Everyone loves a great rivalry because it brings out the best in both sides. Red Sox-Yankees bring us great fall baseball; JR Ewing-Cliff Barnes raises the level of evil to new heights; and without Thomas Edison and Nikola Tesla we may not have the band AC/DC. Well, in the UC industry, we've got Cisco-Microsoft.
Both offer us great UC platforms and if the two would simply get along and commit to working together, they would completely own the UC space--but that would be like asking Jay Leno and David Letterman to co-host a late night show to dominate the ratings. Makes sense on paper, but it's not practical.
From a share perspective though, the rivalry isn't really a rivalry. Cisco dominates the UC space today, as the company has been able to leverage its massive installed base of VoIP. I know Microsoft will argue with this statement and claim they are the market leader, but they include Exchange and Share Point revenue, where I do not. However, no matter how you come up with current market numbers, Microsoft has moved into the #2 position when it comes to user preference.
Towards the end of 2012, ZK Research and Tech Target conducted a UC purchase intentions survey. The survey has much more to do with future buying habits rather than looking in the rear-view mirror. In the survey we asked the question, "Which vendor do you consider your primary and secondary Unified Communications solution provider?" and we made it clear that this was for premise-based deployments.
To no surprise, Cisco held the top spot, with 43% of the respondents choosing Cisco as the preferred primary UC vendor. Microsoft was second with 26.5% of the responding base selecting them as primary. The responses then dropped off a cliff with Avaya/Nortel being selected by only 7%, and everyone else scored below 6% including the mighty IBM who normally scores high in almost every survey simply because they're IBM.
For secondary vendor, the results were closer. Microsoft was the preferred secondary vendor capturing 27.7% of the responses and Cisco slightly behind at 27.4%. Again, the responses drop off rapidly with only Avaya (11%) and Polycom (10.1%) being north of 10% and then everyone else falling well below the numbers.
The net result of these numbers? It's a Cisco-Microsoft dominated world today. By the way, in no way do I think this is a fait accompli, so all you other vendors in the UC market shouldn't give up, but I'll get to that in a future blog.
For Cisco, Microsoft poses a rather unique threat. Prior to Microsoft, Cisco competed with companies that went to market similar to they way it did but didn't have nearly the marketing budgets nor the engineering installed based that Cisco has. If the vendor was large enough to compete, it was going through some sort of transition that hampered its ability to fire all of its cylinders at the same time. It seemed like the enterprise divisions of both Siemens and Alcatel were perpetually up for sale, Avaya went private and Nortel had too many issues to list here. Even IBM, despite its massive installed base, couldn't get out of its own way to figure out what to do with its flailing SameTime business. Each of these companies had good product, but structural issues prevented them from really giving Cisco a challenge. I'm not saying this is the only reason Cisco took so much share, but it certainly helped.
Now, enter our Redmond based friends. Microsoft has its own customers that are as fiercely loyal to Microsoft as Cisco engineers are to it. Microsoft has big marketing budgets, a large installed base, and it's a company that Cisco can no longer win out on just sheer strength and will.
Also, the historical methods of competition have changed as well. Cisco has spent countless hours trying to prove why Cisco UC is better than Lync. Cisco UC is more mature, has higher voice quality and, in most cases is cheaper. The last statement is a bit controversial, but I've done my own studies and Cisco UC winds up being up to 20% lower-cost depending on the environment.
For the sake of argument, let's say the above is true. Here's the thing: Microsoft buyers don't really care. The ZK Research-Tech Target survey asked the question on, "What are the primary reasons for deploying Lync?" and the top response was that "It integrates into Share Point, Exchange and Office". The number two response is that "We are predominantly a Microsoft shop" and the number three answer is that "We want to create UC applications and Microsoft offers the best developer environment". Anything to do with Lync being cheaper, better or more secure fell well behind the top three responses.
In some ways, this shouldn't be a shock. The respondent base is saying that there are better UC solutions but they're buying Microsoft anyway. Isn't that really the whole reason Microsoft wins in most markets? Microsoft puts out a product that's "good enough" and drops it into its huge installed base of Microsoft engineers, and the product takes off. I'm expecting HyperV to become the de facto #2 server virtualization vendor for the same reasons.
This is the crux of the challenge for Cisco. Cisco can't possibly maintain product leadership in all areas of networking at all times, in fact in most markets I can point to, another vendor has products that are on par with or better than Cisco, but Cisco engineers buy Cisco because of familiarity. Microsoft engineers buy Microsoft for the same familiarity.
So, how should Cisco (and everyone) compete? Well, as they say, this is the $64,000 question. The answer lies in finding new buyers within the enterprise where the Microsoft familiarity is minimized. I've outlined the challenge in this blog and will discuss further the solution in a future one.
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