Much of the news coming out of Cisco recently has described the company's collaboration business as "struggling" or disappointing, with indeed much of the blame being attributed to the company's telepresence product line and business unit. From my perspective, it seems that Cisco is being hammered by three separate weather patterns that have come together to shake the boat to its collaboration foundations.
1. The telepresence hype has passed. Cisco rocked the world in late 2006 with the introduction of the CTS 3000, a multi-codec room system that delivered the illusion that the remote people were in the same room with you. Using the terminology of Gartner's hype cycle model, telepresence has evolved from the peak of inflated expectations to the trough of disillusionment as customers have come to grips with the facts that 1) these systems are expensive to buy, deploy, operate, and maintain and 2) a near-telepresence experience can be created at 1/8th the cost.
In the early stages of the telepresence hype cycle, nearly every vendor gave nearly every videoconferencing system a "telepresence" moniker, including such beauties as immersive telepresence, adaptive telepresence, personal telepresence. Much of this was a reaction to the not-so-subtle Cisco brain-washing thrust that telepresence was new, exciting, and transformative while video conferencing was a legacy, failed technology. The great reversal in thought was punctuated by Cisco's blockbuster $3.2-billion acquisition of Tandberg, announced in October 2009 and consummated in April 2010.
Today, the world has come to recognize that "telepresence" has come to describe the multi-codec systems that deliver an immersive experience. Analyst firms have adopted "multi-codec" vs. "single-codec" as clear terms that describe distinct product and market categories and that enable markets to be measured.
Data collected from vendors each quarter by Wainhouse Research suggests that the multi-codec segment is anything but a high-growth video conferencing segment. In fact, 2010 may turn out to be the year of "peak telepresence." Making the immersive, multi-codec segment the face of Cisco's videoconferencing thrust has not proven to be an advantageous positioning strategy.
2. The overall videoconferencing market is struggling. Just one year after Cisco's acquisition of Tandberg, one of the two dominant vendors in the global video conferencing space, the market began some wild gyrations. Industry revenue growth is no longer a certain bet. In fact, worldwide revenues for room and executive systems for the first half of 2012 are down 7% compared to a year earlier.
Two separate factors are at play here. One is the general malaise in the global economy, punctuated by slowing growth in China, India, Germany, and France; a serious banking and Euro crisis in parts of Western Europe; an anemic regional economy in North America, and political/tax uncertainties in the USA. None of this bodes well for the video conferencing industry, where truth be told, many of the customer purchase decisions are easily postponed.
The second factor is that customers considering the purchase of traditional room video conferencing appliances, representing 90% of the market, are now faced with a wide variety of options including lower cost software-based codecs for conference rooms, highly-convenient mobile solutions for individuals, including UC solutions, and no-up-front-cost cloud services for all of the above. Sitting outside the enterprise mainstream, but nevertheless an alternative, are free calling services like Skype.
The impact of these factors on Cisco's overall videoconferencing business can be seen in my graph:
3. Internal management issues have created holes in the hull. The recently announced departure of ex-Tandberg executive and ex-Sr. VP of Cisco's collaboration technology group OJ Winge is just the latest personnel change. Winge will be replaced by Rowan Trollope, formerly president of Symantec's SMB and Cloud business unit. Whether having someone with no video experience run the "telepresence" organization at Cisco is a good move or not is an arguable point.
While this writer never worked for Tandberg or Cisco and has no inside information, it appears that Winge's name can be added to an impressive list of departed videoconferencing sales and engineering talent that includes, but is not limited to Fredrik Halvorsen, Geir Olsen, Hakon Dahle, Tom-Erik Lia, Larry Satterfield, Mark Dumas, Joel Brunsen, and the entire Codian MCU development team.
In addition, changes have been made at a structural level. Most importantly, the sales overlay structure is gone--there are no more video specialists, rather all sales people are expected to sell all Cisco products. The Tandberg account managers have been replaced with Cisco people, many of whom are just learning how to spell video conferencing. This is a recipe for running aground. Channel partners, the very people that made Tandberg so successful, are still learning how to do business with Cisco--apparently it is not as easy as one would think. Is it any wonder that resellers and customers alike are looking for alternatives?
All of this is not to suggest that Cisco won't weather the perfect storm. The company still has many strengths and of course a leading market share. But sinking or abandoning ship is not out of the question. The videoconferencing industry has a somewhat unique history of seeing its leaders disappear--just ask the people who used to work at CLI, GPT, PictureTel, and VTEL.
