Just as Cisco tried to grab the spotlight away from Microsoft on the opening day of last February's Lync Conference, now Microsoft has made a splash by making a provocative claim about Lync shipments--and doing so at the beginning of the week when Cisco's Collaboration Summit opened.
On Monday, BJ Haberkorn, director of Lync product marketing, posted a blog in which he touted several impressive statistics about Lync growth, particularly in Enterprise Voice deployments, the highlight of which was this statement:
"Microsoft is now shipping more enterprise voice lines than any other technology company in the world" (emphasis in original).
That, as Vincent Vega might say, is a bold statement. Is it true? Inevitably, the answer seems to be: It depends. When I reached out to market researchers and Microsoft's chief competitor for their reactions, I got a variety of answers.
Interestingly, Cisco passed on the opportunity to directly challenge the Microsoft assertion. Here's the statement that Cisco sent me in response to BJ's post. The statement was attributed to Chris Wiborg, Director of Collaboration Marketing for Cisco:
"Today's decision-makers aren't just focused on voice or instant messaging. And, they're looking beyond solutions optimized for a particular device, endpoint or operating system. They're looking for a vendor that can offer a collaboration experience that is platform agnostic and supports new ways of working while providing the security and scalability enterprises require. From the boardroom to the browser, Cisco is consistently recognized as the market leader in real time collaboration. We're pleased that 95% of the Fortune 500 run their business with Cisco collaboration solutions."
I asked Jeremy Duke, CEO of market research firm Synergy Research, what he thought of Microsoft's claim. He emailed me a response that touched on 3 points:
"1. Microsoft is growing above and beyond their competitors. In enterprise voice revenues they are growing close to 60% on a on annual basis. In comparison, their top competitors are experiencing negative to flat sales
2. From the Synergy numbers published for last quarter (2Q13), Avaya is taking the biggest market share loss in the face of Microsoft's gains 3. As of last quarter (2Q13), Cisco and Microsoft were neck and neck for the #1 ranking for total Collaboration sales--which includes UC Apps, Video Conferencing, Enterprise Voice, Collaboration Software, and Email. If Microsoft continues to grow as they are trending, it is very likely that they will surpass Cisco for Total Collaboration revenues very soon.
2. From the Synergy numbers published for last quarter (2Q13), Avaya is taking the biggest market share loss in the face of Microsoft's gains
3. As of last quarter (2Q13), Cisco and Microsoft were neck and neck for the #1 ranking for total Collaboration sales--which includes UC Apps, Video Conferencing, Enterprise Voice, Collaboration Software, and Email. If Microsoft continues to grow as they are trending, it is very likely that they will surpass Cisco for Total Collaboration revenues very soon.
I also reached out to Diane Myers, analyst at Infonetics Research. Here's her take:
"I struggle with these claims. Without a doubt businesses are deploying Lync for UC and voice. However, the voice piece is more challenging. Since Microsoft bundles voice with the server license many businesses may be getting it but not enabling or using it. But even by our estimates if every Lync license was enabled with voice we still don't see the numbers being larger than the voice licenses that leading providers such as Cisco and Avaya are shipping.
For example, for the 1H13 Cisco shipped 3.5M voice licenses, Avaya shipped 3.4M, and NEC 3.0M. And when I say shipped I mean revenue generating shipments. Not trials or inventory with the channel. Microsoft had 5M installed base as of the beginning of the year. And that was not over just 2012 but over the course of 3 years.
For example, for the 1H13 Cisco shipped 3.5M voice licenses, Avaya shipped 3.4M, and NEC 3.0M. And when I say shipped I mean revenue generating shipments. Not trials or inventory with the channel. Microsoft had 5M installed base as of the beginning of the year. And that was not over just 2012 but over the course of 3 years.
If you go back to BJ Haberkorn's blog, there definitely seem to be some points that raise questions. So I reached out to BJ and to Microsoft's spokespeople at Waggener Edstrom PR firm, for clarification. Here's what I questioned, and how they responded.
Starting with the big claim about Microsoft now shipping more enterprise voice than any other technology company: In the blog post, BJ Haberkorn attributes this quote to a presentation given by Microsoft COO Kevin Turner, linking to the transcript of that talk. In the transcript, Kevin Turner's quote is, "And the ability to take Lync and Skype, now Microsoft is shipping more enterprise voice lines on unified communications than any other technology company in the world." So I asked whether the claim about shipping more voice than any other company incorporates Skype numbers; BJ Haberkorn responded to me, "No this does not include Skype in any way."
Some of the other numbers that BJ presented in his blog seemed to mix apples and oranges to some extent. Here's the key paragraph on figures that Microsoft has reported:
"Our financial results reflect the growing customer adoption. In our Fiscal Year 2013 earnings release, we announced that Lync revenue grew 30% year over year. In our earnings call, we also disclosed that the Lync business, including Lync Server and Lync Online, surpassed $1B in annual revenue. Our voice software license sales grew 150% on top of an already significant installed base, which we noted in February at Lync Conference was more than 5M seats" (emphasis in original).
That paragraph includes several different metrics: revenue, license sales, seats. And it encompasses different time frames--fiscal 2013, which for Microsoft ran from July 1, 2012 to June 30, 2013, but also a February 2013 announcement of 5 million Lync voice seats deployed so far. So what kind of growth figures are we really seeing here?
One thing I questioned was what "lines shipped" really means. Ever since voice started running on IP systems that provide other functions, some vendors have not been above counting all possible voice endpoints on a system deployed, including all voice ports in their count as soon as the platform shipped--even if the customer turns on just one voice user (or none). So I posed the following question and got the following response from WagEd's spokespeople:
"Q: Also, when you talk about shipping enterprise voice lines, does that mean the number of lines actually enabled with Lync Enterprise Voice (not just EV-capable Lync lines)?
A: The "lines shipped" are purchases, much as PBX vendors typically report their lines shipped via analyst firms."
Then there's the question of specific growth levels. BJ Haberkorn's blog post includes 2 different metrics in that last sentence quoted above: He starts with "software license sales," which grew 150% year-over-year for Fiscal 2013. But in the second half of the sentence, he introduces the often-cited figure from last February's Lync conference, that 5 million seats of Enterprise Voice had shipped by that event. The response from WagEd on this point is that the 150% Y/Y growth does represent revenues and not seats, although they add that sales revenue "correlates well with licenses." Furthermore, the PR spokespeople acknowledge that the 5-million-seat figure represents the shipment total to that point (February 2013), while the Y/Y percentage growth of 150% deals with 2 different points in time, the start point being July 1, 2012, and the end point being June 30, 2013.
So what's the bottom line? Microsoft's statement about shipping more enterprise voice lines than any other technology company is pretty unequivocal in its wording. BJ Haberkorn's source--Kevin Turner's presentation--appeared to leave a big loophole with the mention of Skype, yet BJ seemed to directly close off that apparent loophole in his followup to me.
Curiously, Cisco's spokespeople chose not to directly contradict the claim in their response to me. Given the Infonetics numbers that Diane Myers cited, they'd seem to have plausible grounds for push-back--which they chose not to take.
Ultimately, the big picture is that Microsoft is making gains in enterprise voice and is seeing tremendous success with Lync in general. Jeremy Duke states, plausibly, that these gains are coming more at the expense of Avaya than of Cisco. Yet he also notes that the incumbents are seeing their voice revenue flatten out, while Microsoft, which is growing from its zero base of a few years back, can boast strong growth numbers for voice.
So the battle goes on. It'll be interesting to see what comes out of Cisco Collaboration Summit this week.
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