing us with perspective on how big a new application can grow to."

The many different parts that make up this market speak to the vendor rankings that emerge from the math, Duke said. "Cisco is dominant in premises-based collaboration due to its revenue contribution of IP PBXs, IP phones, and videoconferencing gear, compared to Microsoft being dominant in hosted collaboration with its hosted email and Office 365 offers." (And perhaps now even Skype for Business Online is contributing to Microsoft's hosted/cloud dominance).

"Speaking to how big hosted is becoming, for the first two quarters of 2015, we measured hosted crossing the 50% mark, pushing premises collab spending to under 50% for the first time," Duke said, noting that hosted PBX and UCaaS represent almost 20% of total collaboration spending.

"Most of the headlines around this market circle around new players, such as 8x8 and RingCentral. However, the bulk of the hosted PBX and UCaaS spend remain with more traditional providers such as AT&T and Verizon. But got to give credit where credit is due, the new players (8x8, RingCentral) continue to gain traction and have been disruptive selling to the small end of the business," he said.

"And interestingly the traditional telephony equipment companies are defending their turf, especially Avaya, Mitel, and Shoretel, with different aspects of their own products being offered as integrated cloud offers," Duke concluded.

To me, it would seem that if hosted continues to gain ground and outpace on-premises solutions, we might soon be seeing a new collaboration market leader in Microsoft. Microsoft has been ramping up Skype for Business Online, and Cloud PBX alongside its Office 365 solution, promising a pretty complete set of hosted options for enterprises. While Cisco has been making strong moves with its Collaboration Cloud and WebEx-Spark integration, if it doesn't pick up its hosted game, its substantial lead in premises collaboration might not be enough to keep Cisco on top of the total collaboration market.

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