Last week Polycom held its annual partner conference, Team Polycom, under the sunny skies of Orlando, Fla. The change in venue from the dreary, overcast conditions of Vancouver, B.C., home of the previous two Team events, seems well timed with the vendor's improved market position.
A year ago, Polycom had recently gone through a CEO change and was struggling to find its identity amid questions about its very existence as a stand-alone company. Despite having some great products, Polycom spent most of its time defending itself against Cisco and the myriad of new competitors that had emerged in the past few years. However, the Polycom I witnessed in Orlando seemed to have more swagger and a whole new identity based on a tremendous amount of success since the arrival of new CEO Peter Leav.
Here are some of the major changes to Polycom in the past 12 months.
• Improved profitability - Operating income is one of the most important metrics that financial analysts look at when gauging the health of an established company, as it is a direct measure of an organization's ability to make money. Prior to Leav's arrival, Polycom hadn't had a quarter with double-digit operating income for quite a while. In 2014, the company hit double digits every quarter. Increased profit has a multiplicative effect as it gives Polycom more money to re-invest in research and development. This also has given the company more credibility with Wall Street, as evidenced in a 30%-plus improvement in stock price. The higher market cap means more money to invest or with which to make acquisitions.
• Market leading products - I once thought of Polycom as a fast follower in voice and video. In fact, I believe if you had asked people at Polycom behind closed doors, many would have said the way. In the past year or so, however, the company has unveiled some great new technologies including EagleEye Producer (a version of EagleEye that includes analytics), acoustic bubble, auto-mute capabilities, new phones in the VVX line, RealPresence Desktop and RealPresence Mobile, the CloudAxis video collaboration suite, and others. While some of these reflect improvements over existing products, others have the potential to be game changers. This includes the acoustic bubble and EagleEye Producer.
• Microsoft Lync partnership - The Lync wave has never been stronger, and Polycom is riding it better than any other Microsoft partner since it is the only one that offers native integration. If you want to use Polycom products with Lync, you don't need any gateways, custom software, or proxies -- the stuff just works. I'd felt for a long time that Polycom's native Lync integration was one of the industry's best-kept secrets. Over the past year Polycom has gotten more vocal about its unique relationship with Microsoft, which now includes Office 365.
• Open SIP business rises - To be fair, the open SIP business has been ripping it up now for several years, but the momentum has only gotten stronger. If Lync is a wave then open SIP is a tsunami -- the business is currently four times the size of the Lync business. Almost every major hosted UC service provider in North America, including Ring Central, Vonage, and 8x8, use Polycom phones.
• New attitude - As I said previously, Polycom has traditionally played defense in the UC market despite having great products. Conservatism was certainly the way of the past. Not so for the future. The company has unveiled edgy, modern brand videos and imagery. Also, Polycom is no longer afraid to discuss competition openly and take shots at competitors as appropriate. Expect more offense, less defense from Polycom moving forward.
Click to the next page for a look at where Polycom needs to head next.
So the table appears set for Polycom -- new leader, market leading products, money in the bank, and a whole new attitude. However, in many ways, this is just the start of the new Polycom. Here are some areas on which I feel Leav and the company must focus going forward.
• Channel expansion - Without a doubt, this must be the top initiative for the company. UC, particularly video, is shifting from a hardware-centric model to an industry driven by software, cloud, and mobility. Many of Polycom's channel partners are legacy AV integrators who really have no interest in moving into the new world. Polycom faces some tough decisions on how to gracefully de-emphasize these partners, taking care as to not disrupt the current revenue stream while it attracts new VARs, systems integrators, and professional services firms to be the channel moving forward. This is not an easy task, but it is a necessary one.
• Finding new use cases for its industry leading products - At Team, Polycom presented a number of interesting videos showcasing how some of its cool new technologies can help improve interactions. However, almost all uses cases were "see you, see me" illustrations.
For example, one video showed a person in a loud conference room unable to talk with a remote participant because of all the background noise. But once acoustic bubble is flipped on, a conference room is so quiet you can hear a pin drop. While I appreciate the use case, it's an improvement of something we already know. Instead, the company could have showed an engineer at a machine shop showing a counterpart on the floor a flawed part. Typically, the background noise would have made this impossible but with acoustic bubble it becomes a reality. Alternatively, how about a field service person with a wearable camera standing in the middle of a city trying to diagnose a problem?
I understand the company needs to walk before it can run so it might be trying to take baby steps toward the new uses cases. There is some urgency, though, as its competitive lead won't last forever. Polycom needs to step on the gas now and come up with some use cases that others simple can't match.
• Expansion of open SIP business - While I raved about this business, it is heavily dominated by North America. It's time Polycom focused on growing this revenue stream into the EMEA and Asia Pacific regions. Also, if it could find a way to expand the product sets to include video, even a small amount, this business could see a significant boost.
• Making a platform play - During his keynote, Leav talked about getting into "knife fights" with many of the startups and smaller vendors today. This is because at a field level, Polycom is competing on a product-by-product basis. The company needs to shift to more of a platform sale and gett out of the speeds-and-feeds debate. If it's successful in doing this, the only vendor it should be getting into a knife fight with is Cisco.
Kudos to Polycom for achieving such as dramatic turn around in the past year. Now comes plenty more hard work in keeping the momentum going.
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