I expect Cisco to use its next fiscal year to stretch its lead over its archrival, Microsoft, focusing on video, social networking and cloud based UC.
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Those who follow Cisco know that the company's fiscal year runs August through July, meaning it’s a whole new year for them. I happened to be on the Cisco campus last week and met with a number of individuals that are involved in Cisco's UC and C strategy to discuss what the next 12 months would look like for Cisco in this market. Many industry followers, myself included, believe that Cisco has done a good job of leading this market and will be one of the main companies to watch moving forward, so Cisco's strategy should be something we're all aware of.
Historically Cisco has been all about "catching market transitions", that is, focusing on markets with no true market leader early, inserting themselves as an enabler of the transitioning stuff and then being in a leadership position when it's mature. It's worked for them time and time again and there’s no reason to assume that it won't be a successful strategy moving forward.
Cisco has three main focus areas next year:
* Pervasive video
* Social networking
* Cloud based UC
Looking at each one individually:
Pervasive Video
This should be no surprise to anyone. Cisco has invested billions of dollars into video. It acquired Tandberg, acquired Flip, released a video enabled tablet and although it did not invent TelePresence it certainly legitimized it as a critical component of UC. The value to Cisco is obvious. Video chews up gobs and gobs of bandwidth. More bandwidth equals network upgrades. Despite all of the advanced technologies Cisco has, network infrastructure makes up about half of Cisco’s revenue (and also carries fat margins) so pervasive video would mean a huge boost to Cisco's top and bottom line.
Now, is the world ready to replace every voice call with video? It seems to me that we've heard this story before. Y2K, 9/11, the economic struggles in 05, etc. It seems every few years we declare this to be the year of video and it turns out to be more mouth-share than actual customer mindshare.
So, do I think it will be different this year? I'm guessing it will be improved but not the huge uptick that Cisco is expecting. Now don't get me wrong, I personally believe that video communications are better than voice only. However, I’m not so sure the market and buyers are ready. Much of Cisco's success for their FY11 in video will be their ability to explain to the customer when and how to use all the different types of video effectively.
TelePresence, desktop video, streaming recordings and room based conferencing all have different experiences, they vary in ease of use and should be used for different purposes. TelePresence is great for building relationships and first meetings but isn't spontaneous. Desktop video can be spontaneous but lacks the quality to use for an extended period of time and so on. One of the biggest factors for Cisco's success and the growth of all video is, can Cisco help customers understand where and when to use all the things that fall under the video umbrella? Which processes benefit most from video enablement? What's the best use case of the room based system at the end of the long conference table? What are best practices around TelePresence usage? If Cisco can't help customers answer these questions, then I think people may invest in video--not just use the systems and consider them a waste of money, which is where many customers are at today.
Although there are other video solution providers, I expect Cisco to do much of the evangelizing. Polycom also has a lot to gain but Polycom marketing has been poor to fair over the years. Under former CEO Bob Haggerty, Polycom's strength was stuffing the channel, so new leader Andy Miller may change Polycom but I’ll take a wait and see approach.
I'll maintain some skepticism regarding video. The potential is there but like I said, Cisco has a tremendous amount of educational work to do. If they can do it, there's big upside.
Social Networking
This is rapidly becoming one of my favorite areas of UC and C. I've interviewed many companies over the past few months regarding social media and the results have been mixed but I believe this to be a wave that can't be stopped. Social networking provides a whole new way to work. It leverages communities, it gives workers the ability to build their own networks depending on the project or tasks they are working on and provides a new way of working.
I know there are lots of social networking naysayers out there but those are typically older workers that are heavily tied to e-mail. Now many of these naysayers were the ones pushing e-mail 20 years ago when the main communications tool was the phone. Over time, e-mail became an unstoppable wave and social networking will as well. If we look at the current group of people coming into the workforce, they Tweet, Facebook, chat, blog, upload phbotos, etc but they don't really email. Why? Because e-mail is a crappy communications tool. It's overused and well past its time.
This is why Cisco built Quad. For those who don't know Quad, think of it as corporate Facebook. You can still build your own communities and networks but instead of posting photos, workers can upload project documents, instead of updating your status to let people know you're out shopping with your spouse, you inform co-workers that you’re in a conference call with a top client, etc. Just like Facebook users make that site the first thing they log into when they turn on their computer at home, Cisco wants Quad to be the first thing workers pull up when they sit down at their desk in the morning.
Like I said, I'm a huge believer in the value of social networking as part of the UC and C tool set and I think Cisco has a significant lead in this market. Considering Microsoft has OCS (Lync) and Share Point, it is embarrassingly far behind in providing thought leadership around corporate social networking. While Cisco has been building Quad, Microsoft has been adding an attendant console and branch survivability (oooh, that's exciting). IBM has the right idea with Connections and its Lotus Knows campaign is good but needs to step on the pedal a little here. Avaya’s "Flare" experience can provide a decent interface but needs to broaden the tools set. Siemens is taking a shot at this market by leveraging the public social networking tools instead of building their own. What Siemens has shown definitely has potential but they need to accelerate the development of its offering. Other than these companies, the rest of the industry has shown little in the way of vision on how social networking becomes part of UC.
Cloud-based UC
This is another market that one could look at and claim we've heard this story before as well. The value proposition of cloud-based UC is pretty clear. Why buy all that hardware up front when you could just buy it as a service? Pay a monthly fee and get all the tools you want. Lower operational costs, lower up front costs, no upgrades to do. Seems like a winning value proposition. So why hasn’t it taken off?
Much of the problem lies in the hands of who had been selling cloud based UC, most notably, the telcos. The primary offering available today is simply cloud based VoIP with many operators road mapping to UC, so if customers wanted to do more than VoIP they had to go with a premise based solution. Also, in my experience, most telcos aren’t great at selling a solution like UC. Much of the differentiation in staple telco offerings such as voice trunks and data services is cost and so selling on price has become the norm in too many cases.
Cisco's approach to cloud based UC will obviously be built around WebEx, where voice isn’t the core application. The anchor application for WebEx is obviously web conferencing but Cisco has added e-mail (through its PostPath acquisition), presence (Jabber), video integration and voice. Also, the cloud based strategy aligns nicely with Quad, allowing Cisco to have a very broad cloud story. Considering the large installed base Cisco has with WebEx, it can easily allow customers to just try the other cloud based applications for little to no cost. Once customers try it, the stickiness factor will be there.
Additionally, I think the economic pressure and desire to cut costs combined with the popularity of other SaaS based applications has legitimized UC as a viable cloud based offering and I would expect to see much greater interest over the next few years than we've seen in the past. I know last year it was a key theme at VoiceCon and will likely be a hot topic at next year's Enterprise Connect.
The cloud based strategy may cause a bit of friction with its telco customers but Cisco is looking to use the telcos as a channel for the cloud services as well, so this might provide a quick go-to-market opportunity for telcos that want to broaden their offering quickly.
In summary, I expect Cisco to use its FY 2011 as a year it stretches its lead over its arch rival, Microsoft. Its focus on video, social networking and cloud based UC can have the transitional effects Cisco looks for in markets, and Microsoft’s strategy in all three of these areas is weak to mediocre.
